* FAO world food index up 6 pct in July
* Hikes in grain, sugar prices help fuel rebound
* FAO economist warns against export restrictions
(Adds background, detail)
ROME, Aug 9 (Reuters) - The world could face a food crisis
of the kind seen in 2007/08 if countries restrict exports on
concerns about a drought-fuelled grain price rally, the UN's
food agency warned on Thursday, after reporting a surge in
global food prices in July.
A mix of high oil prices, growing use of biofuels, bad
weather, soaring grain futures markets and restrictive export
policies pushed up prices of food in 2007/08, sparking violent
protests in countries including Egypt, Cameroon and Haiti.
Concern about extreme hot and dry weather in the U.S.
Midwest sent corn and soybean prices to record highs last month,
driving overall food prices higher again and reversing the Food
and Agriculture Organisation's forecast for declines this year.
"There is potential for a situation to develop like we had
back in 2007/08," the FAO's senior economist and grain analyst
Abdolreza Abbassian told Reuters.
"There is an expectation that this time around we will not
pursue bad policies and intervene in the market by restrictions,
and if that doesn't happen we will not see such a serious
situation as 2007/08. But if those policies get repeated,
anything is possible."
A number of major producers imposed various restrictions on
exports in an attempt to control domestic prices in the 2007/08
crisis, including outright bans as well as quotas or higher
tariffs on exports of foods including rice, corn and wheat.
The restrictions reduced supply on international markets,
helping to drive prices even higher.
Grain markets have been boosted recently by speculation that
Black Sea grain producers, particularly Russia, might impose
export restrictions after a drought there hit crops.
Markets drew a little comfort from official Russian comments
on Wednesday that the country saw no grounds to ban grain
exports this year but did not rule out protective export tariffs
after the end of the 2012 calendar year.
The FAO Food Price Index, which measures monthly price
changes for a food basket of cereals, oilseeds, dairy, meat and
sugar, averaged 213 points in July, up 6 percent from 201 points
in June, the FAO said in its monthly index update.
The rise, which followed three months of declines, was
driven mainly by a surge in grain and sugar prices, while meat
and dairy prices were little changed, the FAO said.
HUNGER RISK
It said the U.S. drought, which is the worst to hit the
Midwest in 56 years, had pushed up corn prices by almost 23
percent in July, and international wheat prices had followed,
rising about 19 percent amid worsening output prospects.
Although below a peak of 238 points in February 2011, when
high food prices helped drive the Arab Spring uprisings in the
Middle East and North Africa, the index is still higher now than
during the food price crisis in 2007/08.
Higher food prices mean higher import bills for the poorest
countries, which do not produce enough food domestically, and a
strong dollar would deepen that impact.
"The very strong appreciation of the dollar, and the surge
in prices, is basically a double blow which is going to be quite
stressful for some of the more fragile countries," Abbassian
said.
Charity Oxfam said that the surge in prices could drag
millions of people around the world into conditions of hunger
and malnourishment, in addition to nearly one billion who are
already too poor to feed themselves.
"These price hikes are being driven by more than just a
drought in the US corn-belt and problem harvests elsewhere. Our
food system should be more resilient than this," Oxfam spokesman
Colin Roche said in a statement.
Roche said governments needed to invest more in small-holder
farmers, reconsider biofuel policies and make more effort to
tackle climate change.
The FAO's Abbassian said the situation was still quite
different from 2007/08, when crude oil prices were at record
levels, adding to farmers' costs.
Abundant supplies of rice and sluggish economic growth
should also ease the upward pressure on prices, but a lot will
depend on how the weather develops for U.S. crops and how demand
develops in coming months, he said.
"We will have to see how the high price will ration demand,
and to what extent, be it lesser exports or lesser use for
biofuels," Abbassian said.
"What is quite certain is that it is not going to be a
season where prices fall below the previous year, which is what
we had anticipated. It is going to be another season of very
high prices."
(Editing by Veronica Brown and Keiron Henderson)