Poor face less food as grain prices hit high

Poor face less food as grain prices hit high

By Javier Blas in London and Heba Saleh in Cairo

Published: February 14 2008 01:02 | Last updated: February 14 2008 01:02

Record grain prices are ­placing a “heavy financial burden” on developing countries, forcing a small decline in food consumption, the United Nation’s Food and Agriculture Organisation on Wednesday warned.

The world’s poor countries will have to pay 35 per cent more for their cereals imports – taking the total cost to a record $33.1bn (€22.8bn, £17bn) – in the year to July 2008, even as their food purchases decline by 2 per cent. Food consumption per capita will suffer a slight drop.

The rising cereal imports bill has triggered an increase in food subsidies in countries such as Egypt, Oman and Pakistan, retail price freezes in Russia and China, and large reductions in cereals import tariffs.

Prices for wheat on Wednesday hit a high amid robust demand from emerging countries and weather­-related supply disruptions.

Only two months ago, the FAO estimated the poor countries’ cereal imports bill would rise by 25 per cent.

The world’s largest importer of wheat is Egypt. Darwish Mostapha, undersecretary at the ministry of social solidarity, which is responsible for food sub­sidies, said the country was spending much more to control prices.

“We cannot raise the prices of subsidised food so every increase [in international prices] is absorbed by the state,” Mr Mostapha said. “The bread subsidy alone went up by around $820m last year to reach $2.45bn.”

Food price inflation has forced the Egyptian government for the first time in 20 years to relax the rules about who can receive subsidised food. As a result, officials say they expect an additional 10.5m people to be added to the list.

Pakistan last week launched ration cards to provide subsidised food for nearly 7m households after the price of wheat and edible oils, key staples in the country, soared. Food ration cards in Pakistan were mostly abandoned in the 1980s.

Cereals prices are unlikely to come down in the short-term, said the FAO, despite much more wheat having been planted in the northern hemisphere over the winter.

“The current situation is such that it may require significant increases in production of more than one season’s cereal crop for markets to regain their stability and for prices to decline significantly below the recent highs,” the FAO said.

Top-quality spring wheat – in high demand for baking bread – on Wednesday reached a high of $17.31¾ a bushel at the Minneapolis Grain Exchange, the highest price paid in the US for any wheat variety. However, other strains, such as soft wheat in Chicago, traded significantly lower.

“With world demand showing little sign of abating, international prices of most cereals remain high, and some are still on the increase, while reserves are heading for yet another decline from their already low levels,” the FAO said.