Higher food prices here to stay: World Bank

WASHINGTON (Reuters) - Surging global food costs are not a temporary phenomenon and prices are likely to stay above 2004 levels until 2015 for most crops, the World Bank said on Wednesday.

In a policy paper prepared for weekend meetings of world finance chiefs in Washington, the World Bank said food prices are set to stay high in 2008 and 2009, and then decline as supply and demand respond to high prices.

World Bank President Robert Zoellick said he feared that the higher cost of food would reverse declining poverty levels in some countries.

"As an international community we must rally not only to offer immediate support, but to help countries identify actions and policies to reduce the impact on the world's most vulnerable," Zoellick said.

The Bank suggested that the least disruptive policy response in dealing with higher prices was for countries to introduce or expand cash transfer programs to the poor.

"These support the purchasing power of the poor without distorting domestic incentives to produce more food, and without reducing the incomes of poor food sellers," it said.

To tackle domestic food insecurity, it also said countries should cut tariffs and taxes on key staple foods, which could provide some relief to consumers, albeit at a fiscal cost.

It said food export bans were detrimental to food importers and dampened incentives by farmers to increase production.

A combination of high oil and fuel prices, rising demand for food in wealthier Asia, the use of farmland and crops for biofuels, bad weather and speculation on futures markets have all combined to push up food prices, prompting violent protests in a handful of poor countries.

In the latest rioting, five people have been killed in a week of demonstrations in Haiti over the rising costs of food, while unions in the Western African country of Burkina Faso called a general strike over the increasing cost of living.

The World Bank said there had been a sharp surge in domestic food price inflation especially in Sri Lanka (34 percent), Costa Rica (21 percent) and Egypt (13.5 percent).

In many countries food inflation is higher than aggregate inflation, contributing to inflationary pressures, it said. For example, in Europe and Central Asia overall inflation in 2007 averaged 10 percent, food inflation 15 percent and bread and cereals inflation 23 percent.

The World Bank said currently countries were seeking its help with assessing economic and social implications of rising food prices, as well as possible policy responses.

It is too early to assess the extent to which countries would require World Bank loans to fill funding needs brought on by rising food prices, the bank added.

However, a few countries, such as Burkina Faso, are considering increasing the size of upcoming loans, it said.

The development agency said high food prices highlighted the need for the World Bank and other donors to increase investments in agriculture.

(Editing by Diane Craft)