Global Food Prices Slide on Optimistic Supply Forecasts

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The FAO’s food price index tracks global prices for a variety of agricultural commodities including meat, cereals, sugar, dairy, and oilseeds. Analysts often use it to identify possible food security risks in vulnerable or developing countries. In August of 2019, the index fell for the third consecutive month to 169.8, mainly driven by declines in the prices of cereals and sugars.

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The chart above shows the change in position of barley (blue line), rice (red line), corn (green line), and wheat (purple line) on the IGC food price index since 2015. Beginning in June, the price index for barley, wheat, and corn have declined precipitously. 

Falling corn and wheat prices have driven down the cereals index over the past few months. Wheat production continues to boom in Russia and Ukraine, which creates greater export competition and pulls down wheat prices globally. Concurrently, a more optimistic outlook on the United States’ corn crop has emerged in the past month, which has hurt corn prices in the world’s largest producing and exporting country. Falling sugar prices also contributed to the decline in the global food price index in recent months, as a weakening Brazilian currency encouraged greater production for export.

Despite decreases in the total food price index over the past 3 months, the current index stands 1.1% greater year-over-year and 5.6% greater than the three-year low recorded in November 2018. While cereal and sugar price indices have dropped modestly, the meat price index rose each month since February, and is the main factor buoying the total food price index. Pig prices have surged in response to rapidly declining pig herds in China beset by African Swine Fever (ASF). Chinese appetite for pork seems unshaken, however, as pigmeat imports have swelled to try to meet consumer demand in the world’s largest pork-producing country. Vegetable oils are also bolstering the food price index. Lower than expected Malaysian palm oil production and stocks coupled with elevated demand for soybean oil have moved composite prices of vegetable oils higher over the past few months.

Data compiled by the World Bank and the International Grains Council (IGC) confirm these trends, but also give more detailed insights into the individual commodities moving composite prices. For instance, IGC price data updates weekly and shows price movements of individual cereals including corn, barley, wheat, and rice. GEM Commodities, a dataset provided by the World Bank, issues data monthly which covers various agricultural indices including grains and oilseeds. Some of these datasets extend as far back as 1960, and provide valuable perspective on long-term global food trends. The Gro Intelligence web app and API client give users the ability to seamlessly access and use FAO, IGC, and GEM Commodities data.

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The chart on the left compares the 2019 food price index (marked blue line) with food price index data from previous years beginning in 2005. The chart on the right tracks changes in the grains index (green line) and the fats and oils index (blue line) since 2015. The indices used in both charts are derived from data provided by the World Bank's Global Economic Monitor (GEM) for commodities. 

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