Business | Economy
Food prices 'to stay high for 2-3 years'
High global food prices are likely to linger for two to three years while the world replenishes food stocks, senior White House officials said.
- Reuters
- Published: 00:33 May 15, 2008
Washington: High global food prices are likely to linger for two to three years while the world replenishes food stocks, senior White House officials said.
"Our estimate is that those prices will continue to stay high, not escalate at the same rate as they did last year," Edward Lazear, chairman of President George Bush's Council of Economic Advisors, said.
"Inventories have been depleted and it will take awhile to rebuild those inventories, so those prices will stay high," likely for two to three years, he said.
Disappointing harvests, surging demand in developing countries like China and other factors have sent global commodity and food prices sky-rocketing over last year.
Biofuel production is widely seen as another driver in higher food prices, which jumped 43 per cent in the year through March.
The White House experts underscored that they did not think alternative fuels like ethanol truly play a big role in higher food costs.
"Those who are arguing that the president's increase in the [renewable fuels standard] is contributing to high food prices are incorrect," Keith Hennessey, director of the National Economic Council, said in the same interview.
The White House, embracing biofuels as an alternative to foreign oil, contends that ethanol use accounts for only up to three per cent of the overall increase in global food prices.
Others, including the American Farm Bureau Federation, believe that it accounts for up to 30 per cent of the surge.
US biofuel production relies mainly on corn, but Congress and the administration want to see other fuel sources, like switchgrass or woodchips, become commercially viable soon. About a third of the US corn crop is expected to go to making ethanol in 2008-09, about four billion bushels, up a third from last year.
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