UN Warns of 'Food Crisis' as Prices Continue Surge

A sharp increase of food prices on the international market, mostly driven by a surge in grain and sugar prices, has spurred the UN's Food and Agricultural Organization (FAO) to issue a warning that a food crisis similar to the one experience in 2008 could be on the horizon if proper action is not taken.

The FAO Food Price Index climbed 6 percent in July 2012 after three months of previous decline and indicates that the extreme drought ravaging US croplands and a similar failure in India and elsewhere is having a severe impact food costs.

"There is potential for a situation to develop like we had back in 2007/08," the FAO's senior economist and grain analyst Abdolreza Abbassian told Reuters.

"There is an expectation that this time around we will not pursue bad policies and intervene in the market by restrictions, and if that doesn't happen we will not see such a serious situation as 2007/08. But if those policies get repeated, anything is possible."

Reuters explains that in 2007/08, a "number of major producers imposed various restrictions on exports in an attempt to control domestic prices" and that export bans, quotas, and higher tariffs on rice, corn and wheat caused market reductions which led to soaring prices.

Aid groups met the new FAO numbers with dismay, but not surprise, calling the FAO index numbers a symptom of a 'very sick' global food system.

"This is not some gentle monthly wake-up call," said Colin Roche, a spokesperson for Oxfam International. "It's the same global alarm that's been screaming at us since 2008. These new figures prove that the world's food system cannot cope on crumbling foundations. The combination of rising prices and expected low reserves means the world is facing a double danger."

Roche warned that without action millions more would join the billion people who are already hungry in the world and said that the agricultural policies of the world's wealthiest nations were as much to blame for the impending crisis as anything.

Members of the G-20, said Roche, must "reverse decades of under-investment into small-holder agriculture. The US and EU must ditch their crazy biofuels programs that turn 40% of US corn, for example, into gas for cars and trucks. We must tackle the causes and effects of climate change that will eventually, without action, overwhelm our food system entirely."

"These price hikes are being driven by more than just a drought in the US corn-belt and problem harvests elsewhere. As bad as they are, our food system should be more resilient than this," Roche said.

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