With food prices continuing to surge around the globe, alarms have been raised about factors rearing their heads again that led to the food crisis of 2008 when hungry people rioted in 34 countries.

But another crisis can still be averted through policy interventions by governments, says a report released by the Washington-based International Food Policy Research Institute (IFPRI), whi­ch puts the onus of correctives on China and India.

The report does dispel the notion that China and India are the major consumers of world grain, but adds that they have a global responsibility as large producers and holders of grain. It asks them to bring in line their policy actions to be more open to contain the increase in global food prices and release excess stocks to poorer nations in Africa and Latin America, the two major regions impacted by food riots in 2008.

“Another food crisis can be prevented but urgent actions are needed,” Shenggen Fan, the institute’s director- general, said at a briefing on a new study of the last food crisis. Data show the 2007-2008 food crisis emerged in a ‘perfect storm of factors’,” the latest report titled “Reflections on the Global Food Crisis” report says.

The institute works towards seeking sustainable solutions to end hunger and poverty and is one of 15 centres supported by the Consultative Group on International Agricultural Research, an alliance of 64 governments, private foundations, and international and regional organisations.

The report points to a combination that led to the 2008 food crisis. The factors included increased energy costs, as oil prices skyrocketed to a record $147 a barrel in July that year, and growing demand for bio-fuels that diverted food crops like corn to energy production.

A weaker dollar and trade shocks related to export restrictions, panic purchases, and unfavourable weather also contributed to the crisis.

Derek Headey, research fellow at the institute and co-author of the report, said that many of the factors that caused the 2008 crisis also caused the 1974 commodity crisis “and some of these factors are again playing out in 2010.”

Headey and his co-author, Fan, think the possibility is still unlikely but hope that pinning down the causes of past crises will help mitigate the damage caused by future spikes in food prices before they get out of control.

Acknowledging that grain export restrictions imposed by China and India do lead to a spike in food prices in the short run, Fan said, “We believe that a crisis can be prevented. Countries with large stocks like China and India should relieve some of their stocks to calm down prices and sent positive signals to international markets.”

Responding to a query on how currency devaluations made by larger economies like the US and China could impact food prices, Fan told Financial Chronicle: “Some of the factors that caused the 2008 crisis are on the ground right now. The dipping dollar, high food inflation in China and India will need to be watched. We believe that the global food situation will further tighten in the near future due to weather impacting food production in 2010-11. What we want is many countries to not repeat many of their actions like banning food exports.”

On Thursday the UN’s Food and Agriculture Organisation warned that it expected global cereal production to drop by 2 per cent this year, rather than rise by 1.2 per cent as was believed warlier. It also said the amount of food imported globally currently was worth $893 billion and if it were to pass the $1 trillion mark, it would be at a level not seen since the 2007-08 food crisis.

According to the report, the highest growth in food demand in recent years has been seen in West Asian nations and North Africa.

Relieving China and India from the responsibility of causing the crisis, the report said: “If there is a China–India story, it is more indirect. First, China, and to a lesser degree India, are demanding more oil and more commodities. China has contributed about 30 per cent of the increased demand for oil from 2000 to 2006 and will continue to do so from 2007 to 2030.

Monthly import data also suggest that rising oil imports in China could have contributed to rising oil prices, although the surge in oil prices is far more dramatic than the upward trend in Chinese imports. As for India, its contribution to rising oil prices has thus far been fairly negligible, but its contribution will rise to 12 per cent over the next 20 years or so.”

An economist and director of economic think tank Indicus Analytics, Laveesh Bhandari, said the report would help debunk the government’s view that rising demand was the chief factor responsible for high food inflation in India.

“Our energy consumption translating to high food prices also holds true. Though our stocks are quite stable now, India’s food inflation will continue in the coming year. Allowing free trade will definitely ease the price situation as is clearly brought out in this report,” Bhandari said.

The report called for setting up a system to monitor dipping food stocks of nations, and a mechanism like the World Food Programme in creating a global buffer and divest grain stocks from countries with high reserves.

Indian policy makers however said that allowing an equitable market for poor farmers in the country could compel such a move. “If developed economies like the US and Europe could curtail their farm subsidies, we could look at removing import restrictions, as such a move would also allow a level playing field for our farmers in the global markets,” according to Vijay Sardana, an independent expert who is also on several committees framing government food policy.

International reports say that India’s farmers are among the poorest in the world with their daily per capita income often below $2.

Raj Jain, CEO of India operations at the Bentonville, Arkansas-based Wal-Mart, had told Bloomberg news agency during the India Summit of World Economic Forum 2010 that inclusive growth will create more consumers in a nation where domestic spending accounts for about three-quarters of economic growth.