High food prices to stay: IMF  

March 5, 2011 - 0:0

World food prices are likely to persist, as it will take years for supply growth to respond to growing global demand, the International Monetary Fund (IMF) said Thursday. Going forward, world may face increasing scarcity for land, water and energy, which are the most important inputs of food production, IMF said in its quarterly Finance & Development magazine. The IMF's food price index is now close to the previous spike in June 2008. Though a large part of the recent spike is related to temporary factors, such as weather, the main reasons for rising demand for food reflect structural changes in the global economy that will not be reversed, according to the analysis. The trend increase in food prices can be seen as a reflection, in part, of changing diet patterns of consumers in emerging and developing economies. Consumers in these countries are becoming richer and changing their diet to more high-protein foods such as meat, dairy products, edible oils, fruits and vegetables, and seafood, which are more ""income elastic"" than staple grains, the report said.

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. (Source: RTTNews)