GLOBAL FOOD PRICE INDEX DECLINE

GLOBAL FOOD PRICE INDEX DECLINE

Erle Frayne D. Argonza

Global food price index ended up with a general decline, as per report from the FAO. This was a quick reversal of the year-long trend that saw food prices rising as a whole.

The FAO reported in the mid-phase of last year that food prices were rising, and rising alarmingly. Famine struck the Horn of Africa, while calamities damaged to food base of other countries, events that shook the world food terrain.

Last year also saw the raging conflicts in the MENA (middle east & north Africa), political quakes that also affected the supply chain of food production and distribution. As of this writing, a world war prospect looms as Iran has been threatening to close the Hormuz area, and pronouncements have already been leading to speculations in the oil spot markets and food trading.

Will the pattern of declining food price index hold through for 2012?

[Philippines, 09 February 2012]

Source: http://www.fao.org/news/story/en/item/119775/icode/

FAO Food Price Index ends year with sharp decline / But record high prices mark the year as a whole

12 January 2012, Rome - Food prices fell in December 2011 with the FAO Food Price Index dropping 2.4 percent, or five points from November, FAO said today.

At its new level of 211 points, the Index was 11.3 percent (27 points) below its peak in February 2011.

The decline was driven by sharp falls in international prices of cereals, sugar and oils due to bumper 2011 crops coupled with slowing demand and a stronger US dollar. Most commodities were affected.

However, although prices dropped steadily in the second half of 2011, the Index averaged 228 points in 2011 — the highest average since FAO started measuring international food prices in 1990. The previous high was in 2008 at 200 points.

A period of uncertainty

Commenting on the new figures, FAO Senior Grains Economist Abdolreza Abbassian said that it was difficult to make any firm prediction on price trends for the coming months.

“International prices of many food commodities have declined in recent months, but given the uncertainties over the global economy, currency and energy markets, unpredictable prospects lie ahead,” Abbassian said.

Among the principal commodities, cereal prices registered the biggest fall, with the FAO Cereal Price Index dropping 4.8 percent to 218 points in December. Record crops and an improved supply outlook sent prices of major cereals declining significantly. Maize prices fell 6 percent, wheat 4 percent and rice 3 percent. In 2011, the FAO cereal price index averaged 247 points, up some 35 percent from 2010 and the highest since the 1970s.

Oils and fats down

The FAO Oils and Fats Price Index stood at 227 points in December, down 3 percent from November and well below the level of 264 points one year ago. Larger than expected overall supplies of vegetable oil led to a rise in stocks (notably palm and sunflower oil), which, together with poor global demand for soybeans, deflated prices.

The FAO Meat Price Index averaged 179 points, slightly down compared with November. The decline was mainly driven by pig meat, whose price dropped by 2.2 percent, with sheep meat also receding somewhat. By contrast, poultry and bovine meat prices recorded mild gains. On an annual basis, meat prices in 2011 were 16 percent higher than in 2010.

Dairy products mostly up

The FAO Dairy Price Index averaged 202 points, almost unchanged from November. All dairy products were up slightly with the exception of butter, which dropped by 1 percent. Over the whole year, dairy products were on average 10 percent dearer than in 2010, with particularly strong gains witnessed for skim milk powder and casein, which gained 17 percent each. More modest increases were seen for butter and whole milk powder prices, which progressed by 11 percent, and cheese, by 8 percent.

The FAO Sugar Price Index declined for the fifth consecutive month to 327 points in December, down 4 percent from November and 18 percent from its July 2011 peak. The Index’s weakness in recent months mostly reflects expectations of a large world production surplus over the new season, on the back of good harvests in India, the European Union, Thailand and the Russian Federation.