FAO says wheat, corn prices falling; biofuels absolved; rice still rising

In Canada, FAO officials said in Senate testimony that recent price rises for grains are the result of falling yields and drought, not biofuels, and noted that wheat prices have dropped by 50 percent and corn was showing signs of entering a price decline phase. FAO economist Abbassian added that “Rice is an exception. Perhaps one could qualify it as a sort of a bubble. It’s a thin market. We have five exporters. Three of them don’t want to sell anything. Obviously prices go through the roof. But the moment one of them decides to open up the border, perhaps it collapses,” Abbassian said in noting a 500 percent increase in rice prices due to hoarding.

The U.N. Food and Agriculture Organization’s World Food Program said that they are seeing an urgent problem with world hunger resulting from rising food prices.

The FAO’s global food price index rose 40 percent in 2007 compared with 9 percent in 2006, and food riots have occurred in Mexico, Morocco, Uzbekistan, Yemen and Senegal. The executive director of the World Food Program said that the diversion of 100 million tons of cereals for biofuels, are the cause of falling reserve stocks that are creating the price surge. The director said that the market will eventually adjust to produce more grain, and that in the long term, higher prices would result in investment in African farming for the first time in decades.

The FAO released a report saying that 40 nations face critical food shortages, for reasons including climate change, higher meat consumption in developing countries, crop failure, war, and diversion of food crops for biofuels.

Top FAO official Jeff Tschirley, recently said “FAO strongly feels that food security and environmental considerations must be fully addressed before making investments or policy decisions, and we are actively working to ensure this happens. However, a moratorium that ignores the potential of biofuels to support rural development and assist the economies of developing countries would not, in our view, be a constructive approach to this topic.” He said that the description of biofuels as a “crime against humanity” by Dr. Jean Ziegler, UN Special Rapporteur on The Right to Food, was regrettable.

The U.N.’s Food and Agriculture Organization (FAO) has also released a decision-support tool to assist countries in planning their entry into biofuels production. The analytical framework allows government to assess biomass potential; biomass production costs; the economic bioenergy potential; macro-economic consequences; national and household-level impact and consequences on food security. The tool will be tested in Peru, Thailand and Tanzania – before it is is made available to the international community at large.

Regan Suzuki of the FAO recently said that while biofuels are better for the environment and promote energy security, the effect of competition for land, and the potential for water shortages were areas for concern.

She said that “Biofuels have become a flash point through which a wide range of social and environmental issues are currently being played out in the media,” and said that countries such as India have rolled out biofuels plans without considering the potential effect on deforestation and other negative environmental effects.

In a recent report addressing the food vs. fuel debate, Informa Economics released a 20-year study exonerating ethanol for having a serous impact on food price rises.

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