Global Food Prices Fall 12 Months After as Millions of Families Struggle to Feed
For the first time in 12 months, global food commodity prices fell in June, according to a benchmark United Nations report.
This is coming as the World Food Programme (WFP) on Thursday warned that high food prices, driven by conflict, economic fragility and the impacts of La Niña, are making nutritious food unaffordable for millions of families already struggling to cope with income losses caused by the COVID-19 pandemic.
The FAO Food Price Index averaged 124.6 points in June 2021, down 2.5 percent from May, but still 33.9 percent higher than its level in the same period last year. The decline in June marked the first drop in the Index following twelve consecutive monthly increases.
The FAO Food Price Index tracks changes in the international prices of the most globally traded food commodities. The drop in June reflected declines in the prices of vegetable oils, cereals and, though more moderately, dairy products, which more than offset generally higher meat and sugar quotations.
The FAO Vegetable Oil Price Index fell by 9.8 percent in the month, marking a four-month low. The sizeable month-on-month drop mainly reflects lower international prices of palm, soy and sunflower oils.
The FAO Cereal Price Index fell by a more moderate 2.6 percent from May, but remained 33.8 percent higher than its value in June 2020. International maize prices dropped by 5.0 percent, led by falling prices in Argentina due to increased supplies from recent harvests as a result of higher-than-earlier expected yields.
International wheat prices declined slightly by 0.8 percent in June, with a favourable global outlook supported by improved production prospects in many key producers outweighing most of the upward pressure from dry conditions affecting crops in North America.
The FAO Dairy Price Index fell by 1 percent to 119.9 points in June. International quotations for all dairy products represented in the index fell, with butter registering the highest drop, underpinned by a fast decline in global import demand and a slight increase in inventories, especially in Europe.
The FAO Sugar Price Index moved against the overall food price trend, rising by 0.9 percent month-on-month, marking the third consecutive monthly increase and reaching a new multi-year high.
In Brazil, the world’s largest sugar exporter, uncertainties over the impact of unfavourable weather conditions on crop yields, exerted upward pressure on prices.
The FAO Meat Price Index also rose by 2.1 percent over the month to June, continuing the increases for the ninth consecutive month and placing the index 15.6 percent above its value in the corresponding month last year, but still 8.0 percent below its peak reached in August 2014.
FAO’s forecast for global cereal production in 2021 has been lowered marginally to 2 817 million tonnes, according to the latest Cereal Supply and Demand Brief released today. However, the figure remains 1.7 percent, or 47.8 million tonnes, higher than in 2020, which would mark a new record high.
Forecasts for world coarse grains production have been cut back to 1 513 million tonnes, 3 million tonnes below last month’s expectation. A large cut to the Brazilian maize production forecast accounts for the bulk of the expected global decline, with prolonged periods of dry weather dragging down yield expectations.
World wheat output in 2021 has been lowered by 1 million tonnes to 784.7 million tonnes, still 1.2 percent higher year-on-year, as the dry weather conditions in the Near East cut back yield prospects.
By contrast, the forecast of global rice production in 2021 has undergone a slight upward adjustment since June, with a record of 519.5 million tonnes of rice now expected to be harvested in 2021, up 1.0 percent from 2020.
World cereal utilisation in 2021/22 has been lowered by 15 million tonnes from the previous month to 2 810 million tonnes, nevertheless still 1.5 percent higher than in 2020/21. The downward revision comes largely from lower-than-earlier-anticipated utilization of maize in China for animal feed.
World cereal stocks by the close of seasons in 2021/22 are now forecast to rise above their opening levels for the first time since 2017/18, following a sharp upward revision to 836 million tonnes, up 2.4 percent from last year’s relatively tight level. Higher maize stocks foreseen in China, account for the bulk of this month’s upward revision to world cereal inventories.
FAO’s latest forecast for world trade in cereals in 2021/22 has been raised slightly since June and now stands at a record 472 million tonnes, driven primarily by likely large maize purchases from China taking global maize trade to record levels.
The effects of the COVID-19 pandemic, primarily in terms of income losses, have exacerbated vulnerabilities and heightened existing levels of food insecurity according to the latest Crop Prospects and Food Situation Report, which was also released on Thursday.
FAO assesses that globally 45 countries, including 34 in Africa, 9 in Asia and 2 in Latin America and the Caribbean, are in need of external assistance for food, with conflicts and climate-related shocks continuing to underpin the high levels of severe food insecurity.
