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Food prices may ease in 2012 but won't drop: FAO

A market stall owner displays fruits in Leicester, central England
A market stall owner displays fruits in Leicester, central England

By Catherine Hornby

ROME (Reuters) - Prices of some foods may ease slightly in 2012 due to a slowing global economy but are unlikely to drop drastically from the high levels reached last year, the new director-general of the U.N.'s Food and Agriculture Organization said Tuesday.

Jose Graziano da Silva, the Brazilian who replaced Senegal's Jacques Diouf at the helm of the FAO at the start of 2012, said volatility in food markets was likely to continue and that more people would be at risk of hunger due to economic instability.

"Prices will not be going up as in the last two to three years but will also not drop down. There may be some reductions but not so drastic, in the short term," Graziano da Silva told a news conference in Rome.

"Volatility will remain, that is clear," he said.

Global food prices measured by the FAO hit a peak last February but have been falling since June as crops have improved and concerns about global economic turmoil have reined in demand growth.

High food prices have helped fuel inflation and contributed to the civil unrest which created the so-called Arab Spring last year.

Graziano da Silva said he did not expect the economic slowdown in Europe to impact funding for FAO projects, because the amount countries donated was such a small proportion of gross domestic product that they were unlikely to cut it.

But he said the slowdown was likely to increase the number of people at risk of hunger in the world, which the organization estimated at 925 million people in 2010.

"We will have more work to do, with more people hungry, more people unemployed, and we will need new ways to assist them," he said, as he began a term of three and a half years.

FOCUS ON AFRICA

The 62-year-old agronomist, who is the first Latin American at the helm of the U.N. agency, said he would focus efforts on poor countries that are most in need of outside help and that his priority would be Africa, particularly northern Africa.

He plans a visit to the Horn of Africa early this year, where drought and famine are affecting millions of people.

The FAO is the largest U.N. agency with an annual budget of some $1 billion and 3,600 workers. It is fighting food crises across the world that have been aggravated by price volatility.

Graziano da Silva, the former head of the FAO in Latin America and the Caribbean and a former minister for food security in Brazil, will need to bridge a divide between donor countries and developing countries to foster consensus and avoid paralysis in the organization.

He plans to cut bureaucracy and reduce perks for top management and he also wants to decentralize operations and give more authority to local outposts, he said.

The FAO adopted reforms after an assessment funded by its members in 2007, which said it risked "terminal decline" due to its weak governance and lack of transparency and accountability.

But last year Britain threatened to pull out of the organization unless it improved its performance, and some donors such as the United States have initiated agricultural development projects of their own.

(Reporting By Catherine Hornby, editing by Jane Baird and Keiron Henderson)

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