Global Price Trends

The prices of internationally traded food commodities continued to fall between October 2012 and February 2013

Food prices have been falling for six consecutive months, but the World Bank's Food Price Index in February 2013 was only 9% below the recent all-time peak in August 2012. This means that despite sustained declines, international food prices remain very high and still close to their historical peaks.

Prices of all the three main food categories declined during the months between October 2012 and February 2013. Prices of grains dropped by 5%, fats and oils by 4%, and other foods by 3% (table 1). In the same period, the price of internationally traded wheat declined by 11%, sugar by 10%, and maize by 6%. The price of soybean oil did not change, while Thai 5% rice prices increased by 1%. International fertilizer prices declined by 5% during this period, while crude oil prices rose by 4%.

The international prices of grains in February 2013 remained well above those of a year ago. (table 1). Wheat prices in February 2013 were 15% higher than in February 2012. Maize prices stood 8% higher than a year ago, and rice prices 5% higher than in February 2012. Because of declines in the prices of internationally traded sugar (24%) and soybean oil (6%), other components of the Bank's Food Price Index, the year-on-year international food price change increased by only 1%.

Lower demand in tight international cereal markets and improved conditions of current winter crops explain falling international food prices. Trade flows of wheat, maize, and rice declined in 2012 due to a combination of high prices, lower production, and lower imports of cereals from key importers. A sharp fall in the global use of wheat feed and reduced maize use for ethanol in the United States have both prevented a large increase in world cereal utilization. Favorable weather conditions have been recently reported in the European Union, the Black Sea countries (except for southern parts of the Russian Federation), China, and India. These conditions contrast with less favorable circumstances in the United States, with a protracted severe drought extended across the southern Plains. Looking ahead, favorable conditions for large exporters of maize in South America -- and South Africa -- should also lead to abundant supplies for the rest of 2013. As for rice, conditions are favorable for the main producers in East and South Asia, and among other southern hemisphere producers. Consequently, the world production of cereals for 2012-13 has recently been revised upward by both the Food and Agriculture Organization [FAO] and the U.S. Department of Agriculture [USDA], although production remains about 3% below 2011-12 levels.

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