Food prices will remain high for long - World Bank

By Gamini WARUSHAMANA

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The World Bank (WB) last week warned that food prices would remain high for a long period of time and recommended that countries ensure household food security, lower trade restrictions on food especially staple food.

World Bank experts participated in a video conference organised by the WB under “Food Prices: A Global Perspective”.

The discussion focused on the impact of high food prices in South Asia. There was a lively discussion that connected experts at the WB head office in Washington DC, Pakistan, India, Bangladesh and Sri Lanka.

Food prices will remain high for a long time due to several reasons. Supply restrictions and stockpiling of food has created intense pressure on prices. India and the Philippines have enforced export restrictions and Malaysia and Russia have enforced price control.

Prices will come down but not to the level that prevailed two or three years ago.

Bio fuel production is increasing and governments encourage it. In Europe, US maize is used to produce bio fuel. More lands are used to cultivate crops that produce bio fuel affecting food supply.

The rising crude oil price is another factor. It pushes the cost of production as fertiliser prices are increasing.

However, the supply may respond to the high food prices. But production capacity is limited. Today grain stocks are at its lowest. Speculation is another factor and hedge funds and other investors have started investing more on food futures.

Experts discussed the paradox of whether a global economic slowdown can co-exist with rising food prices. On one hand, it is projected that a global economic slowdown may result in lower inflationary expectations and lower commodity prices (oil, metal and food) as income goes down.

On the other hand, food prices are on the rise, because of rising income in emerging markets, increased demand for ethanol and the depreciating US dollar.

In 2007, the international food price index rose by nearly 40% compared to 9% in 2006.

In the first three months of 2008, prices increased by an additional 50%. Experts said that South Asia might face a severe impact due to the food crisis because it is the largest net importer of food, oil and metal relative to its GDP.

Therefore, food prices will have an impact on growth and poverty in South Asia.

The World Bank estimates that a doubling of food prices over the past three years could potentially push 100 million people in low-income countries deeper into poverty, with obvious welfare and nutritional consequences.

These effects could be especially detrimental in South Asia which accounts for 36 per cent of all undernourished people in the developing world, experts said.

Meanwhile, WB President Robert B. Zoellick called for a new deal for global food policy.

This new deal should focus not only on hunger and malnutrition, access to food and its supply but also the interconnections with energy, yields climate change, investment and the marginalisation of women and others and economic resilience and growth.

In a statement, Zoellick said that the world should help those whose needs are immediate.

The UN’s World Food Program requires at least an additional $500 million of food supply to meet emergency calls. The US, EU, Japan and other countries must act now to fill this gap. If not, many more people will suffer and starve.