Aid body battles price hikes

1 August 2007
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02 August 2007 | Helen Gilbert

The World Food Programme (WFP) will have to change its purchasing strategy if food and oil costs continue to rise.

The UN agency told SM it would be forced to improve the efficiency of its local procurement because of the rapid cost increases over the past five years.

Figures produced by the group, which organises famine relief, show that between 2001 and 2006 the cost of sugar climbed by 95 per cent, maize by 60 per cent and vegetables by 73 per cent. Pulses, rice and wheat also rose by 42 per cent, 29 per cent and 20 per cent respectively.

Reasons for the price increases vary, from adverse weather affecting crops to increased demand for biofuels putting a strain on grain production.

According to Robin Lodge, a WFP spokesman, the growing world population is also having an impact. He told SM demand for grain had been fuelled by the expanding "middle classes" in India and China, who are eating more meat and dairy produce, resulting in a greater need for cereal to feed the dairy and meat herds.

The organisation, which is already examining the way its purchasing affects developing economies (News, 5 July), spends £300 million on food each year in 84 countries.

Lodge said: "We are keen to buy as close to where we are going to deliver the food as possible. Last year 77 per cent of what we bought was from developing countries. But consumption is going up along with the price of oil, and we will need to find ways of increasing efficiency, and purchasing more locally so we knock out transport costs."

Last month the International Energy Agency's medium-term Oil Market Report warned demand would increase faster than expected over the next five years.

The report said demand would grow three times faster in countries outside the Organisation for Economic Cooperation and Development (OECD), which are mostly in developing areas, than in OECD economies. This would happen as increased income levels enabled consumers to buy cars and energy-intensive white goods, and increased production.

The report also warned that, coupled with a slowing down of growth in oil production, the OPEC spare capacity would be pulled down to "uncomfortably low levels".

SMaug2007

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