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Low food stock poses risk of spike in global prices, warns UN

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By Reuters

Posted  Thursday, February 7  2013 at  21:16

In Summary

  • The Food and Agriculture Organisation (FAO) said its food price index, which measures monthly price changes for a basket of cereals, oilseeds, dairy, meat and sugar, averaged 210 points in January, unchanged from December.
  • The Rome-based agency raised its view of world cereal output in 2012 to 2.302 billion tonnes, up 20 million tonnes from its previous forecast, but still two per cent lower than the bumper crop in 2011.
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World food prices stabilised in January after falling in the previous three months, the United Nations food agency said Thursday but it warned that adverse crop weather could cause violent price spikes due to tight grains stocks.

Global food prices surged in mid-2012 following the worst US drought in more than half a century and dry weather in other key grains exporters, raising fears of a food crisis similar to the one in 2008.

But prices eased in the last three months of last year due to expectations that large South American production would replenish tight global cereals supplies.

The Food and Agriculture Organisation (FAO) said its food price index, which measures monthly price changes for a basket of cereals, oilseeds, dairy, meat and sugar, averaged 210 points in January, unchanged from December.

The Rome-based agency raised its view of world cereal output in 2012 to 2.302 billion tonnes, up 20 million tonnes from its previous forecast, but still two per cent lower than the bumper crop in 2011.

Its outlook for world cereal stocks by end of season in 2013 remained unchanged at 495 million metric tonnes, down three per cent from their opening level.

“We should be expecting excellent crops in 2013,” said FAO senior economist Abdolreza Abbassian. “But the weather could turn negative, and because we are in a tight situation, prices could react violently and rise,” he said.

FAO expects wheat output to increase in 2013, due to a 4-5 per cent increase in the winter wheat area in the EU and good weather.

However, the outlook is less favourable in the US due to dry conditions in some areas.

It said that prospects were also good for the maize crop in South America’s main producing countries.

An increase in production is crucial for markets, Abbassian said, because demand is also likely to rise as economies start to recover in 2013.