FOOD-PRICE inflation concerns for policy makers are set to persist even as rice declines and wheat trades below this year’s peak, according to the United Nations, which said that importers are still paying more than a year ago.
Another year of bumper wheat and rice harvests, as well as a continued surplus in corn, is needed to bring stockpiles back to "healthy" levels and reduce inflation concerns, Abdolreza Abbassian, senior economist at the UN Food and Agriculture Organisation (FAO), said in Singapore.
Costlier food may worsen the lives of the 1.1 billion people who the World Bank says live on less than $1 a day, adding to pressure on central banks to raise interest rates even amid increased concerns that the global economy may slip back into recession. Global food prices reached a record in February.
"Food security is the number-one priority of governments, followed by food inflation," Amit Gulrajani, general manager for rice trading and shipping at Olam International, said at a conference in Singapore. Olam, based in the city-state, is one of the world’s three biggest rice shippers.
The World Food Price Index, a 55-item gauge compiled by the Rome- based FAO, rallied 26% in the year to August.
Wheat in Chicago, which peaked at $9.1675 per bushel on February 14, has shed 14% this year and traded at $6.80. Rice, trading at $16.86 per £100, has lost 9.1% since reaching the highest level since 2008 earlier this month.
While the World Food Price Index may decline for a third month in September, the gauge will remain above last year’s level and provide no relief for food-deficit countries that rely on imports for supplies, Abbassian said.
French President Nicolas Sarkozy warned in June that the world must take action to avoid another food crisis, saying policy makers risked making this a "century of hunger" unless there were new rules on global supplies.
Food prices will remain higher in the next decade than the past 10 years as farm production slows and demand increases, the OECD and the FAO said in a joint report in June. Global output is forecast to grow an average 1.7% a year through 2020, compared with 2.6% in the previous decade, they said in their annual Agricultural Outlook report.
XGlobal inventories of cereals including rice, wheat and corn will meet about 20.8% of demand, or 76 days, in the 2011-2012 season, the smallest level of coverage since the 2007- 2008 season, the FAO said in a recent report.
Tightening corn supply, which the FAO described as a cause for concern, was already reflected in high prices, the agency said on September 8. Corn futures in Chicago traded at $6.9725 per bushel yesterday, 37% higher than a year ago.
Rice prices in Chicago gained in July and August.