May 7 - 20, 20

Global food prices fell by 1.4 per cent from March to April, but seem to have stabilized at a "relatively high level," the United Nations Food and Agriculture Organization (FAO) announced.

The FAO said the fall registered by its Food Price Index was the first after three consecutive months of increases. "Although the index is significantly down from its record level of 235 points in April 2011, it is still well above the figures of under 200 which preceded the 2008 food crisis," FAO said.

The index was published in FAO's Food Outlook, a global market analysis, which comes out twice a year. It noted that the prospects for the second half of this year and into the next indicate generally improved supplies and continuing strong demand.

Global food import bill in 2012 could decline to 1.24 trillion dollars, down slightly from last year's record of 1.29 trillion dollars, it said.

The forecast for cereals production was for a modest expansion in 2012 to a new record of 2.371 billion tons compared to 2.344 billion tons in 2011.

However, within the cereals sector, wheat production in 2012 is anticipated to fall by 3.6 per cent compared to 2011, to 675 million tons, with the largest declines forecast for Ukraine, followed by Kazakhstan, China, Morocco, and the European Union, FAO said.

Rice production is expected to grow 1.7 per cent in 2012 to 488 million tons, but slackening import demand and the return of India as a major exporter are keeping prices down, it added.

World sugar output in 2011-12 is set to increase by close to eight million tons, or 4.6 per cent, reaching nearly 173 million tons.

Global food prices declined eight per cent between September and December 2011. Wheat, maize, and rice prices declined due to improved supply conditions, and among concerns regarding the global economy.

However, global prices still remain high, with the 2011 annual food price index exceeding the 2010 annual index by 24 percent.

Prospects for decline in 2012 prices are favorable on account of increasing supplies. Yet, global prices remain high and volatile, markets tight, and oil prices uncertain. There has been strong demand from deficit areas and production losses from La Niņa have already occurred. Domestic food prices also remain high and volatile, and continue to show large differences from country to country. Declining global prices should not diminish vigilant monitoring of food price movements.

Because domestic food prices have remained high, households have adopted coping strategies. These strategies follow common patterns but are not universal. Coping strategies may partially offset some of the effects of crises, yet the nutritional consequences of food crises can quickly become devastating, especially in low-income countries with weak safety nets

While the first quarter of 2011 witnessed sharp rises in international food prices, five consecutive months of decreases at the end of the year drove the World Bank Food Price Index to 14 per cent below its February 2011.

The global Food Price Index averaged 210 points in 2011, up 24 percent from its average in 2010. Average annual prices in 2011 for wheat, maize, and rice also well exceeded averages for 2010. Volatility continued to be high during the fourth quarter, as shown by the periods of price declines followed by periods of marked increases.

Maize prices saw two periods of increases, one through October, and the other in the second half of December. Wheat prices saw four periods in which prices rose: October, late November, half of December, and mid-January.

A factor contributing to the non-transmission of increasing oil prices to food prices was the strong decline in the price of fertilizers. The 10 per cent reduction in the price of fertilizer-a critical input for agricultural production-during the fourth quarter put a halt to sustained increases in fertilizer prices throughout the year.

Concerns about a prolonged deterioration in global demand combined with uncertain economic prospects and U.S. dollar appreciation exerted downward pressures on global prices.

A better-than-anticipated production of wheat from the Black Sea and winter harvests in Argentina and Australia, a good maize harvest in Ukraine, and bumper rice harvests in China and India have all more than compensated for bad harvests in the United States and rice production losses in Thailand and other countries in that region.

The vigorous response from rice exporters such as India and Pakistan and maize exporters such as Ukraine also helped fill the gap in world exports that followed the floods and the mortgage price scheme in Thailand (the world largest rice exporter) and reductions in maize exports from the United States (the world largest maize exporter) due to unfavorable weather.

Demand for rice imports from large Asian importers has been subdued following expectations of good harvests, keeping price pressures down.

Expectations remain relatively favorable for declines in the price of energy including crude oil, and minerals in an uncertain global economy dominated by a persistent debt crisis and a slowdown in the demand growth in China.

The recent elimination of biofuel subsidies in the United States might also contribute to a reduction in the diversion of agricultural production for non-food purposes, although the effect on food prices is not yet clear.