Azerbaijan, Baku, 1 may / Trend corr. A.Badalova / Homi Kharas, senior expert on world economy in the American Institute Brookings, believes that the great link between the world food and the energy market should be weakened.
The market for food has become closely linked with the market for energy, both on the supply side, due to the importance of energy-intensive transport, distribution and fertilizer use, and on the demand side because of the diversion of production from food crops to crops used for biofuels which have become more profitable at current prices. Taken together, these factors require a major response from the agricultural sectors of the world.
"The world must rethink whether it is wise to maintain such a close link between fossil fuel markets (which we believe will continue to be very volatile into the future) and food markets (where it is imperative that price volatility be contained to a minimum level). Without such a change in approach we will probably repeat cycles like the one we are in," Kharas stated.
Globally, there has been very little investment in new technology for farming or in the extension networks required to bring modern farming techniques to much of the developing world.
Ban Ki-moon - UN Secretary-General stated recently that increase in prices for food could damage the world economic growth and security.
There are two problems with food today - a problem of sustainability and availability of food globally and problem with the distribution of food.
"We are reaching the limits of sustainable production. Supply of land is dwindling as farms are converted into industrial production zones in countries like China and India.
Governments can do a lot to address these problems and minimize their impact. At current prices, agriculture has become much more profitable and offers scope for an acceleration of growth, Kharas stated.
For many years, countries have relied upon industrial growth as the main engine for development. The increases in food prices which we have seen are a reminder that it is unwise for any country to neglect its agricultural sector.
But agricultural growth sometimes requires more public investments in research, extension services, transport and distribution, and better seeds, credit and fertilizer markets. It also requires solid property rights so that farmers feel secure in investing in improving the quality of their land.
UN Secretary General stated about the decision to form Task Group, which will develop measures to react on food crisis caused by growth of prices for food.
The correspondent can be contacted at: [email protected]