Food prices drop but trend hard to pick

Food prices fell in December 2011 with the FAO Food Price Index dropping 2.4 percent, or five points from November, FAO said today.

At its new level of 211 points, the Index was 11.3 percent (27 points) below its peak in February 2011.

The decline was driven by sharp falls in international prices of cereals, sugar and oils due to bumper 2011 crops coupled with slowing demand and a stronger US dollar. Most commodities were affected.

However, although prices dropped steadily in the second half of 2011, the Index averaged 228 points in 2011 — the highest average since FAO started measuring international food prices in 1990. The previous high was in 2008 at 200 points.

A period of uncertainty

Commenting on the new figures, FAO Senior Grains Economist Abdolreza Abbassian said that it was difficult to make any firm prediction on price trends for the coming months.

“International prices of many food commodities have declined in recent months, but given the uncertainties over the global economy, currency and energy markets, unpredictable prospects lie ahead,” Abbassian said.

Among the principal commodities, cereal prices registered the biggest fall, with the FAO Cereal Price Index dropping 4.8 percent to 218 points in December. Record crops and an improved supply outlook sent prices of major cereals declining significantly. Maize prices fell 6 percent, wheat 4 percent and rice 3 percent. In 2011, the FAO cereal price index averaged 247 points, up some 35 percent from 2010 and the highest since the 1970s.

Oils and fats down

The FAO Oils and Fats Price Index stood at 227 points in December, down 3 percent from November and well below the level of 264 points one year ago. Larger than expected overall supplies of vegetable oil led to a rise in stocks (notably palm and sunflower oil), which, together with poor global demand for soybeans, deflated prices.

The FAO Meat Price Index averaged 179 points, slightly down compared with November. The decline was mainly driven by pig meat, whose price dropped by 2.2 percent, with sheep meat also receding somewhat. By contrast, poultry and bovine meat prices recorded mild gains. On an annual basis, meat prices in 2011 were 16 percent higher than in 2010.

Dairy products mostly up

The FAO Dairy Price Index averaged 202 points, almost unchanged from November. All dairy products were up slightly with the exception of butter, which dropped by 1 percent. Over the whole year, dairy products were on average 10 percent dearer than in 2010, with particularly strong gains witnessed for skim milk powder and casein, which gained 17 percent each. More modest increases were seen for butter and whole milk powder prices, which progressed by 11 percent, and cheese, by 8 percent.

The FAO Sugar Price Index declined for the fifth consecutive month to 327 points in December, down 4 percent from November and 18 percent from its July 2011 peak. The Index’s weakness in recent months mostly reflects expectations of a large world production surplus over the new season, on the back of good harvests in India, the European Union, Thailand and the Russian Federation.   

Combined resource to tackle food issues

In January 2012 IFPRI is launching two major research programs. These CGIAR Research Programs (CRPs), led by IFPRI, will bring together researchers from across the CGIAR centers to address some of the most pressing problems facing the global food system.

The first of these two programs—Policies, Institutions, and Markets to Strengthen Food Security and Incomes for the Rural Poor, also known as CRP2—will identify the policies and institutions that will enable rural smallholder producers, particularly women, to increase their incomes through better links with markets and equitable access to services and assets. Failures related to policies, institutions, and markets are a major impediment to increasing agricultural growth in the developing world, where a majority of people depend on agriculture for their livelihoods. 

The second program—Agriculture for Improved Nutrition and Health, also known as CRP4—aims to improve the nutrition and health of poor people by exploiting the many synergies between agriculture, nutrition, and health. This program will focus on research in four key areas: value chains, biofortification, control of agriculture-associated diseases, and integrated agriculture, nutrition, and health development programs and policies. John McDermott has been named Director of CRP 4.

New FAO boss talks the talk

Two days after taking over, FAO's new Director-General José Graziano da Silva told his inaugural press conference that the total elimination of hunger and undernourishment from the world will be his top priority.

Graziano da Silva told journalists that with a term in office of only three and a half years there was no time to lose. FAO would begin by scaling up its support to a number of low-income, food deficit countries, especially those facing prolonged crises.

"Ending hunger requires the commitment of everyone: neither FAO nor any other agency or government will win this war alone", said Graziano da Silva, adding that he wanted to work "in the most transparent and democratic way" with member countries, United Nations agencies the private sector, civil society and other stakeholders.

Hunger eradication was the first of five strategic priorities he intended to pursue at FAO, Graziano da Silva said. The others were: move towards more sustainable systems of food production and consumption; achieve greater fairness in the global management of food; complete FAO's reform and decentralization; and expand South-South cooperation and other partnerships.