Monday, September 10, 2007

[PBN] UN warns of food price unrest


By Javier Blas in Rome

Published: September 6 2007 18:57 | Last updated: September 6 2007 18:57

Developing countries face serious social unrest as they struggle to cope
with soaring food prices, inflation that shows no signs of abating, the
United Nations' top agriculture official has warned.

Jacques Diouf, director-general of the UN's Food and Agriculture
Organisation, said surging prices for basic food imports such as wheat,
corn and milk had the "potential for social tension, leading to social
reactions and eventually even political problems".

Mr Diouf said food prices would continue to increase because of a mix of
strong demand from developing countries; a rising global population,
more frequent floods and droughts caused by climate change; and the
biofuel industry's appetite for grains.

"That combination of factors would most likely lead to increases in food
prices," Mr Diouf told the Financial Times in an interview.

Signs of the social unrest these prices could cause were seen in Mexico
this year where mass protests were triggered by rising corn prices. Mr
Diouf said food represented about 10-20 per cent of consumer spending in
industrialised countries, but up to 65 per cent in developing nations.

"If we continue to see an increase in their [food] prices and in their
import bill for food, there is a serious potential situation," Mr Diouf

The warning comes as wheat prices are at a high, forcing developing
countries such as India and Egypt to pay record prices for their food
imports in what cereal traders described as "panic buying" to beef up

Wheat prices this week rose to a record $8.86 a bushel in Chicago, up
about 60 per cent since January. Dairy product prices have also setting
records, while other commodities, such as corn and soyabeans, are
trading well above their historical averages.

Mr Diouf said although the biofuel industry directly increased the
consumption of only a handful of agricultural commodities, such as corn
and rapeseed, its effect spread to other food products because less
acreage was devoted to non-biofuel crops and the cost of feeding
livestock with grain was pushed up.

"The biofuel industry is a new factor creating demand for food for a
non-food use," he said.

Fears about the inflationary impact of biofuels on global food prices
have prompted Cargill, the world's largest agricultural company by
revenues, to question the White House-led push for an increase in
ethanol production through tax subsidies.

Additional reporting by Eoin Callan in Washington
Check for earlier Pacific Biofuel posts:

No comments: