Food Prices Hitting Rock Bottom

By: Saira Malhotra

This past week, Business Week reported on how food prices have taken a nose dive yet again and it is happening world over. Fifth month in a row, the prices have never tumbled to this extent in two years and the United Nations is concerned that commodity prices may be 'bottoming out'.

In October, numbers indicated a price decline by 4%, the biggest decline since March 2010. This was the first sign of alarm, since February 2010 represented a record high of 237.7 points compared to the 215 points in October of this year. According to Abdolreza Abbassian, senior economist at the FAO, "Prices are bottoming out for many commodities in spite of high supplies."

However, some parts of the world are experiencing price increases brought on by environmental influencers. Ukraine, for example, has suffered a drought which has brought about reduced output by 29%. It will be of no big surprise to witness cereal prices show a 3.5% price hike from its reduced output of 2.32 billion metric tons in 2011-12, the FAO estimates.

Sugar has also been a recipient of plummeting points to 340.3 from 361.2 in October and London also showed an 11% slump. The decline is in part a reaction to anticipated surplus from India, the EU, Thailand and the Russian Federation over the next 12 months.

Among other commodities, edible oils also manifested a fluctuation. Their index increased by 10.7 points from 224.3. According to the UN agency, the prices have increased in reaction to potential decrease on palm and soy oil output and rising import demand by China.

The study performed by the FAO, a UN specialized agency has its objectives planted in improving nutrition levels and maintaining agricultural output.

Photo: peter pearson 

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