High grain prices in the long run may lead to more riots and discontent in developing countries which governments must prevent beforehand, a senior official at the UN Food and Agriculture Organisation (FAO) told Xinhua news agency yesterday.

Abdolreza Abbassian, the FAO's secretary of the Intergovernmental Group on Grains, warned that most developing countries are most vulnerable to changes in food prices because they depend upon world markets to import food. Therefore they are also the most vulnerable to social and economic instability, the FAO secretary argued.

"Poorer countries put 66 percent of their expenditure on food, so you can imagine what a one-dollar increase in the price of a good can trigger in a poor country where a lot of people may have only one-dollar income a day," Abbassian said.

Another danger to social stability stems from an issue often underestimated, which is polarisation as a result of rapid development, Abbassian said.

In many countries, people are getting richer and moving to urban centres for new jobs. Economic growth and development have brought urbanisation at a scale and pace that people and governments could not have predicted. There are not only beneficiaries, but also victims, the FAO secretary said.

During the process, "we are leaving behind more people who I call 'don't haves' because they simply have no money and who were hungry even when prices were half as high," he said.

"We are therefore moving into a polarised world even within a same developing country, where the number of educated and skilled workers is rising at a pace too rapid for governments to be able to provide them with jobs and meet their expectations," he said.

Food 'primary trigger of anger'

Moreover, Abbassian said that people, especially those in developing countries, are facing a new source of discontent: As changes have been happening very fast and unchecked there, a volatile situation is emerging where the poor and the new rich live side by side in the same city.

He gave a prototype of what he called the "urban poor" - a young, unemployed engineer living with his family who cannot afford to start his own family. As an engineer, he is expected to be driving a car or raising a kid, but instead he goes to the supermarket and discovers he cannot afford a price increase.

That will make him angry, prompting him to challenge the government that must understand how to meet his expectations, the FAO secretary said.

"A skilled worker will not complain if rents and car prices go up, but his first complaint will be if he cannot feed his family. Food therefore becomes the very primary trigger of anger," he said.

Abbassian stressed that the real issue at stake was therefore not merely controlling food prices, but giving governments the right tools to develop their agricultural sectors and become efficient in the long run - and this was precisely what the FAO has been doing for a long time.

The FAO secretary ruled out the existence of a food crisis but stressed the negative impact weather and market speculation may have on grain prices.

The official attributed the current price increases to the recent unfavorable weather conditions that between the latter half of 2010 and the beginning of this year have first caused droughts in Russia, triggering an export ban.

Weather unpredictability

Moreover, floods in Pakistan and Australia and dry conditions in Latin America all made it difficult to predict production, Abbassian said.

"Since July 2010, almost every month we've had a surprise in weather conditions, and no forecaster will bet on anything before he sees the harvest, and that means we will have to wait till the summer," he said.

Markets function well with expected developments, but what makes them volatile and often dangerous are unexpected developments like natural disasters, he explained, adding weather will thus continue to keep prices precariously high until the summer harvests.

Weather unpredictability is also linked to the rising speculation in agricultural markets.

"What we have observed over the last seven years is an excessive volatility that translates in an excess of liquidity coming into the sector.

"It's what I call 'investment tourists,' and this is contributing to the instability and variability of prices," the FAO official said.

In order to keep speculation under control, Abbassian called for the implementation of clear and transparent rules for the benefit of the market and its participants - a way to know who are the actors, buyers and sellers and the reasons for their actions.  

- Bernama