Sharp rise in FAO food price index

 By JAMES LARAKI

UNFAVOURABLE wea­ther conditions and Black Sea tensions have pushed world food prices to 10-month highs, the Food and Agricultural Organisation (FAO) says. 

The FAO Food Price Index rose sharply in March, up 4.8 points, or 2.3 per cent. 

The Index, a commodity basket that measures monthly changes in global food prices, averaged 212.8, the highest level since May 2013. 

The highest recorded was in January 2011 with 231 points since FAO started measuring food prices in 1990. 

FAO senior economist, Ab­dol­reza Abbassain said the Index was influenced, as expected, by unfavourable weather conditions in some major growing areas and geopolitical tensions in the Black Sea region.

These and other influences are reviewed in greater detail in the AMIS Market Monitor report. 

The Market Monitor is a product of the Agricultural Market Information System (AMIS). 

It covers the international mar­kets for wheat, maize, rice and soybeans, giving a synopsis of major market developments and the policy and other market drivers behind them. 

The analysis is a collective assessment of the market situation and outlook by the 10 international organisations that form the AMIS Secretariat. 

Ultimately, the report aims at improving market transparency and detecting emerging problems that might warrant the attention of policy makers. 

AMIS is hosted at FAO headquarters in Rome (http://www.amis-outlook.org/amis-monitoring/monthly-report/en/). 

Abbassian pointed out that AMIS has an important role to play in reassuring international markets, by promoting close dialogue among its participating countries.

“The Food Price Index looked at March trends,” Abbassian said. 

“Markets have started to discard any negative impacts that the current difficult domestic economic conditions may bear on plantings or harvests in 2014.” 

The Index, based on the prices of a basket of internationally-traded food commodities, saw prices increase in all groups except dairy, which fell for the first time in four months (-2.5 per cent). 

The greatest gains were seen in sugar (+7.9 per cent) and cereals (+5.2 per cent). 

While these developments had little impact on supply and demand in the current season (2013/14), they may affect crops to be harvested in the coming months, heightening the uncertainty surrounding markets in 2014/15. 

The causes of increase in food price index are many, including unfavourable weather conditions and geopolitical tensions in the Black Sea region as indicated in the recent report released by FAO. 

Rising demand in emerging economies, diverting land to non-food production (especially bio-fuels) and other issues will continue to affect world food supply and price. During the last food price crisis in 2008, the World Bank estimated that about 870 million people in developing countries were hungry or malnourished. 

FAO says the number had increased to some 925 million.

While there may be many reasons for increasing trend, the bottom line reason appeared to be that the world has been consuming more food than it was producing. 

Simply, the world is not efficient in producing agricultural outputs, especially food commodities.

To be blamed as well is the long-term policy of encouraging cash crops and industrial crops at the expense of food crops. 

However, most importantly, the world is not investing enough in agriculture. 

The sector is grossly underinvested and underused. 

It is often misplaced in policy decision-making and development investments. 

This holds true for Papua New Guinea, as the agriculture sector continues to be neglected over the years.

FAO and other world leaders concerned with food security have argued that the key to long-term food security lies in boosting investment in agriculture. 

Reports indicate that the rising world food price will have severe impact on millions of people in all parts of the world. 

As country, let us explore options on how PNG should make use of this opportunity, not only to produce enough food for our own consumption but for export to needy countries. 

In doing so we may establish new food trade relationships and establish niche markets. 

Once established, it would be easier to continue and maintain such relations.

We certainly have the advantage because of our huge resource base and untapped potentials which are yet to be explored.