Europe Economy

World Food Prices Rise, Stay Close to Crisis Levels


World food prices rosein September and are seen remaining close to levels reached during the 2008 food crisis, the United Nations' food agency said on Thursday, while cutting its forecast for global cereal output.

TIANLIN, CHINA - MAY 12: A villager looks at the parched paddy on May 12, 2012 in Tianlin county, Guangxi Zhuang autonomous region of China. A lingering drought has dried up most of rivers as high temperature and little rainfall over the past three months this year. Tianlin county had suffered from severe drought over the past three years.
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The worst drought in more than 50 years in the U.S. sent corn and soybean prices to record highs over the summer, and, coupled with drought in Russia and other Black Sea exporting countries, raised fears of a renewed crisis.

Grains prices have retreated in recent weeks due to rapid harvest progress and concerns about weak demand in a slowing global economy.

But the Food and Agricultural Organization's Food Price Index, which measures monthly price changes for a basket of cereals, oilseeds, dairy, meat and sugar, rose to an average of 216 points in September after remaining stable at 213 points in August, the FAO said in its monthly update.

The rise reflected mainly higher dairy and meat prices, with more contained
increases for cereals, it said.

"Prices are remaining high... prices are sustained, it's highly unlikely we will see a normalization of prices anytime soon," FAO senior economist Abdolreza Abbassian told Reuters in a telephone interview.

He added, however, that it was not clear whether the small increase in September meant prices were on an upward trend, but he expected volatility in markets to intensify in coming months.

The FAO's index is below the peak of 238 points hit in February 2011, when high food prices helped drive the Arab Spring uprisings in the Middle East and North Africa, but current levels are very close to those seen in 2008 which sparked riots in poor countries.

The Rome-based agency said it had cut its 2012 world cereals output forecast by 0.4 percent to 2.286 billion tons from a previous estimate of 2.295 billion tons, mainly due to a smaller maize crop in central and southeastern parts of Europe, where yields have been hit by prolonged dry conditions.

Despite the rise in food prices, the United States Mission to the UN Agencies in Rome released a statement on Thursday saying it had agreed with other countries that a meeting of the emergency Rapid Response Forum under the G20's Agricultural Market Information System is not necessary at the moment.

"Agricultural commodity markets are functioning," the mission said.

Abbassian said a ministerial meeting that goes beyond the G20 to discuss
food prices was still planned for October 16.

French President Francois Hollande has launched a global campaign to win
support for strategic stocks of agricultural commodities, but EU development
Commissioner Andris Piebalgs said this week that was not the best way to tame food prices, advising a focus on agricultural investment to boost production.