Food price spike shows reform urgent - report

LONDON Mon Jan 24, 2011 4:11pm GMT

LONDON (Reuters) - The current spike in food prices is a repeat of the 2007/08 crisis and indicates urgent reforms are needed to a stressed global agricultural system, John Beddington, the government's chief scientist said on Monday.

"In 2007/08 everyone said this was just a one-off because we have been looking at price declines for 30 to 40 years and then the same thing has happened," Beddington told reporters at the release of a report commissioned by the government on future food security challenges.

"It indicates the system is under stress," he added.

Food prices hit a record high last month, outstripping levels that prompted riots in 2008, according to the United Nations food agency, and have been a factor in widespread protests in North Africa and the Middle East.

Beddington said it was the volatility of prices that posed the greatest threat to social stability.

"Where you get social disruption is when something happens very quickly and that is what happened with the price spike in 2007/08 and that is what is happening (again)," he said.

Beddington said free trade was "absolutely essential" to limit price spikes and other measures might include the development of regional reserves which could be either physical or financial.

"Where you get trade interruptions when there is a problem with a price spike, that exacerbates the spike and presents problems," he said.

PRICES VOLATILITY

French President Nicolas Sarkozy in a speech laying out his G20 presidency agenda on Monday called for new rules to curb commodity price volatility, warning that the world risks food riots and weaker growth if leaders fail to act.

Farming and environment minister Caroline Spelman told the media briefing that she welcomed France putting food security and price volatility at the top of the G20 agenda.

"There is a tangible political will to address this and I think one of the keys to this will be getting the Doha round (of World Trade Organisation negotiations) going again," she said.

She added that "transparency is crucial," referring to the ability to know who is buying, who is holding stocks and who has the capacity to meet a short-term need.

The report said that efforts to end hunger internationally are already stalling and without decisive action food prices could rise substantially over the next 40 years, making the situation worse.

It called for minimising waste in all areas of the food system and improving the governance by reduces subsidies and trade barriers that disadvantage poor countries.

"There is a broad consensus that the long relative decline in agricultural prices is over. We are going to see a trend of rising prices...What we worry about is volatility," said one of the report's author's Sherman Robinson.

"We have seen price spikes in the last few years. They are a communicator of a system under stress and that is something that is worrying us," Robinson, a professor of economics at the University of Sussex added.

Beddington told Reuters that rising prices might help reduce food waste in the developed world while science could play a key role in tackling challenges in the developing world where about 30 percent of food is lost before it is harvested and a further 25 to 30 percent lost during storage.

"Waste is a massive problem worldwide," he said.

Beddington highlighted the role of weather patterns in the recent run-up in food prices including droughts in Russia and floods in Pakistan.

"What the climate change analyses are saying is that such events are likely to be more frequent over time and that is one of the problems we have got to think about," he said.

"We have to think about having agricultural systems that are adapted," he said, noting, for example, that for a modest investment it would be possible to develop safe storage away from flood plans in areas that are highly prone to flooding.

(Reporting by Nigel Hunt; editing by Keiron Henderson)

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