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Food Prices To Remain High

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Food prices are likely to rise again on resumed demand for agricultural commodities for food and energy and higher input costs due to rising oil prices, the United Nations’ food agency said Feb. 18.

Food prices fell from 2008 highs due to the global economic downturn, but remained above pre-peak levels and were set to stay high at least in the medium term, the Food and Agriculture Organization said, confirming earlier forecasts.

“We expect prices in the medium term – over the next 10 years – to remain firm but not at crisis levels,” said Abdolreza Abbassian of the FAO’s Trade and Markets Division.

But FAO Director General Jacques Diouf warned that most of the factors that led to the food price surge in 2008 were still present – even though one key difference now was that cereals stocks had returned to normal levels.

“If we get a climate shock in one of the major producing countries, then we are back to square one,” Diouf said, presenting the FAO report on the State of Food and Agriculture.

Renewed income growth in developing countries would power demand recovery and drive commodities and food prices higher, threatening food security, especially for poor people, FAO said.

Growing biofuels demand spurred by mandatory targets and incentives in some countries “irrespective of market conditions” would boost prices of maize and vegetable oils used as feedstock for biodiesel and bioethanol and, in turn, of food commodities.

Higher oil prices would translate into increased production costs for farmers as input prices for chemicals and fertilizers as well as higher transport costs would rise.

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