Poor Economic Growth Drives Food Prices Down for the Fourth Consecutive Year

 

FAO's Food Price Index averaged 164.1 points over 2015 and ended the year even lower, at 154.1 points during the month of December.

 

In December, the index declined a further 1.0 percent from its revised November value, as falling prices for meat, dairy and cereals more than offset gains by sugar and vegetable oils.

 

“Supply situation is pretty good for all the food commodities and their prices have fallen anywhere between 15 to 30 percent year on year, which brings the overall index down about 19%. Its been falling for four years and now stands at its lowest level in six years. While the global supply prospect remains favorable the increase in demand has not been as strong; therefore there is a downward pressure on prices.”  FAO senior economist Abdolreza Abbassian told FoodIngredientsFirst.

 

“Sugar is one commodity that should be watched a bit more closely over the next few months because of production setbacks in some of the major producing countries like India and Brazil, it may be that they will be less for exports in order to meet their own domestic demand.”

 

Abbasian believes weather will continue to play a major influence on food prices: “What we have seen in the current El Ninio episode has been anything but predictable, the floods in the US and droughts in South Africa have been much more intensive than we expected; we think weather will be critical also in 2016 and could result in sharp price fluctuations that just aren’t very predictable, thus keeping the market on the edge.”

 

Abbasian discusses the growing role of China: “Today China is a key player for every food commodity whereas until recently we considered China as the main player for energy, minerals and metals. This is challenging because the domestic market condition in China is evolving very fast and that needs very close monitoring to be able to predicts the impact on global food markets.”

 

FAO's Cereal Price Index declined 1.3 percent in December from its November value, due to intensifying export competition among maize producers and expectations of more wheat supplies entering world markets after Argentina removed export taxes. The sub-index, which includes rice, shed 15.4 percent on average during 2015 from the previous year.

The Dairy Price Index subsided 1.0 percent in December, and over the year was 28.5 percent below its average level in 2014, the sharpest decline of any food commodity.

The Meat Price Index dropped by 2.2 percent in December, prompted by surging pork output in Europe and reduced U.S. demand for imported beef. Over the full year, meat was on average 15.1 cheaper than in 2014.

The Vegetable Oil Price Index rose 2.1 percent in December, pushed up by uncertainties regarding Brazil's soybean crop, but over 2015 as a whole was 19 percent below the previous year.

FAO's Sugar Price Index rose 0.6 percent in December, but was on average 21 percent lower in 2015 than the previous year.