U.N. FAO calls on Obama to avert new hunger crisis

MILAN (Reuters) - U.S. President-elect Barack Obama should make fighting world hunger a top priority as the global economic slowdown threatens to trigger a new food crisis, the head of the United Nations' food agency said on Thursday.

Record crops this year and a recent fall in food prices should not create "a false sense of security," because they come against the backdrop of an unfolding global economic decline, the Food and Agriculture Organization (FAO) said in a report.

The United States should call a World Summit on Food Security in the first half of 2009 "in order to reach a wide and common consensus on the definitive elimination of hunger from the world," FAO Director-General Jacques Diouf said in a message congratulating Obama on his election.

Such a summit should seek $30 billion a year to boost rural infrastructure and farm productivity in the developing world, aiming to double output to ensure food security for a world population that is set to reach 9 billion by 2050, Diouf said.

"The summit should also lay the basis for a new agricultural trade system offering farmers in developed and developing countries alike the chance to make a decent living," he said.

RECORD CROPS

World cereals output will jump to record highs this year, hitting 2.242 billion tonnes, including 677 million tonnes of wheat, and will be big enough to meet short-term consumption needs and help replenish depleted global stocks, FAO said.

But the financial crisis is likely to hit the world farming sector and may trigger a new price surge next year, "unleashing even more severe food crises than those experienced recently," the Rome-based FAO said in its bi-annual Food Outlook.

"If the current price volatility and liquidity conditions prevail in 2008/09, plantings and output could be affected to such an extent that a new price surge might take place in 2009/10," said Concepcion Calpe, one of the report's authors.

"The financial crisis of the last few months has amplified downward price movements, contributed to tighten credit markets, and introduced greater uncertainty about next year's prospects," Calpe said, warning that it may trigger a severe food crisis.

Declining purchasing power would trim demand and may trigger a fall in food consumption, especially in poor countries, increasing the number of hungry people in the world from the current estimate of 923 million, FAO said.

Lower food prices are likely to slow down much-needed investment in the farming sector and, coupled with worsened lending conditions, would hit agricultural output in the longer-term, in particular in developing countries.

CUTTING PLANTINGS

Cereals prices have dropped more than 50 percent from recent peaks but input costs, such as energy and fertilizers, remained high and farmers have started cutting their plantings for next year, FAO said.

Areas planted for wheat in the European Union were expected to fall by about 2 percent, while U.S. wheat-sown areas were also seen shrinking, which means global supply may tighten again, the agency said, citing early forecasts.

"If, indeed, production falls sharply next year, episodes of riots and instability could again capture the headlines," it said, referring to food riots that shook some developing countries earlier this year when food prices were surging.

Despite falling food prices and freight rates, the global food import bill is expected to rise 23 percent in 2008 from 2007 to $1,019 billion, with developing countries bearing the brunt of increased import costs, FAO said.

In its previous Food Outlook, FAO forecast total cereals output at 2.192 billion tonnes this year, wheat output at 658 million tonnes and rice at 445 million tonnes.

(Editing by Michael Urquhart)