FAO Rising Cereal Prices Global Concern

Early prospects point to the possibility of a significant increase in world cereal production in 2008, but international prices of most cereals remain at record high levels and some are still on the increase,

Early prospects point to the possibility of a significant increase in world cereal production in 2008, but international prices of most cereals remain at record high levels and some are still on the increase, FAO said today. Cereal production increased in 2008 however, international prices of most cereals remained at record high levels. Both Europe and the United Sates saw an expansion winter grain plantings and good weather this when coupled with a generally satisfactory outlook elsewhere lead to the increased production forecast.

The FAO press release refers to the FAO’s recent Crop Prospects and Food Situation report. Cereal stocks are shrinking but the demand is strong and this combination, reduction in supply and increase in demand, is keeping an upward pressure on international prices. The year 2007 showed a record world harvest but international wheat prices in January 2008 were 83 percent up from a year earlier. The prices are high and total world trade in cereals is expected to peak in 2007/08; this peak is driven in great part by a sharp rise in demand for coarse grains, especially for feed use in the European Union, according the report. Cereal imports for all Low-Income Food-Deficit countries in 2007/08 are forecast to decline by about 2 percent in volume, but as a result of soaring international cereal prices and freight rates, their cereal import bill is projected to rise by 35 percent for the second consecutive year. It is anticipated that Africa will experience an even higher increase. Prices of basic foods have also increased in many countries worldwide, affecting the vulnerable populations most, the report said. Governments, from both cereal importing and exporting countries, have, in an attempt to limit the impact of rising cereal prices on domestic food consumption, taken a range of policy measures, including lowering import tariffs, raising food subsidies, and banning or imposing duties on basic food exports.