Global food prices drop, index at lowest level in 14 months06 September 2013
Global food prices have continued to drop, according to a report from the Food and Agriculture Organisation (FAO). The FAO’s food price index has been falling for the past four months and has reached its lowest level since June 2012. It is now averaged at 201.8 points.
Dairy, sugar and meat slightly rose, however, with the overall fall being largely due to the continuing decrease in the price of cereal and oil. The FAO predicts cereal prices to normalise in the coming months following a predicted bumper harvest.
The steep decline in cereal price stems from strong expectations of production growth, driven by attempts to recover from the damage inflicted on maize supplies in the 2012 drought. The FAO Cereal Price Index averaged 210.9 points in August.
World cereal production is now forecasted to rise to 2,492 million tonnes, a revised figure that has increased predictions by 14 million over the July forecast. This is due to higher maize crops in Argentina and improved prospects for the EU and Ukraine.
“The overall supply-demand situation for cereal markets is much improved over this time last year when drought-hit production and low stock-to-use ratios, especially for maize, raised serious concerns," said David Hallam, director of FAO's trade and markets division.
The global stock-to-use ratio of cereal is expected to increase to 23.3%. This brings it to its highest level since 2002/03. The revised forecast of world stocks is now 13.3% above their low opening levels and their highest since 2001/02.
Rice production is also set to improve, increasing by 1.3% to 497 million tonnes. A 10.5% expansion of coarse grain production has been largely driven by a strong rebound in maize output in the United States. US maize output is expected to be 25% higher than the 2012 drought-reduced level.