The world faces "the real risk of a food crunch" if governments do not take immediate action to address the agricultural impact of climate change and water scarcity, according to an authoritative report out today.

By Javier Blas in London, January 26 2009

     The world faces "the real risk of a food crunch" if governments do not
take immediate action to address the agricultural impact of climate change
and water scarcity, according to an authoritative report out today.

     Chatham House, the London-based think-tank, suggests the recent fall
in food prices is only temporary and that they are set to resume an upward
trend once the world emerges from the current downturn.

     "There is therefore a real risk of a 'food crunch' at some point in
the future, which would fall particularly hard on import-dependent countries
and on poor people everywhere," the report states. "Food prices are poised
to rise again."

     The warning is made as agriculture ministers and United Nations
officials gather from today in Madrid for a UN meeting on food security that
is likely to conclude that last year's food crisis, with almost 1bn people
hungry, is far from over.

     The UN will warn ministers in Madrid that "as the global financial
crisis deepens, hunger is likely to increase" under the impact of rising
unemployment and lower remittances, according to three officials briefed
ahead of the meeting.

     The prices of agricultural commodities such as rice and wheat jumped
to a record high last year, triggering food riots from Haiti and Egypt to
Bangladesh and Cameroon and prompting appeals for food aid for more than 30
countries in sub-Saharan Africa.

     The cost of food commodities had fallen since then, but Alex Evans,
author of the Chatham House report and an expert at New York University,
said that "even at their somewhat diminished levels current prices remain
acutely problematic for low-income importdependent countries and for poor
people all over the world".

     Josette Sheeran, head of the UN's World Food Programme, said she was
expecting that this year would be at least as "challenging" as last year,
when the number of undernourished rose by 40m to 963m people. "We are not
seeing an alleviation of the hunger pressure," she told the Financial Times.

     In addition, agricultural commodities prices have recovered in the
past two months on the back of lower winter plantings in the US and Europe
and a severe drought in Brazil and Argentina, two of the largest producers
of food commodities.

     Since December, wheat prices have risen 15 per cent, corn 17 per cent
and soyabean 22 per cent. In contrast with other raw materials such as oil
or aluminium which have plunged back to the levels of 2002-05, agricultural
commodities are trading higher than they were 12 to 18 months ago.

     During the medium term, the report states that "long-term resource
scarcity trends, notably climate change, energy security and falling water
availability", will put pressure on prices and production, together with
"competition for land and higher demand resulting from increasing affluence
and a growing population". The report recommends investment in farm
production and international aid.