Era of Falling Food Prices Comes to End as World Population Adds 2 Billion

(Bloomberg) – The era of falling food prices has come to an end with the world population set to add another 2 billion people, according to Cargill Inc., the U.S. farm commodities trader.

The United Nations’ Food and Agriculture Organization has said global food output must rise 70 percent by 2050 to feed a world population expected to grow to 9 billion from 7 billion now and as increasingly wealthy consumers in developing economies eat more meat. Food prices tracked by the FAO climbed to the highest ever a year ago on surging grain prices.

“You don’t have to be a reviving bull on commodities to believe that the era, which went from the 50’s, 60’s to 70’s and early 80s, of ever decreasing food prices in real terms has probably come to an end,” Paul Conway, vice chairman of Cargill, said at the Kingsman sugar conference in Dubai yesterday. The conference is continuing through tomorrow when Jacob Robbins, managing director of global sweeteners at The Coca-Cola Co., are among the scheduled speakers.

The FAO food-price index averaged 228 points last year, 23 percent more than in 2010 and above the 200 points recorded in 2008, when food riots erupted from Haiti to Egypt. Prices since then have declined 11 percent by December.

Cargill, based in Minnesota, trades all kinds of farm commodities, including cocoa, soybeans, corn, sugar, meat, wheat and ethanol. Conway is based in Cobham, England. Wheat has doubled since the end of 2005, raw sugar is twice the price in December 2008 and orange juice climbed to a record last month.

Group of 20 farm ministers agreed to a plan last year in June to set limits on export bans and create a crop database to tackle what French President Nicolas Sarkozy called the“plague” of rising food prices.

Hungry People

As many as 925 million people already faced hunger worldwide in 2010, based on the FAO’s estimates. In response to the 2008 food price crisis, countries from India and Egypt to Vietnam and Indonesia banned exports of rice, a staple for half the world. Russia in 2010 banned cereal exports after the country’s worst drought in at least half a century destroyed crops and cut production, sparking a surge in grain prices across the world. Ukraine also restricted exports.

The desire to produce all the food needed locally is“complete nonsense,” Conway said. Export bans in 2008 were a consequence of the desire for self-sufficiency, he said. “That disrupted international trade and we believe exacerbated food price rises in that year,” he said.

The FAO’s index of 55 food items fell 2.4 percent to 210.99 points in December from 216.1 in November. The gauge slipped 4.1 percent in October, the biggest drop since March 2010, after rising to a record 237.9 in February. The January index is set for release on Feb. 9.

“The world’s farmers, some of the smartest businessmen that there are, can produce enough food to feed the next two billion people,” Conway said. “We are very confident about that. However, they need help.”

To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net