No cause for alarm now over global food - FAO

TOKYO Fri Jan 14, 2011 1:34pm GMT

People shop at an open air vegetable and fruit market in the western Indian city of Ahmedabad January 6, 2011. REUTERS/Amit Dave

People shop at an open air vegetable and fruit market in the western Indian city of Ahmedabad January 6, 2011.

Credit: Reuters/Amit Dave

TOKYO (Reuters) - A senior official of the UN's food agency played down concerns that tighter supplies of food could lead to a repeat of the 2008 food crisis because stocks were ample.

Last week, the UN's Food and Agriculture Organisation said global food prices reached their highest levels since its records began in 1990 and that grains prices could climb further as adverse weather patterns give cause for concern.

Food inflation has risen to the top of the agenda for many policymakers with memories still fresh of the 2008 food crisis, when soaring prices sparked riots in several countries, high inflation and in several cases deep trade deficits.

In an interview with Reuters in Tokyo, Hiroyuki Konuma, the FAO's regional representative for Asia and the Pacific, acknowledged that food supply and demand was tight.

But he said the situation was not as severe as 2008 because grains stocks were sufficient at the equivalent of about a quarter of annual production.

"In general, the supply/demand situation of food grains has become very tight at the moment but enough stocks means there is no cause for alarm," Konuma said.

"We still maintain sufficient stocks, which is about 25 percent of annual production. As long as there are sufficient stocks, that means the world has enough food still to feed the people."

Still, he said if stocks continued to drop over the next couple of years, there would be cause for concern.

The FAO report last week showed that its food price index for December had risen for the sixth straight time. Sugar and meat were at record highs and its cereals index, which includes staples such as wheat, rice and corn, rose to its highest level since August 2008.

DIFFERENT FROM 2008

Konuma, FAO assistant director-general and regional representative, based in Bangkok, said it was too early to say if the index had continued to rise in January.

"There could be additional external factors that may cause a potential further increase in prices, but it's premature to say," he said.

Rises in wheat and crude oil prices are the key concerns but they are still below their peaks hit in 2008, while prices of rice, the staple food in Asia, have fallen sharply, Konuma said.

Severe weather and natural disasters have hit key grain-producing countries, fuelling supply shortage concerns as demand from emerging nations such as China and India is growing.

Corn and soybean prices hit two and a half year highs this week after the U.S. Agriculture Department announced a surprisingly steep reduction in its forecasts for global grains and oilseeds supplies.

China, India, South Korea, Algeria are among countries that have carried out various measures to combat rising food prices and growing consumer concern.

Despite some signs of social discontent, Konuma said there were no signs of the sort of riots that were seen in 2008.

The 2008 crisis resulted from a combination of factors including low world stock levels of food grain after wheat production dropped sharply for two straight years in Australia.

"This year, while (stock) is lower than last year by 6 percent, it is not as critically low as two years ago," he said.

In addition, he said there were significant differences now to 2008.

While wheat prices have gained 60 percent since June 2010, they still 30-40 percent below the 2008 peak, Konuma said.

Oil has risen to above $90 a barrel from $60-$70 a few months ago, but is far below the 2008 peak of around $147, and unlike in 2008, the price of ethanol and bio diesel hasn't tracked crude oil prices higher, he said.

One risk is that a rise in oil prices boosts production costs for business and encourages farmers to grow more bio-energy crops, intensifying competition for land and water and accelerating the conversions of key food grains into ethanol, he said.

The 2008 food crisis, initially sparked by fear of wheat shortages in some countries, led some governments to impose export restrictions on rice, the key staple substitute.

Konuma urged countries to avoid protectionist moves, such as imposing export restrictions. He called on exporters to keep to the World Trade Organization's international trade agreements and rules.

He pointed to examples in recent years where countries had restricted exports of grains in order to protect their domestic markets.

"This is alarming. There should be a global watch dog to warn or prevent this," he said.

He also said authorities should take action if market speculation starts to threaten peoples' access to food.

"If access to food is affected by food price hikes, and if it is led by market speculation, then we should prevent such occurrences because food is essential for human beings to survive and it shouldn't be treated as an object or target for investment," Konuma said.

"Fluctuations in price are natural. But over-speculation beyond certain limits affects the life of the poor. It's a moral obligation, a human rights issue. The world should discuss the matter very seriously," he said. (Editing by Neil Fullick)