MercoPress. South Atlantic News Agency

FAO says global food prices remained steady in August, but “the game is not over”

The US corn crop was expected to increase 10% but was down 13%

Global food prices remained steady in August, the United Nations food agency said Thursday, but warned that “the game is not over” as it was only the beginning of the harvest season.

An overall FAO index of food prices averaged 213 points last month, the same level as in July when it had jumped by 6% due to droughts in major exporters the United States and Russia, the Food and Agriculture Organization said.

FAO deputy director David Hallam told a press conference in Rome: “There is a great deal of talk about whether we have some kind of food crisis emerging. There is no strong evidence to suggest that in the price data.”

But he added there was a risk speculators would re-enter the commodities markets, a sign that prices may still rise.

FAO Assistant Director General Laurent Thomas warned that 22 countries, mostly in Africa, are in protracted crisis and said the world must be prepared for food shortages.

A statement released by the organisation said that “although still high, the FAO index currently stands 25 points below its peak of 238 points in February 2011 and 18 points below its August 2011 level.

A sub index that measures cereal prices averaged 260 points in August, also unchanged on the month, ”with some increases in wheat and rice offsetting a slight weakening in maize,“ the statement said.

Key agricultural regions in the United States that had been hit by drought have now benefited from rainfall, while Russia has indicated it would not restrict exports despite a smaller crop in its key farming regions.

FAO Director-General Jose Graziano da Silva warned however that ”we need to keep vigilant on the prices because we are just starting the season,“ adding ”the game is not over.”

Hallam noted that US maize (corn) “production was expected to increase by about 10% this year, in practice it's fallen 13%, so that was quite a shock. Given that the US accounts for more than 40% of world exports of maize, that's a significant development,” he said.

The FAO said maize crops were expected to drop to 864 million tonnes in 2012, a decline of 20 million tonnes from 2011, following the US drought, its worst in around 60 years.

The agency noted that meat prices averaged around 170 points last month, up four points from July. Although meat prices showed an up-tick across the board, the main increase was in pork and poultry, which depend on cereal-based diets.

Several panel members condemned the role financial speculation played in inflating food prices in 2008.

“What is clear is that previous price volatility ... including price spikes has been largely due to ... excessive speculation. So far, this time round we have seen limited price speculation,” said Jomo Kwame Sundaram, UN assistant secretary general for economic development.

But Hallam warned that speculators could be poised to once again make forays into commodities markets.

On Wednesday, Egypt -- the world's largest wheat importer -- set another tender to buy wheat, leading to a strengthening of European cereal prices on global commodities markets Thursday.