World faces food shortages

By Emma Graham-Harrison and Ben Blanchard

BEIJING (Reuters) - The world is eating more than it produces and food prices may climb for years because of expansion of farming for fuel and climate change, risking social unrest, an expert and a new report said on Tuesday.

Biofuel expansions alone could push maize prices up over two-thirds by 2020 and increase oilseed costs by nearly half, with subsidies for the industry effectively constituting a tax on the poor, the International Food Policy Research Institute said.

Global cereal stocks, a key buffer used to fight famines around the world, have sunk to their lowest level since the 1980s due to reduced plantings and poor weather, said the institute's director general, Joachim von Braun.

"The world eats more than it produces currently, and over the last five or six years that is reflected in the decline in stocks and storage levels. That cannot go on, and exhaustion of stocks will be reached soon," he told a conference in Beijing.

Countries such as Mexico have already experienced food riots over soaring prices, von Braun added in a report released at the same meeting, held by the Consultative Group on International Agricultural Research.

"The days of falling food prices may be over," said von Braun, lead author of the "World Food Situation" report.

"Surging demand for food, feed and fuel have recently led to drastic price increases ... climate change will also have a negative impact on food production," he added.

Growing financial investor interest in commodity markets as prices climb is fueling price volatility, and world cereal and energy prices are increasingly closely linked.

With oil prices hovering around $90 a barrel, this is bad news for the poor, who have already suffered "quite dramatic" impacts from a tripling in wheat prices and near-doubling in rice prices since 2000, the report said.

More investment in agricultural technology, a stronger social welfare net with particular support for children, an end to trade barriers and improved infrastructure and finance opportunities in less-developed countries, could all help improve food security.

Although increased trade, a key demand of many developing world nations in global talks, would bring economic gains, in many cases it would not significantly reduce poverty, the report added.

WARMING, BIOFUELS LOOM

Global warming could cut worldwide income from agriculture 16 percent by 2020, despite the potential for increased yields in some colder areas and the fertilizing impact on plants of having higher carbon dioxide concentrations in the atmosphere.

"With the increased risk of droughts and floods due to rising temperatures, crop-yield losses are imminent," the report said.

It warned that Africa would be hit particularly hard by changes in weather patterns, in which scientist say man-made gases pumped into the atmosphere are an important factor.

"When taking into account the effects of climate change, the number of undernourished people in Sub-Saharan Africa may triple between 1990 and 2080," the report said.

Biofuels also threaten nutrition for the poor. Under current investment plans, and assuming expansion in nations with high-potential but without detailed plans, maize prices would rise a quarter by the end of the next decade.

Under a more dramatic expansion, prices could climb up to 72 percent for maize and 44 percent for oilseeds, the report said.

Even when next-generation biofuels that use feedstocks such as wood and straw become commercially viable, competition for resources from water to investment capital may continue.

Global food demand is shifting towards higher-value vegetables, diary, fruits and meat as a result of rapid economic growth in developing countries including China and India.

But it can be difficult for smaller farmers to take advantage of the trend because of large retailers' growing grip on the market and their high safety, quality and other requirements.

(Editing by Ken Wills and Jerry Norton)