Global food prices decline, but remain high, World Bank says

Written by on March 28, 2013 in Bulgaria - Comments Off on Global food prices decline, but remain high, World Bank says

The prices of internationally traded food commodities continued to fall between October 2012 and February 2013, according to the World Bank’s Food Price Index.

Food prices have been falling for six consecutive months, but the World Bank’s Food Price Index in February 2013 was only nine per cent 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 five per cent, fats and oils by four per cent, and other foods by three per cent. In the same period, the price of internationally traded wheat declined by 11 per cent, sugar by 10 per cent, and maize by six per cent. The price of soybean oil did not change, while Thai five per cent rice prices increased by one per cent.International fertiliser prices declined by five per cent during this period, while crude oil prices rose by four per cent.

The international prices of grains in February 2013 remained well above those of a year ago. Wheat prices in February 2013 were 15 per cent higher than in February 2012. Maize prices were eight per cent higher than a year ago, and rice prices five per cent higher than in February 2012. Because of declines in the prices of internationally traded sugar (24 per cent) and soybean oil (six per cent), other components of the World Bank’s Food Price Index, the year-on-year international food price change increased by only one per cent.

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 use.

Favourable 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, favourable conditions for large exporters of maize in South America – and South Africa – should also lead to abundant supplies for the rest of 2013, the World Bank report said.

As for rice, conditions are favourable 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 three per cent below 2011-12 levels.

But international prices still remain particularly vulnerable to several uncertainties, the World Bank report said. Global stocks of cereals dropped by three per cent in 2012, mainly due to the decline in wheat stocks (by nine per cent) and coarse grains (by almost six per cent). The global stocks-to-use ratio also declined compared to the previous season, from 22 per cent to 20.6 per cent for all cereals, although conditions are tighter for stocks of coarse grains than those of wheat. Major exporters’ stocks-to-disappearance ratios (a measure that compares stocks of cereals vis-a-vis the country’s use and exports) became even thinner: 16.4 per cent for all cereals, 13.2 per cent for wheat, and 8.1 per cent for coarse grains (again reflecting tighter conditions for coarse grains). In contrast, global stocks for rice remain much stronger.

Weather forecasts have recently improved in Brazil, but it is still too soon for conclusive supply estimates from upcoming harvests. The continued drought in the United States and dryness in Argentina, South Africa, and Australia also cast doubts over supplies in the coming months, the World Bank report said.

In the case of rice, a drawdown in Thailand’s accumulated stockpiles – estimated at 12 million tons, equivalent to one-third of the world’s total traded rice – into international markets might have potentially destabilizing effects.

On the demand side, China’s announced increasing needs of imported grains (especially maize) augur growing competition in international markets at a time when other large importers – Mexico, Indonesia, the Republic of Korea, and Turkey – are also increasing their import demands.

Oil prices have been on the rise for three consecutive months, exceeding $107 a barrel in February. As indicated in the November 2012 Food Price Watch (FPW), these increases have not translated into increases in fertiliser prices.14 Yet, the February 2013 price of crude oil marks its highest level since April 2012. Other uncertain factors stem from the increasing difficulty of meeting renewed mandates for Renewable Fuel Standard (RFS) volumes for biofuel in the United States. These mandated volumes have increased sharply, from 16.55 billion gallons in 2013 to 20.5 billion in 2015, at a time of high maize prices and reduced production in the United States following last summer’s drought. Consequently, all these factors point to the need for continued efforts to monitor international food prices.

Domestic prices of grains continued to follow expected seasonal patterns in most regions, the World Bank report said.

Prices of staples in West and East Africa remained stable or decreased because of improved food availability resulting from ongoing or recently concluded harvests. In contrast, prices continue to rise in southern Africa during its lean season. In Central America and the Caribbean, prices also follow seasonal trends, with increases for maize, decreases for beans, and increases for imported rice as some local currencies depreciated.

In wheat-importing countries in Central Asia, prices have stabilised at very high levels, reflecting high export prices within the region. In East and South Asia, importers have seen rice prices remain unchanged or decline because of abundant exports. In addition to these expected seasonal influences, a slew of domestic factors have also affected local prices. Such factors include either the depreciation or appreciation of the domestic currency; removal of fuel subsidies; implementation of public input support programs; public stockpiling or, contrarily, release of strategic reserves of food; trade disruption from conflict and increasing insecurity; increased transportation costs; increased humanitarian supplies; and erratic weather.

Between October 2012 and February 2013, the largest wheat price increases took place across monitored markets in Eastern Europe’s Belarus (17 per cent), Moldova (10 per cent), and Ukraine (national average, nine per cent) due to reduced supplies and, in the case of Belarus, high inflation and easing of food price regulation.

Large increases also took place in South American countries dependent on Argentinian exports such as Brazil (national average, 13 per cent) and Bolivia (La Paz, 11 per cent).

Increases in the price of wheat in some monitored markets in Pakistan (Karachi, 14 per cent) and India (Mumbai, 15 per cent) reflect high government purchases and strong export demand, the World Bank report said.

In contrast, wheat price reductions were limited to single-digits in some monitored markets in Ethiopia and South Africa, both due to adequate supplies, and in Ecuador, partially due to recent price controls.

