Food price inflation may decline

Food price inflation may decline slightly in the next year but is likely to remain above projected long-term levels, U.S. Department of Agriculture chief economist Joseph Glauber said on Monday.

We are probably looking for food price inflation to come down but not much for this next year," he told Reuters in an interview after speaking at a conference on food security in London.

Glauber said food price inflation in the U.S. is currently running at an annual rate of about 5 to 6 percent and may drop to 4 to 5 percent for next year.

USDA has forecast that food price inflation will return long-term to around 2 to 3 percent.

Glauber said that higher feed costs, following a sharp advance in grain markets earlier this year, had not immediately translated into increased prices for livestock products.

"They (livestock farmers) pass them on by reducing their herds and that just takes time. That is one reason we see inflation lower next year but still not back to 2 to 3 percent levels," he said.

Glauber said high commodity prices could improve yields and bring more land into production. He added, however, there was limited expansion capacity in North America and some constraints in South America linked to environmental concerns.

"I think in the long run a lot will be tied to technological developments and higher prices will certainly encourage research," he said, adding price signals could also encourage producers to innovate and adopt more efficient technologies in areas such as the use of water.

Glauber said he expected an increase in corn plantings in the U.S. next year. This year there was a significant shift from corn to soybeans.

"Right now the price levels are pointing towards a slight shift to corn next year," he said.

Glauber, who is involved in the long-running Doha round of world trade talks, said he felt a lot of progress had been made but there remained "thorny issues out there."

He said language had been discussed which would require more monitoring and surveillance of export prohibitions.

"I think that is a positive step," he said.

Several countries have imposed restrictions this year on exports of key commodities such as wheat and rice in response to tight global supplies and surging domestic prices. "It is hard to argue to a country they should bring down imports barriers only to find there is no supply to export them because some other country is putting on export barriers," Glauber said.

"The problem is they (export restrictions) exacerbate an already tight situation worldwide."

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