Food prices to stay volatile in next decade - U.N.

ROME (Reuters) - Food prices are likely to be increasingly volatile over the next decade as supply fails to keep pace with demand and climate change makes bad weather more frequent, the head of the U.N. farm agency said on Wednesday.

Lennart Bage told a meeting of IFAD's governing council in Rome that global demand for food was projected to rise 50 per cent by 2030, and double by 2050.

At the same time, agricultural productivity which used to grow at 4-5 percent in the 1970s and early 1980s, has fallen to 1-2 percent now. Global use of grains has exceeded production for seven of the last nine years.

"Against this background, bad weather in any major producing area, or other temporary factors, will easily lead to a spike in food prices," Bage said.

"With climate change increasing the frequency of droughts and floods, we can expect a much greater volatility in food prices over the next decade," he added.

While the global economic downturn has pushed prices of food items down since their record peak in June 2008, they remain generally very high, particularly in developing countries.

With limited potential to increase the amount of land available for cultivation, most of the increased production will have to come from higher productivity on existing farmland.

"In fact...annual productivity increase has to go back to 3-5 percent. This will not happen on auto-pilot. This requires increased political attention and much greater investment," he said.

Most of the world's 500 million smallholder farms have very low productivity, especially in poorer countries, because they don't have access to modern, highly-productive seed varieties or fertilizers, and they depend heavily on unreliable rain.

Bage said that over the next four years IFAD would provide about $3.7 billion to support agricultural projects and help 70 million people on smallholder farms increase their productivity and incomes.