UN warns about higher food costs*

BBC - Higher food prices may be here to stay as demand from developing
countries and production costs rise, says an influential report out today.

A report by the UN's Food & Agriculture Organisation (FAO) and the body
for rich nations, the OECD, said prices will fall, but only gradually.

It said the current price spike was higher than previous records, partly
due to bad weather ruining crops.

But factors, such as rising biofuel demand, will keep future costs high.

The FAO said speculators were also to blame for volatile commodity markets.

Soaring bills

In its annual Outlook report, the FAO predicted beef and pork prices
might be 20% higher by 2017, wheat could be up to 60% more expensive and
the cost of vegetable oils might rise by 80%.

Prices will level off at a far higher average level than seen before the
crisis erupted. The long era of cheap food is over
David Loyn,-BBC international development correspondent

Long era of cheap food is over

World prices for wheat, maize and oilseed crops doubled between 2005 and
2007, and while the FAO expects these prices to fall, the decline may be
slower than after previous spikes.

As well as key factors such as weather, supply and demand and energy
costs, speculators are also to blame for making commodities prices more
volatile, the FAO says.

It is also concerned about the increasing use of crops for biofuels.

"Biofuels are the largest new source of demand for agriculture and are
causing higher prices," said Merritt Cluff, one of the authors of the
report.

"We are very worried particularly about biofuel policy. US government
incentives for ethanol producers are distorting the market," he added.

Looking ahead, climate change may also affect crop harvests, pushing up
prices further.

But the hardest-hit by rising food costs will be the poorest people on
the planet, where a large share of income is spent on food, the FAO warned.

"We are hugely concerned about the poorest and we expect the number of
undernourished people to rise," said Mr Cluff.

The FAO believes the commodity boom has forced some in the developing
world to spend more than half their income on food, particularly those
countries that have to import much of their food.

But even the its outlook may be too conservative, as the BBC's
International development correspondent David Loyn highlighted,
predicting price of black gold was a near impossible task.

"One key assumption made is that crude oil prices will peak at $104 a
barrel by 2017. The price is already well above that, and some reputable
analysts are now predicting oil will go to $200 a barrel," he said.

And he added that while there may be a drop in food prices in coming
years, "there is a sting in the tail.

"Prices will level off at a far higher average level than seen before
the crisis erupted," he said. "The long era of cheap food is over."

Rising food bills have triggered protests, riots and panic buying in
some developing countries.

Earlier this month, the FAO calculated the amount of money being spent
globally on importing food was set to top $1 trillion (£528bn) in 2008,
a 26% rise on the previous year.

However, the food crisis could also shift the epicentre of global
agriculture from developed to developing countries and the FAO predicts
that emerging economies will dominate in the production and consumption
of most basic foods in 10 years.