Slowing economies across the globe have raised recessionary fears once again. This time emerging economies that have been growing despite all odds have also started showing signs of cooling. This slowdown in global demand has had an impact on food prices too. According to the latest data released by the FAO, the food price index clocked in at a 20-month low in May 2012, the lowest level since September 2010. Besides the slower demand dynamics, the supply side is also at play in bringing down food prices, with a promising production outlook for major food categories. In the cereals category, improved weather conditions and a record maize crop helped decrease prices of maize and wheat. Rice prices increased in May, however, owing to increased demand ahead of the Ramadan season and the price-pledging scheme in Thailand. Oils and fats, sugar and the dairy categories witnessed a significant month-on-month decrease too. Rising concerns of a global recession, strong supplies in major export markets and expectations of new supplies were at the back of the decline in these groups. Meat continues to be an incorrigible food category, with meat prices remaining resistant at nearly the same levels. Besides the demand and supply dynamics discussed, a strengthening dollar has also been helping ease down food prices, which are dollar-denominated. Even Mother Nature has been kind as far as food prices this year are concerned. Last year, particularly in the former half, adverse climatic conditions in various food-producing nations had weighed heavy on food prices. 2012, however, has been blessed so far with the weather situation having been stable in major food exporting countries. Higher food prices also attracted speculative investors contributing further to soaring food prices last year. The absence of such triggers worked with improving supply relative to global demand in stabilising food prices. "Falling food prices due to good harvests and increases in stocks should mean a reduction in the number of hungry in the world in 2012," said FAO Director-General José Graziano da Silva earlier this week. Yet, this doesn call for complacency regarding food prices at all. Long-term factors that can contribute to a return of the 2011-levels are still quite persistent. These include a growing global population, growing incomes, especially in emerging economies, and changing dietary preferences towards a more protein-rich diet. Consequently, the sector should not be ignored by food-producing countries and investment for improving productivity should be consistently made to avoid a repeat of a food crisis.
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