Global Food Prices Decline – World Bank

The World Bank Groups latest Food Price Watch has indicated that global food prices have declined by 8% between September and December 2011 due to increasing supplies and uncertainty about the global economy.

However, it indicated that prices still remain volatile and high with the 2011 annual index pegging it at 24% higher than its average in 2010.

According to report, while the first quarter of 2011 witnessed sharp increases, five consecutive months of decreases at the end of the year drove the World Bank Food Price Index 7 percent below the December 2010 levels, and 14 percent lower than its February peak. “Nevertheless, global prices remain high with the 2011 annual index averaging at 210 points against 169 points average in 2010,” the report said.

According to the quarterly Food Price Watch report, despite the downward trend over the last few months, global prices of key staples continued experiencing volatility, and the average annual prices of wheat, maize and rice well exceeded averages for 2010.

“Domestic food prices also experienced sharp increases in many countries from December 2010 to December 2011. Wheat prices were up 88 percent in Belarus and 23 percent in Ethiopia; rice prices increased 81 percent in Uganda and 56 percent in Malawi; maize was up 117 percent in Kenya and 106 percent in Mexico; and sorghum increased 57 percent in Burkina Faso and 28 percent in Ethiopia.”

It also mentioned that, “The worst food price increases may be over but we must remain vigilant. Prices of certain foods remain dangerously high in many countries, leaving millions of people at risk of malnutrition and hunger. Governments must step up to the plate and implement policies to help people cope.”

Unseasonal increases in cereal prices threaten to deteriorate food insecurity conditions, especially in conflict-affected areas in Africa and across southern Somalia. In addition, the adoption of some coping mechanisms in poor homes from eating cheaper meals to taking children out of school could have negative, long-lasting effects on the health and well-being of millions of families in already difficult situations. Therefore, more and well-targeted support to help people cope is needed, such as school food programs, conditional cash transfers, and food-for-work programs.

Notwithstanding, there are prospects for decline in 2012 food prices due to weaker consumer demand as a result of a sluggish global economy.  Expected declines in the price of energy and crude oil, and strong forecasts for 2012 food supplies are visible.

Nevertheless, the report indicated that some upward price pressures still remain. “These include a possible increase in demand for bio-fuels if oil prices pick up again, very low stock-to-use levels for maize, volatility in oil prices as a result of unrest in producer countries, and weather changes.”