FAO Food Price Index drops in October

by Bryan Salvage
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ROME – The Food and Agriculture Organization of the United Nations (FAO) Food price index dropped to an 11-month low in October, declining 4 percent, or nine points, to 216 points from September. Prices, however, still remain generally higher than last year and very volatile, FAO warned.

Sharp declines in international prices of cereals, oils, sugar and dairy products triggered the drop; meat prices declined the least. However, FAO's November Index showed last month’s prices were still 5 percent above the corresponding period in 2010.

Improving supply outlooks for many commodities and uncertainty about global economic prospects is placing downward pressure on international prices, although this has been offset to some extent by strong underlying demand in emerging countries where economic growth remains robust.

Most agricultural commodity prices could remain below their recent highs in the months ahead, according to FAO's biannual Food Outlook report also published on Nov. 3. The publication reports on and analyzes developments in global food and feed markets.

Regarding cereals, where a record harvest is expected in 2011, the general picture points to prices staying relatively firm, although at reduced levels, well into 2012.

Food Outlook forecast 2011 cereal production at a record 325 million tonnes, 3.7 percent above the previous year. The overall increase comprises a 6.0 percent rise in wheat production, and increases of 2.6 percent for coarse grains and 3.4 percent for rice. Globally, annual cereal food consumption is expected to keep pace with population growth, remaining steady at about 153 kg per person.

International cereal prices have declined in recent months, with the FAO Cereal Price Index registering an 11-month low of 232 points in October. However, cereal prices, on average, remain 5 percent higher than last year's already high level.

High food prices are putting pressure on least developed countries (LDCs) that have seen their food import bill increase by almost one-third from last year, the study relayed. The global cost of national food imports is expected to approach $1.3 trillion this year.

World cereal inventories are forecast to increase by 3.3 percent from their reduced opening levels, to 507 million tonnes by the end of seasons in 2012. At this level, the world cereal stocks-to-use ratio for 2011/12 is expected to approach 22 percent, up only slightly from 2010/11.
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