Record food prices to rise, warns UN

World food prices soared to a record high in December, according to the United Nations Food and Agricultural Organization (FAO).

Its monthly food price index reached 214.7 in December, pushed up by higher prices for sugar, cereals, oil and fats. The previous record high was 213.5 in June 2008, but the index had fallen as low as 139 by February 2009.

Despite the short-term volatility, both the FAO and the Organisation for Economic Co-operation and Development (OECD) forecast food prices to rise further in the medium and long terms. (article continues below)

The forecasts are based on the resumption of economic growth, above all in developing countries.

Increased demand owing to biofuel production, a growing world ­population and changes in eating patterns will also help push up prices, the FAO says.

Environmental problems, including droughts in some of the world’s major food producers, and higher production input costs are putting pressure on the production and supply side.

However, global agricultural production will generally remain on track to satisfy estimated demand, according to the FAO.

World net production is expected to grow 22% over the period to 2019, while the UN reports population growth has declined to 1.2% a year.

Food price inflation will have an effect on all countries, but especially on developing nations, most notably India, where inflation is running at close to 10% and food forms a substantial part of the consumer price index.