World food prices fall in January, unlikely to rally: FAO

Monday, 23 February 2015 00:00 - - {{hitsCtrl.values.hits}}

World food prices languish at 4-year low
Unlikely to rise if ample supply, low import demand continue
Lower oil price could encourage farmers to produce more

Reuters: World food prices are unlikely to rise much from their four-year slump as long as high production, low oil prices and limited import demand continue, a senior economist for the United Nations food agency said recently. The United Nations Food and Agriculture Organisation’s (FAO) global food price index fell in January, continuing an almost uninterrupted decline since last April. “Supply keeps being revised up, and on the import demand side, there really isn’t much activity simply because many importing countries themselves have very good supply,” said FAO economist Abdolreza Abbassian. FAO’s forecast for world cereal production in 2014 hit a new record high of 2.534 billion tonnes in January, marginally above its December estimate. The lower oil price could favour production, Abbassian said, as farmers can still make a decent margin on their produce thanks to lower input costs. “The (oil price) decline keeps agriculture healthy ... At a time of surplus, increased production could even mean further downward pressure on prices, in the absence of a major drought or catastrophe,” Abbassian said, adding that food prices could simply stabilise instead. Cheaper crude oil also knocked FAO’s vegetable oil index to its lowest level since October 2009 in January by eroding the price difference between the two for use as biodiesel feedstock. Overall food price declines and stability have not applied everywhere, Abbassian said. Currency fluctuations have affected trade patterns and prices in countries that have experienced higher currency volatility, “from India all the way to China.” In the European Union, a weaker euro has given a fillip to exports. Its 28 member states together are one of the world’s biggest cereals producers. At the same time, import demand from China is shrinking, Abbassian said, contributing to surplus supplies of cereals. The outlook for crops in 2015 is favourable, partly thanks to good weather conditions and more planting in North America and parts of the Middle East and north Africa, which outweighed decreases in Russia and parts of Far East Asia, FAO said. Cereals stocks at the end of the 2014-15 season are now forecast to be 622.7 million tonnes, marginally lower than previously forecast. The FAO index measures monthly price changes for a basket of cereals, oilseeds, dairy products, meat and sugar. It averaged 182.7 points in January, 3.6 points below its revised reading for December.

Record harvests, falling oil prices bring more affordable food: TRFN

(Thomson Reuters Foundation) - Record harvests and falling oil prices have helped to push food prices to a four-year low, improving the affordability of food in nearly three quarters of countries surveyed, according to data from the Economist Intelligence Unit (EIU). The new Global Food Security Index shows that world food prices dropped 2.8% between September and November 2014. Food became more affordable in 79 out of 109 countries, with Hungary and Botswana seeing the biggest improvements in affordability. Global food prices fell across all commodities except cereals, with the most dramatic declines in dairy and sugar prices, according to UN’s Food and Agriculture Organisation (FAO). World soybean production will reach an all-time high in 2014-15, and corn output is on track to beat all previous records, the EIU reported. “Supplies and stocks of the major grains are very strong, which will push global prices lower in 2015,” Leo Abruzzese, the EIU’s Global Forecasting Director, said in a statement. “The 60% decline in the price of crude oil since July also is good news for food security. During the last 25 years, food and energy prices have tracked each other closely, so cheaper crude oil usually means more affordable food.”