America's climate could have a 'significant impact' on the volatile cost of wheat and corn.
US weather will increase food prices, expert says
ABU DHABI // Food prices are expected to rise sharply this year as experts predict a challenging year for agricultural staple foods.
Despite the UAE's new electronic monitoring system for food prices, Stephan Rikiert, the director of transaction banking at Dubai's Standard Chartered Bank, said prices were likely to jump, mainly because of global climatic conditions.
Mr Rikiert was speaking at the recent Salon International de l'Agroalimentaire (Sial) Middle East in Abu Dhabi.
"This won't affect all commodities but most of them," said Mr Rikiert. "A lot of the food the UAE imports is from the US where there are a lot of weather-related issues, so this will have a significant impact on prices here."
He said most of the country's wheat and corn come from that part of the world.
A UN report in October warned of higher and more volatile food prices, with UN food agencies calling for international action.
"Food price volatility may increase over the next decade due to stronger linkages between agricultural and energy markets and more frequent extreme weather events," read the report.
As for the ministry's electronic price monitoring system, Mr Rikiert said it could help keep food prices down but it was an artificial system.
"It is not a market-driven measure so it could have a detrimental effect long-term," he said. "It would help the transparency in terms of people knowing the prices of food but it would affect imports much more."
Since last June, the FAO food price index has gone down from 233 points to 211 last month. But that will not stop prices from increasing this year. After hitting a record high of 238 last February, consumers in the UAE have felt the pinch.
"I'm furious about these predictions," said Daniel O'Reilly, a 33-year-old British resident of Dubai. "I've been cutting down on a lot of meat because it can get really expensive but there's only so much I can do."
Mr O'Reilly, who grocery shops at Spinneys, said he had hoped food would get cheaper this year.
"I'm not surprised by the increase," said Fatima Fadlallah, a mother of three in Abu Dhabi. "The situation wasn't great in 2011 and it looks like it's only getting worse."
She shops for her family at Carrefour every week. "It can become very expensive when you have three children who need a lot of food to grow," she said.
But food was not the only issue on Mr Rikiert's agenda. He also warned that available water sources must be harnessed globally to increase irrigation - although on this point economists are far from united.
"In the UAE, water comes from groundwater so there is a question of sustainability as agriculture is a heavy user of water," said Kevin Parris, a senior economist in the agricultural policies and environment division at the Organisation for Economic Cooperation and Development.
"Given the climatic conditions and water problems in the UAE, it might be better if water was used for purposes other than agriculture."
He also said the cost of growing food in the country was "horrendous, particularly the water cost" - a point Mr Rikiert did agree on.
"Water must be used more efficiently in the UAE," he said. "The country must use new technologies to save water in agriculture because a lot of it is wasted by irrigation methods used to produce crops."
The world's water is one of its most vital resources yet one that is under major threat across the globe. "There's a worldwide problem that fresh water is a scarce resource and it is becoming scarcer by the day," added Mr Rikiert.