x Abu Dhabi, UAEFriday 21 July 2017

Global food prices fall for the fifth month in a row

Although worldwide food prices have dropped for the fifth consecutive month, experts say they will remain volatile over the next few years.

ABU DHABI // Global food prices have dropped for the fifth month in a row.

The United Nations Food Price Index, which measures the monthly change in the international prices of a basket of commodities, has dropped 11 points since the beginning of the year, reaching 199.1 points last month.

Experts predicted prices would remain volatile.

“International prices have declined but they are still above their historical levels,” said Jose Graziano da Silva, the director general of the UN’s Food and Agriculture Organisation (FAO). “Prices are expected to remain volatile over the next years.”

Mr da Silva spoke at a meeting about global food prices in Rome at the beginning of the month, attended by 30 agriculture ministers.

“If higher and volatile prices are here to stay, then we need to adapt to this new pattern,” he said, urging countries to benefit from the current stable situation to prepare for future market turbulence.

Economists said the recent drop in prices was the result of a “bumper harvest” from the United States.

“This is attributable to a decline in grain, edible oil and sugar prices, which have been pressured lower by current large global stockpiles,” said Abah Ofon, a commodities analyst at Standard Chartered Bank in Singapore.

“Or, in the case of grains, expectations of a bumper harvest from the US, which is the largest exporter of corn, wheat and soybeans.”

Although the FAO Cereal Price Index is 20 per cent lower than a year ago, Mr Ofon said he expected food prices in general to slowly increase over the next few months.

“This is partly on weather concerns but also on the back of stronger demand, particularly in Asia as festival demand picks up.”

Although Mr da Silva said improved global governance had played an important role in warding off additional price surges since July last year, Mr Ofon said the weather was another factor to take into account.

“The market expects a good global grain harvest,” he said. “Improved weather relative to 2012, and speculator liquidation have also undermined prices.

“Sugar and wheat are down about 16 per cent since the start of the year, and corn is down about 24 per cent.”

Last year, the World Bank warned that the cost of maize, wheat and soybeans had shot up by a “historic” 25 per cent in July alone.

Although the UAE has set fixed prices for many food staples, the Middle East was listed as a region particularly vulnerable to price increases because of its reliance on imports.

Drought in the US, a country from which the UAE imports a range of foods, was largely blamed for last year’s price surge.

cmalek@thenational.ae