Commodity Online
ROME : United Nations Food and Agriculture Organization ( FAO ) on Wednesday warned that ongoing credit crisis might lead to another food crisis if major donors stop aid to developing countries.

In a statement issued here, FAO Director-General Jacques Diouf said major donor countries should avoid reducing aid to developing countries’ agriculture and introducing protectionist trade measures in response to the unfolding global financial crisis.

“The great uncertainty now enveloping international markets and the threat of global recession may tempt countries towards protectionism and towards reassessing their commitments to international development aid,” Diouf said.

“It would be unfortunate if this were to be the case and the recently mobilized political will towards enhanced international support for developing country agriculture were to evaporate,” he added.

Diouf noted that the financial crisis, following hard on the heels of the soaring food price crisis which threw an additional 75 million people into hunger and poverty in 2007 alone, may well deepen the plight of the poor in developing countries. “Last year it was the pan,” Diouf said. ” Next year could be the fire”.

A severe food crisis could happen despite the record 2008 cereal harvest which is now expected. Production this year is forecast to increase 4.9 percent to a record 2 232 million tonnes.

However some 36 countries around the world are still in need of external assistance as a result of crop failures, conflict or insecurity, or continuing local high prices, according to FAO's Crop Prospects and Food Situation report.

Commodity prices are currently dropping, mainly on expectation of favorable crop prospects but also because of a slowing world economy, among other factors.

This could mean a cutback in plantings followed by reduced harvests in major exporting countries.

Given continuing low grains stocks, this scenario could lead to another turn of record food prices next year – a catastrophe for millions who by then would be left with little money and no credit.

The impact of the financial crisis may also be felt in developing countries at the macro level, with further potentially negative effects on agriculture and food security, Diouf said. “Borrowing, bank lending, official development aid, foreign direct investment and workers’ remittances – all may be compromised by a deepening financial crisis”, he noted.