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stocks are set to keep prices high and volatile in 2011 and 2012, the United Nations’ food agency said.

Rising food prices have become a major political concern after they helped fuel protests earlier this year that toppled rulers in Tunisia and Egypt, with unrest spreading through North Africa and the Middle East, major grain importing regions.

World food prices fell in May compared with April, driven by declines in cereals and sugar prices, but remained well above the year-ago period, according to data released by the UN Food and Agriculture Organisation yesterday.

The FAO Food Price Index, which measures price changes for a food basket of cereals, oilseeds, dairy, meat and sugar, fell to 232 points in May from 235 in April but was still 37 percent above May 2010.
“The general situation for agricultural crops and food commodities is tight with world prices at stubbornly high levels, posing a threat to many low-income food deficit countries,” David Hallam, FAO’s director of

Markets and Trade Division, said in a statement.
Global cereals output is expected to rise 3,5 percent to 2,315 billion tonnes this year, recovering after a 1 percent fall in 2010, but it would not be sufficient to rebuild strong stocks which could stabilise prices, FAO said in its key Food Outlook report (www.fao.org).

The next few months will be critical in determining how major crops will fare this year, the report said.

Although prospects are encouraging in some countries such as Russian and Ukraine, weather conditions, featuring too little and in some cases too much rain, could hamper maize and wheat yields in Europe and North America, it said.

World wheat output is seen rising 3,2 percent to 674 million tonnes this year, but wheat stocks are seen down 2,6 percent at the end of 2011/12 season to 183 million tonnes, the Rome-based agency said.
World cereals stocks at the end of 2011/12 season are expected to edge 0,8 percent higher to 494 million tonnes, still well below 534 million tonnes at the end of 2009/10 season.

“With total cereal production barely meeting consumption, international prices are likely to stay high, especially in the wheat and coarse grain markets,” the FAO said.
Winter wheat futures in Chicago in May were about 75 percent higher than in the same period of last year, prompting markets to expect high prices in the first half of the 2011/12 marketing season, which starts in July, the FAO said.

Russia’s decision to lift its grain export ban from July could put some downward pressure on prices but, with an uncertain crop outlook in the United States and in major EU producers, it said: “International prices are expected to remain volatile.”

Early in May, major international grain markets were hit by the biggest commodities sell-off since 2008, but concerns about adverse weather damaging crops in the biggest producing countries have given some support to prices.

Soaring international prices of grains and vegetable oils are likely to help raise global costs of imported foodstuffs by 21 percent this year to a record of US$1,29 trillion, surpassing the US$1 trillion mark for the third time in the past four years, the FAO said.

The poorest countries are going to be hit hardest because their food import bill is expected to surge 30 percent and account for roughly 18 percent of all their import spending, the FAO said.
Governments, especially in developing countries, are trying to contain food prices to avoid a repetition of the 2007/2008 food crisis, when soaring prices sparked street riots. Belarus in May decided to freeze some food prices. – Reuters.