World Bank: Food Prices Decline but Remain High as Weather Concerns Increase

27 Nov 2013 --- International prices of food continued to decline between June and October 2013, but remain high. The World Bank’s Food Price Index decreased by 6% between June and October 2013. Despite steady declines in the past few quarters, prices remain high: the Bank's Food Price Index was only 12% lower than a year ago and 16% below the all-time peak in August 2012.

The overall decline is mainly driven by the prices of grains, which were 19% lower in October than in June. However, within the prices of grains, there is some variation. The price of internationally traded maize fell by 32%, with sustained drops in each of the last three months. Prices of rice (Thai 5%) also fell markedly—but less—between June and October, by 16%.

In contrast, the international price of wheat increased during this period. The increase between June and October was 4%, with a sharp increase of 6% in October alone. Despite an increase of 6% in the Bank’s average price of crude oil during this period, fertilizer prices have not increased.

Weather has played a role, alongside improved production prospects, in sustained price declines. Favorable outlooks for the supply of cereals predict record harvests for wheat, maize, and rice.

However, deteriorating weather conditions and other uncertainties might further affect price trends. Bad weather in South America, Black Sea countries, China and India particularly warrants concern.

This issue of the Food Price Watch also explores the role that extra-large scale farming, popularly known as “super farms” may play in boosting agricultural productivity and poverty reduction. The jury is still out on whether this trend has a positive or negative effect on boosting shared prosperity, especially in those countries with fragile institutions and poor oversight: social, environmental and animal welfare concerns must be weighed with potentially promising benefits such as jobs and efficiency gains.