FAO Food Outlook Predicts Continued High Food Prices Worldwide

By Amanda Strickler

Biannually, the United Nations Food and Agriculture Organization (FAO) publishes the FAO Food Outlook report which provides information on market trends for food staples including cereals, oils and fats, sugar, meat, and dairy. The May 2011 Food Outlook indicates a 37 percent increase in average food prices since the May 2010 report.

FAO data shows a global price hike in food staples of 37% since May 2010. This is despite overall increases in food production. (Image credit: FAO)

Unpredictable climatic conditions in several of the world’s major crop-producing countries are the main reason for high food prices, notes FAO.  Drought in Russia and the Ukraine in 2010 led to cereal export bans and export limitations respectively. Dry conditions in Europe and the U.S. have hindered wheat production, while unusually wet climates in other regions of the U.S. resulted in lower than expected corn yields.

These unusual weather patterns have led to a decline of staple crops entering the market.  Countries are either holding on to reserves to prevent domestic food insecurity—like what’s happening in Russia; or countries have depleted stockpiles and have low current yields to replenish them, like in the U.S. The result is less food being traded on the world market which means higher food prices.

Simultaneously, global crises, including Japan’s earthquake and tsunami and political unrest in the Middle East and North Africa region, have contributed to general market instability.

With food prices are at a near-record high, FAO credits the increasing food production within traditionally import-heavy countries as the factor preventing a recurrence of the 2008 food crisis. But a jump in regional cereal production does not change the fact that many poor countries still rely heavily on food imports to feed their growing populations. FAO estimates that the 2011 food prices could result in these nations experiencing a food import cost jump of 30 percent.

Russia plans to lift its wheat export ban next month, Ukraine has increased wheat plantings for 2011, and the U.S. has expanded acreage for maize cropping. But these agricultural preparations depend heavily on stable weather, which is increasingly unpredictable because of climate change.

Markets and Trade Division Director of FAO David Hallam notes that, “The general situation for agricultural crops and food commodities is tight with world prices at stubbornly high levels, posing a threat to many low-income food deficit countries. Low agricultural stocks and uncertain weather means this threat will likely continue—FAO predicts world food prices to  remain high and volatile for the remainder of 2011.

Amanda Strickler is a research intern with Nourishing the Planet.

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