Spiralling global food prices, despite record levels of production, are a warning to fast growing developing countries like India to set their farm policies straight if they are to meet the growing demand for food in the years ahead. Global food and edible oil prices, the inflation in which rose almost tenfold last year to double-digit levels, show no sign of offering a reprieve. In the first seven months of the current fiscal year, the annualised price rise has been around 13.8%. This may not be a blip. World cereal stocks are expected to fall to 420 million tonnes by end 2008, the lowest level in a quarter century. International wheat prices have actually doubled since the start of this fiscal, and not only because of lower-than-expected harvests in East Europe and Australia. For the 2008 season, acreage under wheat is expected to expand by 10% in Canada, and by slightly lower percentages in the US and EU, but analysts expect prices to stay high for a combination of other reasons. The Food & Agriculture Organisation (FAO) blames rising global prices on falling output in the smaller developing countries, low levels of global stocks and strong demand from the roaring biofuel industry. Add to this large increases in feedstock demand because of en masse non-vegetarian diet shifts in markets like China, and the implications are clear. Rising food prices could fuel inflation in India just when a lid was thought to have been put on it.
The Union finance ministry?s mid-year review is not oblivious to the danger. It points out that retail prices of rice, potatoes, onions, certain dals and edible oils have gone up by double digits, while those of milk and mutton are uncomfortably high. While the Indian cereal output of around 200 million tonnes projected by FAO this year may paint a comfortable scenario, the country cannot expect to stay isolated of global conditions. Local stocks are low, and being forced to import high-priced wheat again could push up overall prices?something the government would not want as an election year closes in.
In the West, if new incentives are offered for biofuel production in addition to existing farm subsidies, grain flight from India could actually become a possibility. In response, the country may have to re-
examine the incentive system in place for the agriculture sector.
