UN food aid agency's gap grows, ration cuts loom

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WASHINGTON, April 18 (Reuters) - Surging crop prices have helped widen the World Food Program's funding gap to around $750 million this year, and the U.N. food aid agency warned it may have to cut rations for hundreds of thousands of schoolchildren if new donations don't materialize soon.

In February, WFP announced it needed extra donations to help cover a $500 million shortfall, driven by soaring food and fuel costs, and avoid cutting back food aid deliveries in 2008.

Since then, costs have spiked even more even as tight crop supplies and high food prices intensify hunger, WFP Executive Director Josette Sheeran said on Friday, bringing the total shortfall for this year to $755 million.

World prices for rice, wheat and other staple crops have soared to historic highs in recent months; the price the agency pays for rice jumped 70 percent in the last six weeks.

The crop crunch is compounded by high fuel prices -- U.S. crude oil hit a record $117 a barrel on Friday -- that make it more costly to transport food.

"The world's misery index is rising," Sheeran warned in a speech that laid out a grim portrait of global food insecurity: The most vulnerable people in already poor countries, many of them overall food importers, skipping meals or choosing less nutritious meals for their children.

The run-up in commodity prices, rooted in growing biofuel output, rising incomes, and poor weather, has been simmering for several years, but exploded in the past nine months.

Most poor people "don't know what hit them," she said.

WFP has received some responses to its emergency appeal -- the United States this week announced it would draw about $200 million in wheat and transport costs from a crop trust, much of which will go to WFP -- but is seeking more support.

"We will face in the next couple of weeks the need to cut at least 400,000 children from school feeding. We've been borrowing from our future pipeline in the hopes of increased contributions coming in," Sheeran said.

"We're literally sitting down thinking, 'What goes now?' These are very, very challenging choices," she said.

WFP has run into unusual procurement problems -- it was unable to buy wheat in Asia recently for 10 days, for example.

The agency is also troubled, Sheeran said, by what appears to be a reduction in new crop plantings by farmers in Africa.

"One would expect that the natural reaction from farmers throughout the world to high prices would be to plant more. In the developing world, there are indications the reverse is happening," she said.

One reason may be higher prices for inputs like fertilizer, which jumped 135 percent in three months in Kenya.

"These farmers are in subsistence mode, withdrawing from markets until things stabilize. This could indicate serious shortage in upcoming harvests," she said.

Sheeran, like many others, assumes a cautious tone when addressing the price or export controls that some countries are resorting to in order to rein in food prices.

While understandable for politicians facing unrest or protests, such measures may be counterproductive, she said.

Global leaders such as U.N. Secretary-General Ban Ki-moon, World Bank President Robert Zoellick and others are calling for urgent, coordinated steps to address the food crisis.

"Access to basic resources could be the peace and security issue of our time," Sheeran added. (Editing by Christian Wiessner)