The United Nations’ Food and Agriculture Organisation (FAO) said on Friday, September 2, that although global food prices have dropped for the fifth consecutive month, they are still roughly 8% higher than they were at the same time last year.
In August, prices for five basics — cereals, vegetable oil, dairy, meat, and sugar — were lower than in July, according to the organisation’s most current Food Price Index.
The Index keeps tabs on the monthly changes in these basic food costs throughout the world. Last month, it averaged 138.0 points, a decrease of roughly 2% from July but a 7.9% increase over the previous tally.
The prices of world food commodities are determined by the forces of supply and demand in the international market. However, government policies and other factors can influence these prices.
For example, a country may impose tariffs on imported food commodities in order to protect its own producers. Alternatively, a country may subsidise its exports in order to make its products more competitive in the global market.
In line with this, Ukraine exports may be a factor in the decrease of cereal prices. The FAO noted this decrease is due to the resumption of exports from Ukrainian Black Sea ports, along with better production prospects in North America and Russia. A landmark agreement to lift the ban on Ukrainian grain exports during the protracted conflict was signed in July by Ukraine, Russia, Turkey and the UN.
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On average, rice prices remained unchanged in August, while prices for coarse grains, such as maize, increased slightly.
Vegetable oil costs dropped by 3.3%, making them marginally less expensive than they were in August 2021. Due to reduced export duties and the restart of Ukrainian shipments of sunflower oil, the FAO ascribed this to the increasing supply of sunflower oil from Indonesia.
As for dairy prices, despite a 2% decrease, these were still 23.5% higher than they were in August 2021. Cheese prices rose for the ninth straight month, although milk prices eased as supply from New Zealand were anticipated to grow, despite estimates for decreased output in Western Europe and the US.
Meat costs decreased by 1.5% but remained somewhat more than 8% than they were in August of previous year. Bovine meat prices plummeted because of poor domestic demand in several of the main exporting nations, but pig meat quotes increased as export availability increased. International poultry quotations also dipped amid rising export availability.
Due in major part to strong export restrictions in India and declining ethanol prices in Brazil, sugar prices also dropped to their lowest point since July 2021.
Additionally, the FAO has released its worldwide grain output projection for this year, which predicts a drop of roughly 40 million tonnes, or 1.4%, from last year.
The majority of this reduction mostly affects coarse grains, with maize yields in Europe predicted to fall 16% below their five-year normal level due to the unusually hot and dry weather conditions hitting the continent.
FAO, however, predicts that due to anticipated record harvests in Russia and favourable meteorological conditions in North America, there will be a negligible reduction in global wheat output.
As compared to the record high achieved in 2021, the world’s rice output is predicted to fall by 2.1%.
In the short run, changes in the prices of world food commodities can have a significant impact on the economies of importing and exporting countries. For example, an increase in the price of wheat may lead to higher bread prices in importing countries, which could lead to inflationary pressures. On the other hand, a decrease in the price of coffee may lead to lower profits for coffee producers in exporting countries.
In the long run, changes in the prices of world food commodities can also have an impact on global food security. For example, a sustained increase in the price of rice could lead to widespread hunger and poverty in rice-importing countries.
Alternatively, a sustained decrease in the price of corn could lead to a decrease in global food production, which could lead to higher food prices and food insecurity.
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