For all those who think that the current spike in food prices is a temporary phenomenon, a major report by two expert bodies in this field may come as a shock. For it predicts that high food prices are here to stay, even if they fall a little from the current record figures.

Moreover, the Agricultural Outlook published by the Organisation for Economic Co-operation (OECD) and the Food and Agriculture Organization of the United Nations (FAO) warns that the populations of as many as 22 countries are at risk of malnutrition over the next decade.

The report, published ahead of a world food summit in Rome, says more genetically modified crops may be needed and suggests a rethink of biofuel programs that are hurting grain supply for food and animal feed.

At the same time, it calls for an end to restrictions on the export of food, with open trade said to be vital in any solution to the record prices that have sparked protests in many countries.

OECD chief economist Angel Gurria added: "The way to address rising food prices is not through protectionism but to open up agricultural markets."

The report forecasts alarming trends in price rise over the next decade as compared to the last ten years (See graph1). The causes cited are poor harvests, notably in countries such as Australia; grains diverted to biofuel; financial investor flows in food commodity futures markets and high oil prices that raise production and freight costs.

Such increased prices would have alarming consequences, especially among the populations of poorer countries where a larger proportion of a household's income goes towards meeting food expenses.

Table 1

Moreover, food prices have a domino effect on prices of other goods also. Therefore, an increase results in large-scale inflation, further compounding the miseries of the affected population.

Again, the impact of food on consumer price inflation is much greater for poorer countries than for the rich ones. In a way, it is an extension of the picture presented by the figures in Table 1.

Table 2

In Rome, the FAO listed 22 countries, most of them in Africa, which had high levels of "chronic hunger" and were "especially vulnerable" to rising food and fuel prices. (See: Video interview with  Philippe Beaugrand, mission chief to Mali, Africa Department, IMF)

The OECD-FAO report said hundreds of millions of people were already going hungry before the price increases but that "the numbers of people suffering from extreme hunger have (now) increased even further.

"In the short term, humanitarian aid for the populations in countries most severely affected is urgently required," the report said.

Food prices and their impact on the world economy will be one of the issues that will be addressed at the OECD Ministerial Council Meeting in Paris on 4-5 June 2008. At a separate summit at FAO headquarters in Rome, on 3-5 June, world leaders, including many Heads of State and Government from around the world, will discuss policies and strategies on how to improve and ensure world food security and re-launch agriculture in rural communities of developing countries.

''Coherent action is urgently needed by the international community to deal with the impact of higher prices on the hungry and poor,'' Jacques Diouf, Director-General of the FAO said at a press conference launching the Outlook in Paris. ''Today some 862 million people are suffering from hunger and malnourishment – this highlights the need to re-invest in agriculture. It should be clear now that agriculture needs to be put back onto the development agenda.''
At the top of the list of 22 endangered populations mentioned in the report are the people of Eritrea, Niger, the Comoros, Botswana, Haiti and Liberia. They are followed in order of severity by Burundi, Tajikistan, Sierra Leone, Zimbabwe, Ethiopia, Zambia, the Central African Republic, Mozambique, Tanzania, Guinea-Bissau, Madagascar, Malawi, Cambodia, North Korea, Rwanda and Kenya.

As remedial measures, the report recommended increased use of genetically-modified crops and a rethink of the current biofuel policy, especially when ''it is not clear that the energy security, environmental and economic objectives….. will be achieved with current production technologies.''

Some other salient features of the report are:

• Both consumption and production is growing faster in developing countries for all agricultural commodities except wheat. By 2017, these countries are expected to dominate trade in most farm products.
•  High prices will be beneficial for many commercial farmers both in developed and developing countries. However, many farmers in developing countries are not linked to markets and are unlikely to benefit from the projected higher prices
• Cereal markets are expected to remain tight as stocks are unlikely to return to the high levels of the past decade.
• Consumption of vegetable oils, both from oil seed crops and from palm, will grow faster than for other crops over the next 10 years. The rise is being driven both by demand for food and for biofuels.

Food and Agriculture Organization (FAO)

FAO is a specialized agency of the United Nations that leads international efforts to defeat hunger. Serving both developed and developing countries, FAO acts as a neutral forum where all nations meet as equals to negotiate agreements and debate policy.

FAO is also a source of knowledge and information, and helps developing countries and countries in transition modernise and improve agriculture, forestry and fisheries practices, ensuring good nutrition and food security for all. Its Latin motto, fiat panis, translates into English as "let there be bread!"

The OECD-FAO Agricultural Outlook 2008-2017

This is the fourth time that the Agricultural Outlook report has been prepared jointly by the Organisation for Economic Co-operation and Development (OECD) and FAO. The report draws on the commodity, policy and country expertise of both organizations in providing a longer-term assessment of future prospects in the major world agricultural commodity markets.

The report is published annually, as part of a continuing effort to promote informed discussion of emerging market and policy issues. This edition of the Agricultural Outlook offers an assessment of agricultural markets covering cereals, oilseeds, sugar, meats, milk and dairy products over the period 2008 to 2017.

For the first time, it also includes an analysis of and projections for global biofuel markets for bioethanol and biodiesel, facilitating the discussion of interactions between these markets and those for the main agricultural feedstocks used in their production.

The market assessments for all the commodities are based on a set of projections that are conditional on specific assumptions regarding macroeconomic factors, agricultural and trade policies and production technologies; they also assume average weather conditions and longer-term productivity trends.

This year's Outlook is set against a backdrop of exceptional increases in prices for many agricultural commodities, and this has posed a considerable challenge in preparing the projections and assessing the ''durability'' of the various influences shaping these prices.