IMF sees no immediate respite from high food prices

3/07/2011 21:30:33 PM

In a significant remark, the IMF said global food price hikes are likely to stay for some more years as it will take years for supply growth to respond to growing global demand.

In a report published in its quarterly Finance & Development magazine, the IMF said people in developing countries are becoming richer and eating more meat and dairy, meaning more grain for livestock feed and land for grazing animals.

Rising demand for biofuels and bad weather also tightened supply, the report added.

The report said, the world food price index tracked by the United Nations rose to a record in February. Food inflation fueled political unrest across North Africa and the Middle East that toppled leaders in Tunisia and Egypt, the largest wheat importer.

Food output will have to climb by 70 percent by 2050 as the world population swells to 9 billion and rising wealth boosts meat and dairy consumption, the U.N.’s Food and Agriculture Organization says. Producing one kilogram (2.2 pounds) of pig meat can take 3.5 kilograms of feed, U.S. Department of Agriculture data show.

The surge in oil and other commodity prices probably won’t cause a permanent increase in broader inflation, U.S. Federal Reserve Chairman Ben S. Bernanke said in testimony to the Senate Banking Committee last week. Crude oil traded in New York rose 28 percent in the past 12 months.

The unexpected spike in oil prices, triggered by political unrest in the Middle East, is also an indirect contributor to food inflation. High oil prices and policy support have boosted demand for bio-fuels, which in turn, increased demand for feedstock crops.

Fuel is also used in all stages of the agricultural production cycle, from sowing to harvesting to distribution, it said. Another main factor is adverse weather conditions across the globe. Floods in Australia, Pakistan, and parts of India have helped push up the cost of food, as have droughts in China, Argentina, and Eastern Europe.

At the same time, energy prices are again on the rise, with likely knock-on effects for food. The Food and Agriculture Organization (FAO) of the United Nations on Thursday said that its food price index averaged 236 points in February, the highest record since FAO started monitoring prices in 1990

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