World food prices down 2.1% in twelfth consecutive monthly decline

By Onome Amuge

The benchmark index of international food commodity prices declined for the 12th consecutive month in March 2023, averaging 126. 9 points, down 2. 1 per cent from the previous month and 20. 5 per cent below its peak level in March 2022, ,the Food and Agriculture Organization of the United Nations (FAO) has reported.

The decline in the FAO food price index, which monitors monthly changes in the international prices of a basket of commonly-traded food commodities, reflected drops in the prices of cereals and vegetable oils that more than offset a steep rise in sugar and meat prices.

According to the report, the figures suggest a long-running decline in food prices is continuing, further helping to undercut global inflation pressures and ease concerns about hunger and food security, which are particularly weighing on some of the world’s poorest nations.

The FAO attributed a mix of ample supplies, subdued import demand and the extension of the Black Sea Initiative for the drop.

 “During the past twelve months since March 2022, the index has fallen by as much as 32.8 points (20.5 percent). The decline in the index in March was led by drops in the cereal, vegetable oil and dairy price indices, while those of sugar and meat increased,” it added.

The FAO cereal price index dropped 5.6 per cent from February, with international wheat prices  declining 7.1 percent, pushed down by strong output in Australia, improved crop conditions in the European Union, high supplies from the Russian Federation and ongoing exports from Ukraine from its Black Sea ports. Similarly, World maize prices declined 4.6 per cent, due partly to expectations of a record harvest in Brazil, while those of rice fell by 3.2 per cent amid ongoing or imminent harvests in major exporting countries, including India, Vietnam and Thailand.

Elsewhere, the FAO vegetable oil price index averaged 3.0 per cent lower than the previous month and 47.7 percent below its March 2022 level, as ample world supplies and subdued global import demand pushed down soy, rapeseed and sunflower oil quotations. That more than offset higher palm oil prices, which rose due to lower output levels in Southeast Asia due to flooding and temporary export restrictions imposed by Indonesia.

The FAO Dairy Price Index eased 0.8 per cent as prices of cheese dipped due to slower purchases by most leading importers in Asia as well as increased availability in leading exporters, but butter prices increased due to solid import demand.

By contrast, the FAO sugar price index rose by 1.5 percent from February to its highest level since October 2016, reflecting concerns over declining production prospects in India, Thailand and China. The positive outlook for the sugarcane crops about to be harvested in Brazil limited the upward pressure on prices, as did the decline in international crude oil prices, which reduced demand for ethanol.

Meanwhile, the FAO meat price index rose slightly, by 0.5 per cent, as international bovine meat quotations moved higher, influenced by rising internal prices in the U.S on expectations of lower supplies moving forward, while pig meat prices rose due to increased demand in Europe ahead of holidays. Despite avian influenza outbreaks in several large exporting countries, world poultry meat prices fell for the ninth consecutive month on subdued global import demand.

Despite the significant decline in global food prices, the FAO admitted that food prices remain at historically elevated levels and food security remains in a perilous position.

“While prices dropped at the global level, they are still very high and continue to increase in domestic markets, posing additional challenges to food security. This is particularly so in net food-importing developing countries,”said Máximo Torero, chief economist at the FAO.

Torero added that the food-price index remains close to levels seen in 2011, when a spike in prices helped prompt a wave of global civil unrest, particularly in Middle Eastern and North African states.