Global wheat and other cereals output will jump to record highs this year, but the financial crisis is likely to hit the world farming sector and may trigger a new price surge next year, UN`s food agency said on Thursday, according to Reuters.

World cereals output, seen at a record 2.242 billion tonnes including 677 million tonnes of wheat, would be big enough to meet short-term consumption needs and help replenish depleted global stocks, the Food and Agriculture Organisation said.

But this year`s record crops and the recent fall in food prices should not create "a false sense of security", because they come against the backdrop of unfolding global economic slowdown, the Rome-based FAO said in its bi-annual Food Outlook.

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"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 the 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 fertilisers, 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 imports 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.