Top harvests worldwide ease pressure on costs

At an outdoor market in Hanoi, Vietnam's capital, Trinh Thi Thanh pays 100,000 dong ($5.22) a kilogram for the pork her family eats more than any other meat. That's down from 150,000 dong a few years ago, easing pressure on the cost of family meals that had been surging, she said.

''In the past, price fevers happened much more often,'' said Thanh, 63, who buys food for a household of seven adults and two children. ''Now, even when wages or petrol prices go up, food costs in the market don't advance, or rise very little.''

Gains in food costs around the world have slowed as record harvests from India to the US expanded supply and sent corn, soybeans, wheat, sugar and coffee into bear markets. Standard & Poor's GSCI Agriculture Index of eight crops tumbled 22 per cent last year, the biggest annual drop since 1981. Morgan Stanley and Rabobank International cut their outlooks for farm goods in December, and costs are easing for buyers including Panera Bread and General Mills.

The world's food-import bill slid 3.2 per cent in 2013 to $US1.15 trillion, the United Nations estimates. Global costs are down 13 per cent from an all-time high in February 2011, when floods and drought ruined crops and sparked protests in Africa and the Middle East, toppling leaders in Tunisia and Egypt. The International Monetary Fund said prices will drop 6 per cent this year. In Vietnam, where a third of income is spent on meals, increases slowed to a 5.1 per cent annual rate in December from as high as 34.1 per cent in August 2011.

''Food-price inflation could be a little bit lower at the consumer level due to what's happening in terms of commodity prices,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York. ''Supply has risen, and the laws of supply and demand tell you that eventually these crop prices and these food goods are going to mean lower prices for consumers.''

Corn posted the biggest commodity loss last year, dropping 40 per cent. Wheat tumbled 22 per cent, coffee slid 23 per cent, sugar was down 16 per cent, and soybeans declined 8.3 per cent. The MSCI All-Country World Index of equities rose 20 per cent, while the Bloomberg Dollar Index, a gauge against 10 major trading partners, added 3.5 per cent. The Bloomberg Treasury Bond Index lost 3.1 per cent as of December 30.

Corn farmers in the US, the world's biggest agricultural exporter, probably harvested a record 13.989 billion bushels in 2013, and global output gained 12 per cent to a record high, the government said on December 10. The grain is used mostly as feed for cattle, pigs and chickens, and to make sweeteners, cooking oil and ethanol. Prices in Chicago have tumbled 50 per cent from a record high of $US8.49 a bushel in August 2012.

The International Grains Council projects inventories of wheat and feed grains, including corn, will climb to 379 million tonnes, a four-year high, before the start of the 2014 harvest. Global production of wheat, which reached a record price in 2008, will be a record high for the fourth time in six years, US Department of Agriculture data shows.

Cheaper feed grains mean lower costs and expanding meat supplies from poultry, pig and cattle producers. Vietnam's pork output in the first nine months of 2013 increased to 3.3 million tonnes, up 2.1 per cent from the same period in 2012, according to a November 25 report by the agriculture ministry.

''Producers around the world have responded to four or five years of record prices in the grain and oilseeds markets and record profits in the US, South America and the Black Sea,'' said Bill Cordingley, head of food and agribusiness research and advisory for Rabobank in the Americas, who is based in New York. ''There will be price relief for the retailers and the consumer.''

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