Era of cheap food is over: World Bank

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Falling productivity and high oil prices are likely to keep global food prices at elevated levels for another decade, a top World Bank official said in Mumbai.

"Oil prices are not going to come down. The era of cheap food is over and prices are likely to remain high for at least the next ten years," World Bank South Asia Region Vice-President Praful Patel said.

He said the current situation has "caught the whole world by surprise" and the crisis was due to a combination of factors, he said.

The effective measure in the South Asian region will be a pro-poor and pro-agriculture approach with "coordinated and cohesive" policies and implementation, he said.

A global financial mechanism to fund programmes for enhancing agriculture productivity was required and the World Bank is setting up a special trust fund of USD 800 million to support such initiatives.

"The World Bank will contribute USD 50 million from its net income, while the remaining will be raised through donors like various UN agencies," Patel said.

The global bank has already increased its South Asian commitment for agriculture to USD one billion from USD 300 million last year.

A substantial part of these funds will be diverted towards R&D to improve the farm productivity and develope high quality seeds.

"This is in addition to what the World Bank will be spending on building roads in rural areas," he said.

Commenting on the rising food prices, Patel said one of the root causes is supporting and sustaining huge agricultural subsidies by the Western World.

He suggested that the issue should be addressed on priority and subsidies should be "eliminated completely". As per rough estimates, the farm subsides to farmers of the Western World are to the tune of USD 300 billion. The high oil prices too contributed to the crisis as the entire region is a net importer of oil.

He said farm productivity has to be increased but deforestation is not the answer. "There is potential for increasing the productivity through R&D and the process has begun."

Failure of wheat producing countries, especially the major producer Australia, too affected reliable supplies, he said.

Giving example of the US, Patel pointed out that competition between people and cars (biofuels) was also pushing up prices.

"In US, they are producing maize for biofuels which had some affect on the food supply," he said.

The South Asian countries are making efforts to increase income of the people to pull them out of poverty, which has led to a change in their food basket.

"Not that Indians are eating more food," he quipped on the recent statement by US President George W Bush that rising consumption in India and China had fuelled food price rise.