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Resource centre on India's rural distress
 
 

Global food prices seen falling as demand growth slows: FAO
-Bloomberg
 
World food prices will drop this year as increase in unemployment in developing and developed countries slows growth in demand, the United Nations said.
 
“We have started to see a decline in food prices,” Jose Graziano da Silva, director general of the UN’s Food and Agriculture Organisation, said at a conference in Hanoi on Thursday.

World economic expansion will slow to 3.3% this year from 3.8% in 2011, according to the International Monetary Fund.

In China, Premier Wen Jiabao has announced a growth target of 7.5% for this year, down from 8% in the past seven years. Global harvests of wheat and rice, the world’s two most-consumed grain, are headed for records as farmers boost planting to benefit fromrising prices.

“We saw acreage up across almost all crops, while we’ve seen efforts at expanding livestock herds,” adding to food supply and pushing prices lower, Michael Creed, an agribusiness economist at National Australia Bank, said by phone from Melbourne. The high prices last year certainly produced a response from farmers, he said.

While global food prices climbed for a second consecutive month in February on higher costs for cereals, cooking oils and sugar, they are down 9.5% from a record in February 2011. An FAO index of 55 food items increased 1.2% to 215.3 points from 212.8 points in January, the agency said on March 8.

Prices of rice, wheat and corn soared to records in 2008 on global shortages, prompting export limits by some countries and spurring concern that a food crisis was looming. Riots occurred from Haiti to Egypt.

“The FAO Index will be lower” by the end of the year, Da Silva said. Consumer prices have shown signs of retreating with inflation in China, the world’s second-largest economy, easing to the slowest pace in 20 months, data showed this month.

Wheat prices declined 29% from their high in February 2011 and traded at $6.4675 a bushel on the Chicago Board of Trade today. Rice prices tumbled 25% from a peak in September to $13.95 per 100 pounds.

In Asia-Pacific, food price volatility remains a “threat” with retail rice costs in many countries 10% to 30% higher than in 2011, he said. A number of countries are close to their limit for agricultural expansion, he said. “Land degradation also affects productivity in Asia and Pacific, a region that is increasingly threatened by water scarcity.” The region is home to 62% of the world’s 925 million undernourished people, Da Silva said. Undernourishment fell from 20% to 15% in the 16 years to 2006-2008, he said.