Stock markets may be swooning, but food commodities are experiencing lower and more stable prices, and may hit a record year-on-year drop in 2015, the UN food agency said Thursday. The Food and Agricultural Organisation said that "agricultural commodities are going through a period of lower and less volatile prices", as "most cereal and vegetable oil prices are on a trajectory that is both steady and declining".
The downward trend, after dramatic upward price spikes from 2007 through early 2011, has been helped by high inventory levels, sharply lower oil prices and the renewed strength of the US dollar, it said. The FAO's food price index hit a six-year low in August, and figures released Thursday showed it nudged up less than a percentage point to 165.3 points. That is down almost 19 percent from one year ago, and the FAO said declining trade volumes and weaker prices could trigger a record year-on-year drop in the world food import bill in 2015.
"The takeaway message here is that statistically, the most recent shifts in behaviour foresee downward price momentum with lower volatility," FAO commodity specialists Adam Prakash and Friederike Greb said in a research note. Lower food prices relative to incomes "seem to be a boon to food security - by making food acquisition more affordable", they said, adding that is particularly pronounced in developing countries where food purchases typically account for a significant share of overall household income for the poor.
Meanwhile, the FAO dialled back its forecast for this year's world cereal production projection to 2.534 billion tonnes, which would be a 0.9 percent drop from the record level set last year. The drop was mostly due to reduced output of maize in the United States, where corn prices have fallen by half since July 2012.
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