A glut of commodities from butter to wheat and an economic slowdown for importers including China will reduce global costs of importing food by 19 percent to a five-year low, the United Nations forecast.
The world food-import bill may fall by $261 billion to $1.09 trillion, the UN’s Food & Agriculture Organization wrote in a report on Thursday. The cost of importing food was a record $1.35 trillion in 2014, according to the FAO.
Global food prices tracked by the FAO rose for the first time in 11 months in September, after the longest slump since 1998. Still, market fundamentals indicate no reversal of the downward price trend in most food markets, according to the FAO.
“Energy-price prospects remain subdued and, with economic uncertainty in major importing countries such as China, there is little sign of an upturn in global demand prospects,” FAO economists Adam Prakash and Friederike Greb wrote.
The commodity-import bill for cereal-based foodstuffs may slide 24 percent to $135 billion, while costs for dairy are predicted to drop 40 percent to $59 billion. Meat imports are seen falling 19 percent to $144 billion.
Agricultural commodity prices are linked with energy prices, which drive demand for biofuel derived from crops as well as the cost of inputs such as fuel and fertilizer. The correlation between the FAO’s food-price index and oil prices has been “very pronounced,” especially since 2007, according to the report.
International commodity prices typically have an inverse relation with the U.S. dollar, with a stronger greenback weighing on commodity values, according to the FAO.
“The appreciation of the U.S. dollar against major currencies is showing no sign of abating, underscored by the strength of the U.S. economy relative to elsewhere,” Prakash and Greb wrote.
Low international food prices will benefit countries that rely on imports, as long as falling currencies don’t wipe out any gains from lower prices, according to the report. The food-import bill for sub-Saharan Africa may drop 21 percent to $37 billion, the FAO said.
“Lower food prices relative to incomes seem to be a boon to food security, by making food acquisition more affordable,” Prakash and Greb said.
Falling commodity prices could hurt farmers’ profits, reducing investment in agriculture, according to the FAO.
“Paradoxically, underinvestment in agriculture has often been cited as one of the main causes for the sharp price hikes of the last decade, as it had lowered the capacity of world agriculture to respond when most needed,” the FAO economists wrote.
The FAO’s index of 73 food prices rose 0.8 percent to 156.3 in September. The gauge climbed for the first time since October 2014, lifted by a rebound in dairy prices following production cuts by farmers in New Zealand, and rising sugar prices on weather concerns.