Global food prices down, but situation still uncertain: FAO

Although food prices declined in March, volatility in prices is expected to continue in the coming months amid fluctuating oil prices and low stocks of foodgrains across the world, UN body FAO said on Thursday.

According to the Food and Agriculture Organisation, global food prices fell for the first time after eighth consecutive months of price spikes in March this year in the wake of a decline in international prices of oil, sugar and cereals.

The food price index, a measure of the monthly change in international prices of a basket of food commodities, averaged 230 points in March, 2011, down 2.9 per cent from its peak in February, 2011, but still 37 per cent above its reading in March last year.

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"The decrease in the overall index this month brings some welcome respite from the steady increases seen over the last eight months," FAO Trade and Market Division director David Hallam said.

But to consider it a reversal of the upward trend would be premature, Hallam pointed out, adding that the information on new plantings over the next few weeks needs to be checked to get an idea of future production levels.

"But low stock levels, the implications on oil prices of events in the Middle East and North Africa and the effects of the destruction in Japan all make for continuing uncertainty and price volatility over the coming months," he cautioned.

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Crude oil prices rose to above a two-and-a-half year high of $123 a barrel on Wednesday because of speculation and political uncertainty in North Africa.

International prices of oils and sugar dropped the most, followed by cereals.

In contrast, dairy and meat prices were up, although only marginally in the case of meat, the FAO index said.

The Cereal Price Index in March, 2011, though down 2.6 per cent from February, 2011, is still 60 per cent higher compared to the corresponding period of the previous year, the world's apex agriculture body said.

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Sugar prices declined, prompted by prospects of increased market availability, notably from India, it said.

The FAO's Oils/Fats Price Index fell by 7 per cent, interrupting nine months of consecutive rise.

The March, 2011, slide primarily reflects a recovery in global supply prospects for palm oil, FAO added.

Dairy prices were high on the back of firm import demand together with lower than expected production in Southern hemisphere supplying countries, where the milking season is coming to a close, it said.

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Meat prices rose due to trade disruptions in several key markets, particularly North Africa and Japan, it added.

Global food prices averaged 236 points in February 2011, up 2.2 per cent from January, the highest record in real and nominal terms since the FAO started monitoring prices in 1990, the United Nation's apex body on agriculture said earlier.