 A recent drop in food prices could discourage farmers from sowing crops and cut supplies to an increasingly hungry world, the head of the United Nations Food and Agriculture Organisation said on Monday. FAO chief Jacques Diouf said in an interview on the sidelines of the High Level meeting on Food Security for All in Madrid that many producers had sold harvests in the second half of the year, when prices were particularly low. "These people will have no incentive to reinvest (in the coming crop year) and some will even have losses," he said. "That would entail a significant drop in output in 2009/10 and a sharper increase in prices than in 2007/08, unless it is tempered by the effect of the economic recession on income." The Madrid conference was sponsored by the UN and other international bodies like the World Bank. A report from London-based thinktank Chatham House on Monday also saw recent falls in food prices providing only a temporary reprieve with a reverse upward set to resume in the medium to longer term. "There is a real risk of a 'food crunch' at some point in the future, which would fall particularly hard on import-dependent countries and on poor people everywhere," the report said. The report said climate change, water scarcity and competition for land would make it hard to meet an expected 50 percent rise in demand for food by 2030. It called for more investment in agriculture with a focus on helping small farms. "While arguments for supporting small farms are sometimes dismissed as based on a romantic attachment of peasant agriculture, the evidence shows that with the right policy framework, small farming can be a viable route out of poverty," the report said. Aid agency Oxfam, in another report issued on Monday, echoed concerns about the need to invest more heavily in agriculture. "Decades of underinvestment in agriculture coupled with the increasing threat of climate change mean that despite recent price falls, future food security is by no means guaranteed, and in fact the situation could get worse," Oxfam said. FOOD STOCKS RELATIVELY LOW FAO's Diouf said that although world cereal production in 2008 was a record 2.245 billion tonnes and could easily meet estimated demand in the 2008/09 campaign of 2.198 billion, stocks were relatively low. Cereal stocks of 431 million tonnes were enough to cover just 19.6 percent of demand, the lowest level in 30 years. The FAO estimates that almost 1 billion people suffer from malnutrition, a number which rose by 40 million in 2008. Diouf has asked U.S. President Barack Obama to call a summit to find ways and means to invest an annual $30 billion in agriculture which he says could eradicate hunger by 2025. "If there is real political will, we should be able to mobilise this $30 billion as it is only eight percent of the support to agriculture by OECD countries," he said. A food security summit held in Rome last year had prompted pledges of $22 billion in food aid, mostly for the medium term. Diouf estimated that about $2 billion had been received to date. "We are hoping that on the occasion of this meeting, there will be the possibility of more funds being confirmed for immediate or use of the months to come," he said. 