Domestic maize prices have varied more markedly, with increases of 43 per cent in monitored markets in Malawi (Lilongwe) from production shortfalls, strong export demand from neighboring countries and depreciation of the currency, and in Zambia (national average, 23 per cent increase) mainly because of seasonal factors. Large increases between 15 per cent and 20 per cent were observed in certain markets in Uganda as a result of increasing imports and public purchases, and in Honduras and Nicaragua due to seasonal factors.

Decreases in maize prices reached 44 per cent in markets in major producer areas in Somalia, and in monitored markets across Kenya, South Africa and Ethiopia, all reflecting increasing supplies.

Also between October 2012 and February 2013, rice prices increased by 10 per cent in certain markets in India, and between seven per cent and nine per cent in some monitored markets of Bangladesh, Malawi, Mozambique, Niger, and Burma. These domestic price increases reflect increases in export prices, public purchases, and increasing fuel and transportation costs. The largest declines in the price of rice were observed in the capital cities of Mali (12 per cent) and Rwanda (16 per cent), because of increased supplies.

Domestic price variations during the months of February 2012 and February 2013 show the usual wide range in yearly prices,with large price increases observed among key grains. The price of wheat in February 2013 was 46 per cent higher than 12 months ago in Belarus, 45 per cent higher in Brazil, and 43 per cent higher in Moldova.

Annual price increases exceeding 30 per cent were observed in markets across India, Afghanistan, Sudan, and Ukraine.

For those markets for which information was available, only the capital city of Bolivia reports a decrease in the domestic price of wheat (three per cent).

Large increases in the annual price of maize have occurred in Russia (national average, 75 per cent) and some monitored markets in Malawi (47 per cent); in Haiti (42 per cent), because of increased import prices from the United States and the sharp contraction in 2012 domestic production; in Zambia (32 per cent), due to procurement programs, strong export demand, and depreciation; and in Somalia (22 per cent), from disrupted supplies and continued appreciation of the Somali shilling

The price of maize went down in the past year across certain markets in South Africa, Mexico, and Kenya because of increased production.

The price of rice in some monitored domestic markets in India increased 55 per cent in the past 12 months due to high procurement volumes, sustained exports, and rising fuel prices. Large increases were also observed in some markets in Mexico (40 per cent) and Brazil (national average, 30 per cent) related to increased demand for high-quality Thai and U.S. rice.

The annual rice price went down in monitored markets in Somalia by 33 per cent, partially due to appreciation of the local currency, followed by other price drops in Uganda, Niger, and Mali of between 12 per cent and 17 per cent.

Overweight and obesity constitute a global epidemic even in a world of high and volatile food prices. The prevalence and numbers of people affected by overweight and obesity have increased in the past three decades, during both periods of low and high international food prices, the World Bank report said.

“So as one malnutrition problem, undernourishment, is falling, others, overweight and obesity, are increasing rapidly.”

In 2008, the number of overweight adults was 1.46 billion, of which 508 million were obese.

Even conservative projections predict truly shocking numbers in the future if current trends are unabated: 2.16 billion adults might be overweight and 1.12 billion obese by 2030.

And such increases should be expected across all regions and in countries like China and India.

As food prices remain high and, arguably, increasingly volatile, unhealthy calories tend to be cheaper than healthy ones, the World Bank report said.

This is the case of junk food in the developed world, but also of less nutritious food substitutes in poor households in developing countries coping with recurrent food (and other) crises.

In fact, overweight is not an epidemic restricted to rich countries. Half of the world’s overweight people live in nine countries, including the United States and Germany, but also in China, India, Russia, Brazil, Mexico, Indonesia, and Turkey.

Regions with the highest obesity prevalence – exceeding 25 per cent of the adult population – include North Africa and the Middle East, Central and South America, and southern sub-Saharan Africa.

“Policy responses so far have only partially addressed the epidemic,” the World Bank said. “Responses have ranged from doing nothing to punishing overweight people by, for instance, imposing fines on employers when employees exceed certain waistline limits in Japan.”

Taxes, outright bans, or restrictive legislation on certain foods and ingredients along with clearer standards for food labels and awareness campaigns are attempts to veer consumers toward healthier foods.

“Yet, it is not evident that reducing obesity is among the top global policy priorities.”

Nonetheless, the current multilateral discussions on the post-2015 Millennium Development Goals (along with the United Nations [UN] high-level meeting on the prevention and control of noncommunicable diseases) offer an unprecedented opportunity for integrating global and national collective action to fight all forms of malnutrition, from stunting to obesity, the World Bank said. This integrated and collective action has, nonetheless, a tall order: it must help prevent this double burden – triple, if micronutrient deficiencies are considered – from increasing as the world becomes more prosperous.

“Unhealthy food tends to be cheaper than healthy ones, like junk food in developed countries. When poor people with some disposable income in developing countries try to cope with high and increasingly volatile food prices, they also tend to choose cheap food that is high in calories but without much nutritious value,” said Otaviano Canuto, World Bank Group’s Vice President for Poverty Reduction and Economic Management.“Half of the world’s overweight people live in just nine countries – China, United States, Germany, India, Russia, Brazil, Mexico, Indonesia, and Turkey – evidence that obesity is not an epidemic restricted only to rich countries.”

(Photo: amalrik)

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