World food prices may hit record high in 2013

Global food prices are rising and are likely to touch an all-time high in 2013 due to drought in some parts of the world, according to a report.

It added that governments' interventions to check high food prices by way of export bans and commodity stockpiling could exacerbate commodity price volatility.

"Skyrocketing agri-commodity prices are causing the world to re-enter a period of "agflation", with food prices forecast to reach record highs in 2013 and to continue to rise well into Q3 of the 2013," Netherlands-based Rabobank said.

Also, the Food Price Index of UN body FAO is expected to rise by 15 per cent by the end of June 2013, it said in the report, adding that world food prices are rising once again as drought in the US, South America and Russia have diminished crop prospects and tightened already low inventory levels.

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As a result of drought in key exporting countries and rapid demand growth in developing countries, the combined global wheat, rice, corn and soyabean stocks-to-use is expected to fall to 19.6 per cent in 2012-13, only 0.4 per cent above 2007-08 levels, it added.

According to the Rabobank, "This time around, the most affected commodities are largely used in animal feed (like corn and soyabean) and are not core food staples (such as wheat and rice) of the world's developing economies."

Unlike the staple grain shortage seen in 2008, this year's scarcity will affect feed intensive crops with serious repercussions for animal protein and dairy industries, it said.

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The report "Re-entering Agflation", prepared by the Food and Agribusiness Research and Advisory (FAR) wing of the Rabobank, said global grains and oilseeds prices are likely to remain at a high for at least the next 12 months.

Emphasising that the impact of high food prices on the poorest consumers should be reduced this time around, FAR global head Luke Chandler said, "...purchasers are able to switch consumption from animal protein back towards staple grains like rice and wheat."

"These commodities are currently 30 per cent cheaper than their 2008 peaks. Nonetheless, price rises are likely to stall the long-term trend towards higher protein diets in Asia, the Middle East and North Africa," Chandler added.

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In developed economies - especially the US and Europe - where meat and corn price elasticity is low, the knock-on effect of high grain prices will be felt for some time to come, he added.

Stating that food security remains a highly sensitive issue in many parts of the world, the report said, "We expect to see a return of government interventions, which could exacerbate food and commodity price volatility."

Increases in commodity stockpiling and interventions such as export bans are a distinct possibility in 2012-13 as governments across the globe react to protect domestic consumers from increasing world food prices, it said.