August 10, 2010 / 5:56 AM / in 7 years

World Bank urges nations to avoid food export bans

WASHINGTON (Reuters) - The World Bank on Monday urged countries to refrain from imposing policies that could trigger a new global food price crisis as drought-hit Russia said it could extend a grain export ban into next year.

<p>An unidentified government official sits on sacks of wheat donated by the U.S. at a food distribution point near Jijiga, eastern Ethiopia December 1, 2009. REUTERS/Barry Malone</p>

World Bank Managing Director Ngozi Okonjo-Iweala told Reuters the sharp spike in grain prices since last week did not amount to a crisis yet, but emphasized increased food price volatility would hurt poorer countries.

She said the poverty-fighting institution would activate a food fund when the World Bank board, currently in recess, reconvened in early September in case the situation worsened.

Grain prices have soared since last week after Russia, the world’s No. 3 wheat producer in 2009/10, banned grain exports as the worst drought on record ravaged crops across the Black Sea region and concerns grew about supplies from dry weather in Western Australia.

In Ukraine, the world’s sixth-largest wheat exporter, grain exports are facing delays after the introduction of a new system of customs controls last week, while bad weather there could cut crop and exports forecasts.

Okonjo-Iweala said the World Bank was conducting a survey of vulnerable countries amid reports that exporters had cancelled wheat contracts to Bangladesh and were reviewing contracted wheat supplies to Egypt, the world’s largest wheat importer.

She said flooding in India, Pakistan and China had also raised food supply concerns.

“We don’t see a crisis yet and are hoping to head it off by asking countries not to undertake policies that will precipitate a crisis,” she said in an interview.

“Although you can understand how governments would want to ... implement certain polices they think are good domestically, those policies are not always the best, like export restrictions and bans, have a strong impact on the market and cause hoarding,” she added.

Okonjo-Iweala said she hoped countries where grain production was good, such as the the United States, would make up for the decline in output in Russia.

She said global food stocks were better than in 2008, which saw food prices rise to record levels, triggering food shortages and related social unrest in poorer countries.

She said by activating the World Bank food fund, the institution would be ready to quickly disburse funding to countries if the situation warranted it. The fund was created during the 2008 price crisis to help developing countries facing food shortages and to help them increase production.

Okonjo-Iweala said there was about about $800 million in the fund to help developing countries. The fund disbursed roughly $1.2 billion during the 2008 crisis, while the World Bank also increased agricultural lending in its programs to boost food production.

“We are worried about the impact of continued volatility,” she added. “Countries have not called out yet. We are doing a quick survey ourselves to see which are the most vulnerable and whether their contracts are being impacted.”

She said a recent World Bank study of 26 developing countries showed significant increase in food price volatility over the past year.

Okonjo-Iweala said the Bank had been in contact with food aid groups working among communities in poor countries to gauge the situation.

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