FAO concerned over surging food prices, wheat output to rise

Unexpected rise in oil cost could further exacerbate global food prices that touched a record high in February this year, UN body FAO said today even as it forecast the global wheat output to rise by  around three per cent in 2011.

Global food prices soared for the eighth consecutive month in February this year on back of rising prices of almost all the commodities except sugar, Food and Agriculture Organisation (FAO) said.

Food price index, a measure of the monthly change in international prices of a basket of food commodities, averaged 236 points in February, up 2.2 per cent from January.

This is the highest record in real and nominal terms since FAO started monitoring prices in 1990, FAO said on its website. 

"Unexpected oil price spikes could further exacerbate an already precarious situation in food markets," FAO Trade and Market division Director David Hallam said.

"This adds even more uncertainty concerning the price outlook just as planting for crops in some major growing regions are about to start," Hallam added. Crude oil prices are hovering at $100.78 a barrel in US.

Amongst the items, Cereals and Dairy products registered major surges, it added. FAO expects tightening of global demand-supply balance in 2010-11.

"...Global cereal stocks this year are expected to fall sharply because of a decline in inventories of wheat and coarse grains. International cereal prices have increased sharply with export prices of major grains up at least 70 per cent from February last year," it added.

The increase in cereal prices in February mostly reflect gains in international maize prices, driven by strong demand amid tightening supplies, the world's apex agriculture body, said.

In case of dairy products, firm world demand continues to underpin prices. However, the recent earthquake in New Zealand, a major supplier, does not seem to have affected global availability of dairy products, it added. 

FAO expects winter crops in the Northern Hemisphere to be generally favourable and forecast the global wheat production to increase by around three per cent in 2011.