Global Food Prices to Rise 40% in Coming Decade

June 6, 2013Marketsby EW News Desk Team

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Rising global food demand will push prices up 15 to 40 percent over the coming decade as consumption outpaces production growth said the United Nation’s food agency and the OECD on Thursday, warning that governments will have to increase investment in agriculture to boost food security.

Global agricultural production is expected to grow 1.5 percent a year on average over the coming decade, compared with annual growth of 2.1 percent between 2003 and 2012, according to a new joiknt report published by the Organisation for Economic Cooperation and Development and the Food and Agriculture Organisation.

The report blamed the output slowdown on “limited expansion of agricultural land, rising production costs, growing resource constraints and increasing environmental pressures” as the key reasons behind the trend.

While the world’s population is only expected to grow by one percent a year over the same period, food prices are expected to climb 15 to 40 percent, fuelled by stronger demand, including for biofuels, and higher incomes and rapid urbanisation in developing countries.

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"We would urge governments around the world to begin to shift and to shift quickly from old-style policies to a greater focus on productivity and innovation," said Ken Ash, director general of the OECD's trade and agriculture division. "If we carry on blissfully as if nothing has changed in the world, there could be a problem."

Higher prices will have their biggest impact in developing countries where some families spend up to 60 percent of their incomes on food, added Merritt Cluff, an FAO economist.

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In a special report, the OECD and FAO said China, with one-fifth of the world’s population, high income growth and a rapidly expanding agri-food sector, will have a major influence on world markets.

China is projected to remain self-sufficient in the main food crops, although output is anticipated to slow in the next decade due to constraints on production, land degradation and water depletion, and greater production variability due to climate change.

According to FAO estimates, China’s food security has improved with the number of undernourished falling by almost 100 million since 1990, despite adding an additional 200 million people to its population.

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