The Crop Prospects and Food Situation report also provides the latest data on Low-Income Food Deficit Countries (LIFDCs). According the most recent assessments, total cereal production of the 47 LIFDCs is forecast to decline by 2.1 percent in 2021, to 190 million tonnes.
The drop mostly relates to expected production downturns in Near East Asian countries, notably in Afghanistan and the Syrian Arab Republic, where widespread and prolonged drought conditions cut yields and dampened this year’s production prospects.
Among the LIFDCs in Africa, scarce rainfall in Somalia is expected to result in a sizeable production decline, and small reductions are also likely in several West African countries, where conflicts continue to erode farming households’ productive capacities.
In Southern African countries, production upturns are expected to boost households’ food availability and partly offset some negative effects from the COVID-19 pandemic.
The 45 countries in need of external assistance for food are: Afghanistan, Bangladesh, Burkina Faso, Burundi, Cabo Verde, Cameroon, Central African Republic, Chad, Congo, Democratic People’s Republic of Korea, Democratic Republic of Congo, Djibouti, Eritrea, Eswatini, Ethiopia, Guinea, Haiti, Iraq, Kenya, Lebanon, Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Namibia, Niger, Nigeria, Pakistan, Senegal, Sierra Leone, Somalia, South Sudan, Sudan, Syrian Arab Republic, United Republic of Tanzania, Uganda, Venezuela, Yemen, Zambia and Zimbabwe.
WFP is however, the 2020 Nobel Peace Prize Laureate. We are the world’s largest humanitarian organization, saving lives in emergencies and using food assistance to build a pathway to peace, stability and prosperity for people recovering from conflict, disasters and the impact of climate change.
“High food prices are hunger’s new best friend. We already have conflict, climate and COVID-19 working together to push more people into hunger and misery. Now food prices have joined the deadly trio”, said WFP Chief Economist, Arif Husain.
“If you’re a family that already spends two thirds of your income on food, hikes in the price of food already spell trouble. Imagine what they mean if you’ve already lost part or all of your income because of COVID-19.”
Latest food price data from WFP’s Market Monitor shows that the average price of wheat flour in Lebanon – where economic turmoil has accelerated over the last year – was 50 percent higher in March-May 2021 than in the previous three months. Year-on-year, the price has risen by 219 percent. Meanwhile, in Syria the price of cooking oil has increased by 58 percent over the same time period, and by a staggering 440 percent year-on-year.
But there are also high food price hotspots in Africa. In Mozambique, which is ravaged by conflict in the north of the country, the price of cassava flour went up by 45 percent in March-May 2021 compared to the previous three months, WFP’s data shows.
On international markets, after rising for 12 straight months, food prices dipped slightly in June according to the Food Price Index of FAO – which measures price changes in international markets. The index stood at 124.6 in June, just below the peak of 136.7 in 2011. Meanwhile, over the last three months the cost of a basic food basket has gone up by more than 10 percent in 9 countries where WFP works.
New evidence on the impact of the pandemic on chronic hunger worldwide will be published next week in the annual State of Food and Nutrition Security in the World (SOFI) report, which focuses on complementary food system solutions that address the key drivers of food insecurity and malnutrition; conflict, climate change and economic downturns.
The recent price hikes directly impact the people WFP serves, but also millions of families on the edge of hunger whose incomes have been decimated by the pandemic. The World Bank has estimated that the pandemic could push as many as 97 million people worldwide into extreme poverty by the end of 2021.
Countries more likely to experience high food price inflation are those that depend on imports for food, those where climatic or conflict shocks could disrupt local food production, and those suffering from macro-economic fragility – with the Middle East witnessing some of the highest price increases. In many countries, currency depreciation has further driven up local food prices, affecting people in places such as Zimbabwe, Syria, Ethiopia and Venezuela.
For WFP, high food prices have two effects. Firstly, they drive up the number of people around the world who need food assistance. Secondly, they increase the cost of buying the commodities needed for food assistance operations. In the first four months of 2021, WFP paid 13% more for wheat than it did in the previous year.
A record 270 million people are estimated to be acutely food insecure or at high risk in 2021 – a 40% jump from 2020, driven by conflict, economic shocks, natural disasters, the socio-economic fallout from COVID-19, and now food price hikes. In 2021, WFP is undertaking the biggest operation in its history, targeting 139 million people worldwide.