Last update: Tue, 17 Jan 2017 07am
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Global food prices ease; Wheat supply set to tighten

World food prices have hit the lowest ebb since June 2012, as FAOS Food Price Index slips down 1.5 percent from October, mainly off the back of depressed global prices for a number of commodities including sugar and cereals.

Averaging 211 points during the course of last month, the Index has managed to lose nearly three percent over the same period last year.

Sugar remains the major reason for this trimming; averaging 274 points in November, FAOS Sugar Price Index was down by 14 points on account of huge stocks held by the largest exporting nations of the world including Brazil.

However, FAO once again reports a tightening in the world cereal markets, despite the easing down of global prices for the second month in running.

Predicting volatility within the international food markets, the Rome based agency has slashed down its global cereal production figures once again, estimating world cereal output hovering around 2.28 billion tons in 2012.

The overall decrease in world cereal output this year comprises a 5.7 percent reduction in wheat production which might further be reduced on account of diminished prospects in Australia and Brazil, where wheat harvesting is currently underway.

Moreover, the report notes that early indications from winter crops planted in the northern hemisphere continue to remain less than positive, with conditions remaining dry across most grain producing regions of USA and Russia, while wet conditions across most of Europe continue to hamper plantings as farmers in France and UK struggle with continued showers.

Projected figures for rice production however continue to remain upbeat, with three consecutive years of record global production bound to raise global inventories by 10.5 million tons to a record 170 million tons by the year end. Consequently, FAOs Crop Prospects report for December earmarks rice to be the only cereal with prices remaining well below last years levels.

Rising as a consequence of the summer droughts that hit major food basket regions of the world, global prices for food commodities have generally eased down in the last few months, mainly as a result of supplies from other regions compensating for the low yields in the drought-hit areas.

Additionally, world trade in cereals is also forecasted to slough off some six percent this year, hovering around the 296 million tons.

Reduced import demand from a number of wheat exporting countries in Africa and Asia, which have had excellent harvests, remains the most significant factor here, easing much pressure off the global supply demand dynamic which would have remained in limbo on account of thinning export supply from the Black Sea region.