Despite end-of-year decline, 2011 food prices highest on record – UN

Global food prices declined in December, but the overall annual average was the highest ever on record, the United Nations Food and Agriculture Organization (FAO) reported today.

Last month, FAO’s Food Price Index level was 211 points – 27 points below its peak in February. The decline was driven by sharp falls in the international prices of cereals, sugar and oils due to a productive harvest coupled with a slowing demand and a stronger United States dollar.

However, despite the steady decline in prices during the second half of the year, the Index overall averaged 228 points in 2011 – the highest average since FAO started measuring international food prices in 1990. The second highest average occurred in 2008 at 200 points.

“International prices of many food commodities have declined in recent months, but given the uncertainties over the global economy, currency and energy markets, unpredictable prospects lie ahead,” said FAO Senior Grains Economist Abdolreza Abbassian.

Cereal prices registered the biggest fall due to record crops and an improved supply outlook, with the FAO cereal price index dropping 4.8 per cent last month. Maize prices fell by six per cent, wheat by four per cent, and rice by three per cent. However, the cereal price index for the year rose by 35 per cent from 2010, the highest since the 1970s.

The oils and fats price index also dropped, with a three per cent decline from November due to the unexpected surge in supplies of vegetable oil – mainly of palm and sunflower oil – which, coupled with poor global demand for soybeans, deflated prices.

Meat prices were slightly down from November, mainly due to the 2.2 per cent drop in pig meat prices, but as with other commodities, its annual price was 16 per cent higher than in 2010.

Dairy prices remained almost unchanged, and the sugar price index declined for the fifth consecutive month, reflecting expectations of a large sugar world production surplus over the new season due to good harvests in India, the European Union, Thailand and Russia.