Respite in Global Food Situation

  • 1 September 2013

Statistics released by the United Nation’s Food and Agriculture Organization (FAO) reveal that global food prices have continued to fall in recent months. The FAO Food Price Index recorded an average of 205.9 points in July 2013, 4 points (nearly 2 percent) below its revised value for June and 7 points (or 3.3 percent) lower than in July 2012. The report showed a decline in grain prices including wheat, soy, and palm oil, in addition to prices of sugar, meat and dairy products.

The decline in prices sends out many encouraging signs for the global food markets. Firstly, it indicates that the markets are more stable now and have averted a crisis that had risen alarmingly twice in recent years, and the one that swept global markets in 2007. Secondly, the fall is part of a general downtrend in prices which began several months ago, regardless of the upward pressure caused by seasonal effects. In general, the lower prices hint at significant changes in the supply and demand equation in global food markets in recent months.

The FAO report includes data confirming the validity of this proposition as it registers decline in demand for certain food crops, such as maize and soy in Asian countries at a time when supply side of agricultural products – such as wheat, sugar, dairy products and meat – showed relative increase. We have also witnessed positive changes in export oriented policies adopted by certain crop-producing countries that allowed the export of larger quantities of their products compared to what have been exported in similar periods in previous years.

These changes are likely to reflect positively, at least temporarily, on the global food security situation. Their positive effects will also affect the food import bills around the world. However, it is important not to be extremely optimistic about these changes. It is also necessary that the situation is handled with extreme caution, especially in countries that heavily depend on food imports.

These countries have to deal with relative calm being experienced by global food markets as a period of transition during which they can prepare for any future supply shortfalls. This can be achieved through greater coordination between countries, particularly food producing countries. A solid foundation could be laid for greater co-operation among food producing and importing countries, investments could be made in food production, exchange and consumption, and preparations could be made for a large increase in consumption in the long term, due to steadily increasing population in these countries and the rest of the world.