Business | Markets
Food prices likely to show a downward trend - EU
Global food prices are likely to move in a downward trend, after recent record highs in key areas such as grain and dairy, as supply of basic commodities slowly begins to increase, Europe's farm chief said on Monday.
- Reuters
- Published: 00:21 May 20, 2008
- Mariann Fischer Boel with Irish agriculture minister Brendan Smith at the meeting of EU agriculture ministers in Brussels.
- Image Credit: EPA
Brussels: Global food prices are likely to move in a downward trend, after recent record highs in key areas such as grain and dairy, as supply of basic commodities slowly begins to increase, Europe's farm chief said on Monday.
While adverse weather conditions in many regions over several seasons have hit supply, the situation now seems to be returning to normal and would take some pressure off prices, EU Agriculture Commissioner Mariann Fischer Boel said.
But higher food prices were not a temporary phenomenon due to underlying structural factors, she told a meeting of the EU's 27 agriculture ministers.
"Prices are likely to fluctuate in the medium term around a level that is higher than what we have seen in recent decades," she said. "But we do not think that the record levels reached in recent months are likely to persist."
"With the temporary factors diminishing in importance and when the supply response fully sets in, we could see prices abate - how much, we don't know. But the tendency in the market is pointing downwards, both for cereals and for milk prices."
Fischer Boel singled out a number of supply-side factors to blame for the recent price surges, like the "very damaging effects" of grain export curbs imposed by major suppliers Russia and Ukraine, and also US biofuels policy - which she said had affected both maize and soybean markets.
"I have no doubt that the growing speculative activity on futures markets for agricultural commodities has contributed to driving up prices and amplifying price movements," she said.
Earlier, at the same meeting, current EU president Slovenia circulated a paper to ministers saying Third World farming industries might benefit from the food price rises as market conditions provided an opportunity for sectoral development.
"A medium and long-term response should focus on the support to the development of agriculture in these countries," it said.
"In this respect, high prices should not be considered simply as a threat, but also as an opportunity to boost the development of the agricultural sector all over the world."
The EU says it has already done a lot to alleviate pressure on food prices, such as raising milk quotas and temporarily suspending cereal import tariffs as well as the requirement for certain amounts of arable land to remain fallow between crops.
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