World food prices dropped in 2023, easing food inflation concerns

Prices of most commodities fell during the year on an annual basis, FAO data shows

A farmer works in a rice field in India. Prices of the grain rose in December amid an export ban by New Delhi. AP

The UN food agency’s world price index fell by 10.1 per cent on an annual basis in December as the prices of most commodities declined, helping to ease concerns over global food inflation.

The Food and Agriculture Organisation's price index, which tracks the monthly change in the international prices of a basket of commodities, averaged 118.5 during the month.

The prices of meat, dairy, cereals and vegetable oils fell during the month on an annual basis while that of sugar increased, the UN agency said in its report on Friday.

The index fell by 1.5 per cent in December when compared with the previous month as the prices of meat, vegetable oil and sugar fell, while the prices of cereals and dairy rose.

The index recorded 124 points over the entire year, 13.7 per cent lower than the average value recorded in 2022. The average food price Index was 125.7 points in 2021 and 98.1 in 2020.

The cereal price index averaged 122.8 points in December, up 1.5 per cent compared with the previous month amid an increase in the prices of wheat, maize and rice, according to the data.

“After falling for four consecutive months, wheat export prices increased in December, supported by weather-related logistical disruptions in some major exporters and tensions in the Black Sea amidst solid demand,” the Rome-based organisation said.

“World maize prices also strengthened in December, underpinned by concerns about Brazil’s second crop plantings, and logistical constraints hindering shipments from Ukraine.”

Cereal exports from Black Sea ports continued to be affected amid the Ukraine conflict.

Russia and Ukraine are important producers of wheat and other cereals and use ports in the Black Sea to export cereals to different markets around the globe.

The FAO rice price index also rose by 1.6 per cent above its November level “in response to purchases by some Asian buyers and reduced competition among exporters owing to India's export restrictions and tight availabilities in Vietnam”, the report said.

Last year, India, Asia's third-largest economy and an important exporter of rice, banned the export of non-basmati white rice, to ensure the availability of the grain in the domestic market, after production was hit as a result of heavy monsoon rains.

The dairy price index also rose in December while the meat price index, vegetable oil price index and sugar index fell in the month, compared with the previous month.

Vegetable oil prices were down 1.4 per cent month on month, reflecting “lower world prices across palm, soy, rapeseed and sunflower seed oils, underpinned by subdued purchases from major importers, despite the seasonally lower outputs in leading producing countries”, it said.

The sugar price index averaged 134.6 points in December, down 16.6 per cent from November to hit its lowest level over the past nine months.

However, it remained 14.9 per cent above its level in the same month last year.

“The December plunge in international sugar price quotations was mainly driven by the strong pace of production in Brazil, bolstered by conducive weather conditions,” the report said.

“In addition, the decision of the government of India to limit the use of sugar cane for ethanol production [for more production of sugar] in the current season exerted some further downward pressure on prices.”

Central banks around the globe are planning to cut interest rates this year as inflation continues to fall amid the easing of oil and gas and food prices.

The US Federal Reserve expects to cut interest rates as it has made “clear progress” in bringing down inflation towards its 2 per cent goal, minutes released this week of its meeting on December 12 to December 13 showed.