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World must brace for higher food prices: experts

Weak monsoon can impact food prices in India; Thailand and India are two of Asia's leading rice exporters

AFP | AUGUST 23, 2012, 01:41 PM IST

With drought parching farms in the United States and nearthe Black Sea, weak monsoon rains in India and insidious hunger in Africa's Sahelregion, the world could be headed towards another food crisis.

Asia should keep a catastrophe at bay with a strong riceharvest while the G20 group of industrialized and emerging economies tries toparry the main threat, soaring food prices.

"We have had quite a few climate events this year thatwill lead to very poor harvests, notably in the United States with corn or inRussia with soja," warned Philippe Pinta of the French farmers federationFNSEA.

"That will create price pressures similar to what we sawin 2007-2008," he added in reference to the last global food alert, whenwheat and rice prices nearly doubled.

In India, "all eyes will be on food inflation - whetherthe impact of a weak monsoon feeds into food prices," Samiran Chakraborty,regional head of research at Standard Chartered Bank was quoted by Dow JonesNewswires as saying.

Monsoon rains were 15.2 percent below average in mid-August,according to latest data from India weather bureau, and Asian rice prices areforecast to rise by as much as 10 percent in the coming months as suppliestighten.

India and Thailand are two of Asia's leading rice exporters.

Indian Food Minister Kuruppasserry Varkey Thomas toldparliament this month that prevailing conditions "could affect the cropprospects and may have an impact on prices of essential commodities."

Despite that warning however, the UN Food and AgriculturalOrganization expects rice output to slightly surpass "excellentresults" recorded last year, though the FAO cut its global forecast forproduction of unmilled rice to about 725 million tons from its previous figureof 732 million.

The world is feeling the onset of the El Nino weatherphenomenon, which has a natural warming effect, is active in the westernPacific and expected to last until winter in the northern hemisphere, accordingto Japanese meteorologists.

The US farm belt has been ravaged by the most stiflingdrought since the 1950s, and the country's contiguous 48 states have justsweltered through the hottest July on record.

Corn production is probably at the lowest level in sixyears, the US Department of Agriculture said, and curtailed production willlikely send corn and soybean prices to record highs, it added.

"Cereal prices have shot up, with an increase in (corn)prices of almost 40 percent since June 1," strategists at the CM-CICbrokerage noted.

Commerzbank commodity experts said high temperatures anddrought around the Black Sea "have resulted in wheat crop shortfalls on ascale that cannot yet be predicted with any accuracy."

US commodities analyst, AgResource Company president DanBasse told the Australian Broadcasting Corporation last week that theAustralian harvest could play a role in easing the food shortage.

"We need every metric tonne of wheat and grain theAustralian farmers can produce," Basse said. "Anything that theAustralian farmer can do to assure or boost his production should be profitablein the year ahead."

Jean-Rene Buisson, head of France's national association offood industries (ANIA) said: "All products based on cereals, includingmeat, will be affected by price increases, not necessarily by September, butdefinitely during 2013."

In China, food prices are considered politically sensitiveand account for up to a third of a consumer's average monthly budget,government statistics show.

China has reined in inflation as its economy slows however,while its grain output stood at 1.3 trillion tonnes in the first half of theyear, up 2.8 percent from the same period a year earlier.

The Financial Times (FT) said concerns over the US harvesthad prompted senior G20 and United Nations officials to consider an emergencymeeting on food supply, with a conference call on the issue scheduled forAugust 27.

The newspaper cited officials as saying the talks were not asign of panic but rather reflected the need to establish a consensus to avoid arepeat of the riots and tensions sparked in 2007-08 by spiking food prices.

Major concerns include hoarding or export restrictions byfood producing countries, along with panic buying by others.

Also crucial is the balance between the use of grain as adirect source of food and its role as animal feed or as a basis for motorfuels.

FAO director general Jose Graziano da Silva of Brazil calledin the FT for the United States to suspend biofuel production programmes toease the pressure on food resources.

"An immediate, temporary suspension" of a mandateto reserve some crops for biofuels "would give some respite to the marketand allow more of the (corn) crop to be channelled towards food and feeduses," he wrote.

A region where food is in chronic shortage is the Sahelregion of Africa, where the number of malnourished children is estimated tohave hit a new high of 1.5 million as cholera and locusts emerge as newthreats, UNICEF has warned.

The relief agency World Vision Australia said 18 millionpeople need food assistance in Niger, Mali, Chad, Mauritania and Senegal.

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