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FAO warns of high, volatile food price effects

10 October 2011 15:50 (UTC +04:00)

â€œPrice volatility makes both smallholder farmers and poor consumers increasingly vulnerable to poverty,â€ the Food and Agriculture Organisation said in an annual report today.

â€œBecause food represents a large share of farmersâ€™ income and the budget of poor consumers, large price changes have large effects on real income.â€

While some large countries could isolate themselves from the food and economic crises through restrictive trade policies and functioning safety nets, small import-dependent countries, especially in Africa, were vulnerable, the agency said.

â€œEven short episodes of high prices for consumers or low prices for farmers can cause productive assets â€” land and livestock, for example â€” to be sold at low prices, leading to potential poverty traps.â€

The Rome-based agency warned that food prices were likely to remain high and unstable, as demand increases in fast growing economies, populations continue to rise, and growth in biofuel demand puts pressure on the food system.

â€œFood price volatility may increase due to stronger linkages between agricultural and energy markets, as well as an increased frequency of weather shocks,â€ it said.

Large short-term price changes could have a long-term impact on development, the agency warned, like hampering childrenâ€™s consumption of key nutrients in early life, â€œleading to a permanent reduction of their future earning capacity, increasing the likelihood of future poverty and thus slowing the economic development processâ€™â€™.

The agency called for more investment in agriculture, including initiatives that help small farmers gain access to markets, and safety nets for alleviating food insecurity.