FRANKFURT (MNI) – Upside pressure on food prices will remain in
place over the long term, the European Central Bank concluded in its
most recent Monthly Bulletin.
Dietary changes in emerging markets combined with the use of food
crops for biofuels imply that demand will remain robust for food
supplies. Biofuels are thought to impact especially demand for sugar and
maize.
On the supply side, changes in technology, and not necessarily the
expansion of arable land, has accounted for most of the production
increase in developing countries and nearly all in advanced economies
over the last three decades, the bank commented.
But, “agricultural technologies have however remained largely
unchanged over the last two decades, which implies that higher yields
cannot be obtained without further improvements.”
“Stable food prices during this period have led to some complacency
about global food concerns and to a reduction in R&D funding,” the ECB
observed.
Higher prices, may, however, prompt both public and private
investment into yield-enhancing technologies, “rather than
cost-cutting”, as was most recently the case, the ECB forecast.
“Taken together, these considerations suggest that there will
remain upside pressure on food prices in the long run, due to robustly
growing global demand,” the central bank concluded.
“While there is scope for supply-side effects to match the rise in
demand, there remains significant uncertainty about the extent and pace
of the ability of supply to meet the expected rise in demand and thereby
help to limit the rise in food prices,” it added.
–Frankfurt bureau; +49-69-720142, tbuell@marketnews.com
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