ROME (Reuters) – Global food prices continued to decline for the 12th straight month in March, according to the United Nations food agency. Prices have dropped significantly, down by 20.5% from the peak reached a year ago following the onset of Russia’s invasion of Ukraine.
The Food and Agriculture Organization’s (FAO) food price index, which monitors the prices of the most globally traded food commodities, averaged 126.9 points in March, compared to 129.7 points in February. This marks the lowest index level since July 2021. The February figure was initially reported as 129.8 points before being revised slightly lower.
FAO attributed the decline to a combination of factors, including ample supplies, reduced import demand, and the extension of an agreement that allows for the safe export of Ukrainian grain via the Black Sea. The drop in the overall index was driven by decreases in the prices of cereals, vegetable oils, and dairy products, which outweighed increases in the prices of sugar and meat.
Maximo Torero, FAO’s chief economist, commented on the ongoing price changes, noting that while global prices are falling, domestic food prices remain high in many regions. “This is particularly so in net food-importing developing countries, with the situation aggravated by the depreciation of their currencies against the U.S. dollar or the euro and a mounting debt burden,” Torero said in a statement.
Falling prices in cereals, vegetable oils, and dairy
The FAO’s cereal price index dropped by 5.6% month-on-month in March. Wheat prices saw a notable decrease of 7.1%, while maize prices fell by 4.6%, and rice prices eased by 3.2%.
Vegetable oil prices also fell by 3.0%, with the index now standing 47.7% lower than its level in March 2022, when prices spiked due to supply disruptions caused by the conflict in Ukraine. Dairy prices registered a smaller decline, down by 0.8% from February.
In contrast, sugar prices increased by 1.5% in March, reaching their highest level since October 2016. This rise was attributed to concerns over reduced production prospects in major producing countries, including India, Thailand, and China. Meanwhile, meat prices also edged higher, increasing by 0.8%.
Forecast for global wheat production
In a separate report on global cereals supply and demand, FAO revised its forecast for 2023 world wheat production, now estimating it at 786 million tonnes. While this figure is 1.3% lower than the 2022 production level, it still represents the second-largest wheat harvest on record.
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FAO noted that near-record sown areas are expected in Asia, though dry conditions are affecting North Africa and southern Europe, which could impact crop yields in these regions.
The FAO also updated its forecast for global cereal production in 2022, revising it upward to 2.777 billion tonnes. This is just 1.2% below the total cereal production recorded in the previous year. For the 2022/23 period, world rice production is forecasted to reach 516 million tonnes, 1.6% lower than the record harvest of 2021/22.
Global cereal utilisation and stock levels
World cereal utilisation for the 2022/23 period is expected to reach 2.779 billion tonnes, representing a 0.7% decline from the previous year. FAO also predicted that global cereal stocks would decrease by 0.3% by the end of the 2022/23 season, bringing them down to approximately 850 million tonnes.
The continued easing of global food prices, particularly in cereals and vegetable oils, has provided some relief following the sharp price spikes seen in the aftermath of the Ukraine conflict. However, challenges remain, particularly for developing countries that rely heavily on food imports and are grappling with high domestic prices and unfavorable exchange rates.
The FAO’s monthly food price index tracks international prices for a basket of commonly traded food commodities, including cereals, vegetable oils, dairy, meat, and sugar. The decline in the index since its record high in March 2022 reflects improvements in global food supply chains as well as changes in demand and market conditions.
