Food prices held steady last month after a significant rise in July, the U.N. Food and Agriculture Organization (FAO) announced this morning with cautious relief.

Last month, FAO reported a 6 percent rise in food prices for the month of July following three subsequent months of price decreases. This resulted from a summer marred by a devastating drought in the American Midwest, as well as extreme heat in Russia and the former Soviet states and erratic rains in South America (ClimateWire, Aug. 9).

However, the index -- which remained at 213 points through August -- is still far below the historical peak of 238 points from February of last year, thanks to a curb in price speculation, fewer panic reactions like export bans on grains, and more transparency across world agricultural markets.

"There's ground for concern, but we're a long way from some kind of crisis," said David Hallam, director of the Trade and Markets Division at FAO.

Grains production to slip

In July, global corn prices rose 23 percent and wheat prices rose 19 percent. Overall, corn production this year is projected to be 13 percent lower and wheat production 5 percent lower than last year's yields, said Hallam. Plentiful supplies of rice around the world helped buffer some of the losses in India tied to an unusually mild monsoon season, he added.

The World Bank estimated that food prices rose 10 percent in July with corn and soybeans reaching an all-time high. The bank relies on a different methodology than FAO to create its food price index (ClimateWire, Sept. 4).

Despite poor growing conditions and extreme weather events this year -- disasters that are expected to increase in frequency with climate change -- the world has learned lessons from the 2008 and 2011 price spikes, said FAO Director-General José Graziano da Silva. Fast growth prior to 2008 pushed up the demand price for food and mineral commodities.

Investors start showing 'moral restraint'

Investors saw high prices as an opportunity to reap substantial profits in both food and mineral commodities. Extreme weather events, like the 2010 summer drought in Russia, pushed the country to ban exports of the grain. This move raised flour prices in Russia by 18 percent and the price of wheat in Pakistan by 16 percent, according to an Oxfam International report.

"There is good news, but we need to be vigilant and act responsibly," said Graziano da Silva.

The Agricultural Market Information System, an initiative to improve transparency in markets launched at last year's Group of 20 nations summit on agriculture, will also improve coordination across nations and control prices, Hallam said.

Commodity buyers are now showing a "moral restraint" from taking advantage of high prices for personal gain, said Jomo Sundaram, U.N. assistant secretary-general on economic development, thanks to pressure from humanitarian nongovernmental groups and agencies.

Future financial regulation could play a part in tightening the rules on price speculation, Sundaram said. He also called on the media to avoid an impulsive forecast of crises and to be "responsible in the evaluating of the situation."

"Crying crisis prematurely can become a self-fullfilling prophecy," he said.