World Food Prices to Remain Elevated After Drop in August on Cooking Oils
World food prices probably will stay at historically high levels this year on a lack of stockpiles after falling in August on lower costs for cooking oils and dairy products, the United Nations said.
An index of 55 food commodities fell to 231.1 in August from 231.9 in July, the UN’s Rome-based Food and Agriculture Organization said in a report on its website today. The gauge has slipped 2.8 percent from a record 237.7 in February, while remaining higher than at any time in previous years.
“You’ll have these high prices continuing,” Abdolreza Abbassian, a senior economist at the FAO, said by phone. “Certainly for the countries that import food, the kind of food inflation they’ve experienced so far is not really going to diminish with our food index dropping 1 or 2 points.”
The cost of living is rising across the world. U.S. consumer prices advanced 0.5 percent in July as food and energy costs rose. In Uganda, where protests erupted in April over rising living expenses, July inflation was almost 19 percent, the fastest pace in 18 years on surging food prices.
The food-price index also declined in July from 233.2 in June, according to the FAO. The MSCI World (MXWO) Index, a gauge of the biggest equities in developed markets, dropped 7.3 percent in August, the fourth retreat in a row.
“In spite of all the other things going on in today’s world markets, especially in the financial sector, here you have a situation where prices seem to be sustained,” Abbassian said. “You’re not seeing the plunge you’re seeing in equities. It tells you that the markets are very tightly balanced.”
Food prices may fall 2 percent or 3 percent from August’s level by the end of the year, according to Abbassian. He doesn’t expect a correction similar to 2008, when the index dropped 34 percent from its June peak of 224.1.
“Don’t expect a sharp downturn,” Abbassian said. “The message is prices remain high. They may come down a bit, but not significantly.”
Higher grain prices limited the food-price gauge’s drop as an index of cereal prices climbed to 252.5 in August from 247.2 the previous month, after a decline from 259 in June.
A gauge for meat prices was little changed at 180.6 from 179.2 in July, while a dairy index dropped to 220.6 from 227.8. An edible-oils index fell to 243.6 in August from 251.2 a month earlier.
“Dairy and meat prices will be under pressure in the coming months,” Abbassian said. “When it comes to value-added foods such as meat and dairy, economics and income matter more than in other commodities, and the economic conditions are not really good.”
Countries will spend $1.29 trillion to import food this year, the most ever and 21 percent more than in 2010, the FAO has estimated.
Higher food costs have sent “tens of millions of people” into poverty since late 2010, and the world’s hungry populace may soon exceed 1 billion again, aid and development charity Oxfam International said Aug. 3. The number of malnourished people in the world fell last year to 925 million from 1.02 billion in 2009, according to the FAO.
9.2 Billion People
“So far there are no signs that things would be getting better,” Abbassian said. “In the poorer countries, consumption is mainly grains. We’re up from last year.”
World food output will have to rise 70 percent by 2050 as the global population climbs to 9.2 billion from an estimated 6.9 billion in 2010, the FAO estimates. The price of staple foods including corn will more than double in two decades without action, Oxfam said in May.
Global grain production is forecast to rise 3 percent to 2.307 billion metric tons in 2011-12, the FAO said in a separate statement, down 5.8 million tons from a July outlook. Corn-crop prospects in the U.S. deteriorated because of hot weather in July and August.
World cereal stockpiles probably will remain little changed at 488.3 million tons from 487.8 million tons at the end of the 2010-11 season, the UN agency said.
“Low inventory for the second season means we’ll be looking with anxiety to what will happen to 2012 production already now,” Abbassian said. “Everything now depends on corn. It has been setting the tone for the whole season.”
Corn futures climbed 15 percent in Chicago last month after rising 7.8 percent in July, while wheat rose 11 percent in August and 17 percent the previous month. Corn has gained 19 percent this year, compared with a 5.7 percent drop for wheat.
Growth in agricultural output will slow to 1.7 percent a year through 2020, compared with 2.6 percent in the previous decade, the FAO and the Paris-based Organization for Economic Cooperation and Development said in a report in June.
Discontent about rising food costs helped spark protests across northern Africa and the Middle East this year that became known as the Arab Spring, leading to the ouster of Hosni Mubarak as Egypt’s president and threatening governments in Syria, Libya and Yemen.
The FAO, set up in 1945 as a specialized UN agency, says it leads international efforts to defeat hunger and helps developing countries improve farming. Its mandate includes lifting nutrition levels and agricultural productivity.
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