World food prices drop to 55-month low

Higher local output estimated to depress cross-border sales

Global food prices touched a 55-month low in February, falling 14 per cent from a year earlier, due to a bumper crop in 2014 which left world inventory at a record high.

Data compiled by the Food and Agriculture Organization (FAO) of the United Nations showed the average food price index at 179.4 points in February, from 208.6 in the same month a year before. In January this year, the index was at 181.2.

“Booming prospects for wheat output explain the bulk of the decline in the food price index. Rice prices were more stable, with aromatic rice quotations increasing markedly, compensating for much of the declines in the other varieties. The first thing to flag is the favorable outlook for production of a number of crops in 2015. Stocks are also very strong for most cereals,” said Michael Griffin, dairy and livestock market expert at FAO.

The price index decline to its lowest level since July 2010 reflects robust supply conditions and ongoing weakness in many currencies versus the dollar, which appear set to continue, he added.

FAO estimates global cereal production at 2,541.8 million tonnes in 2014-15. With a carryover stock at 615.3 mt from last year, total supply goes up to 3,157.1 mt against utilisation of 2,475.2 mt. Thus, the carryover stock as of March 5 was estimated at 681.9 mt for the next year, a record.

Also, global trade (cross-border transportation) is expected to remain subdued at 344.2 mt in 2014-15 as compared to 357.4 mt the previous year. The decline is expected because of rising local output.

With the 2015 winter wheat crop already developing in the northern hemisphere, FAO forecasts production for the year at 720 mt or one per cent below the record output of 2014, discounting normal yields in the European Union and Central Asia after strong levels last season.

Globally, 1,107 mt of cereals are forecast to be used for food consumption in 2014-15, resulting in a slight increase in average per capita intake to 153.3 kg. Cereals used for animal feed are anticipated to grow by four per cent and account for 877 mt. The world cereal stock at the close of the 2014-15 crop season is estimated at a 15-year high of 631 mt, with part of the revision resulting from reviewed estimates of previous year stocks in China and Ukraine.

The sugar price index averaged 207.1 points in February, down 4.9 per cent from January, the sharpest move of any commodity. The drop reflected optimism on production prospects in Brazil after recent rain, as well as India's announcement of subsidising export.

By contrast, the dairy price index rose for the first time in a year, averaging 181.8 points in February, a 4.6 per cent increase from the previous month. The increase was driven by milk powders and reflects both a seasonal slowdown in European output as the quota for the season draws to a close and crimped supply from New Zealand and Australia. Cheese quotations remained largely unchanged.