OTTAWA (Reuters) - Food prices should stay high for the next two to three seasons but should eventually ease as stocks are replenished, the Food and Agriculture Organization (FAO) said on Thursday.
Senior officials from the U.N. agency, testifying by video link to a Canadian Senate committee, also said corn prices would be supported this year by lower U.S. plantings and by increased demand for ethanol.
FAO commodities economist Abdolreza Abbassian said price rises for major grains in the past year had less to do with food being diverted to biofuels than with below-average yields and drought.
But for the current growing season, he said corn prices should be supported by 20 million tonnes in new demand for ethanol, combined with lower U.S. plantings -- barring big weather problems production should fall by 30-35 million tonnes from last year's record output.
The Canadian Parliament is processing government legislation which would mandate a minimum 5 percent ethanol content in gasoline. Abbassian said the country should consider whether it will have less canola, wheat and barley for export and whether it might have to import corn.
The general message is that food prices will remain high for a while, though Abbassian said rice might be in a price bubble.
He said speculators had added to volatility, though they were basically following market trends.
Another FAO analyst, Ali Gurkan, head of the trade and markets division, said financial market speculation was unlikely to dissipate soon.