Cereal prices, particularly for wheat and maize, have reached a 10-year high, the Food and Agriculture Organization said in its latest Food Outlook report published on Thursday.
Poor harvests in key producing countries and a fast-growing demand for biofuel have driven up grain prices, while supply constraints have also dominated the rice economy, the report said.
Global expenditure on imported foodstuffs in 2006 could reach ahistoric high of 374 billion U.S. dollars, over 2 percent more than the previous year's level. Import bills for developing countries are anticipated to rise by almost 5 percent from 2005, mainly as a result of price increases rather than an increase in the actual volume of food imports.
FAO anticipated that many countries will reduce purchases, not always in response to improved domestic supplies but rather because of high international prices. Moreover, higher energy costs may force many of the poorer developing countries to curtail expenditures on imported staples to sustain their fossil fuel needs.
FAO's latest forecast of world wheat output in 2006 stands at roughly 592 million tons, almost 33 million tons, or a 5.3 percent, drop from 2005. A turnaround is likely, however, with increased winter plantings and good growing conditions raising expectations for a strong rebound for the 2007 harvest, FAO said.
World production of coarse grains in 2006 is estimated to stand at 981 million tons, down by 2.1 percent from 2005 but above the average for the past five years. Current strong prices are likely to encourage higher plantings and larger production in 2007, but if industrial use, mainly for ethanol, continues to grow at the current pace, it may take more than one good crop season for prices to retreat significantly from their current highs, the report said.
Typhoons, drought, flooding, diseases and insect attacks have marred prospects for rice crops in 2006, so virtually no growth in global production is anticipated this year. The outlook for 2007 rice crops in the southern hemisphere was also negative, according to the report.
Oilseed prices have also been on the rise, but gains have been well short of those witnessed for cereals, which is likely to trigger a shift away from oilseed cultivation toward more profitable cereal crops in the coming season. This will exacerbate current imbalances, especially in the vegetable oil markets, which have seen demand rising faster than production, FAO said.
