Food prices dip, but costs still high, World Bank says

Global food prices declined by 6 percent over the last quarter, but are still not far from their historical peaks, according to the World Bank Group’s latest Food Price Watch report. Wheat markets remain tight, and weather-related concerns in Brazil, Paraguay, Argentina, Ukraine, and the Russian Federation may further drive up wheat prices over the next few months.

Domestic prices showed typically large variations across countries, mainly attributable to seasonal trends but also due to a combination of factors including bad weather, public procurement policies, local supply shortfalls and currency devaluations.

“Sustained declines in prices are welcome. We have a lot to be pleased about,” said Ana Revenga, acting vice president for the Poverty Reduction and Economic Management Network at the World Bank Group. “But these gains are fragile. Persistent concerns around erratic weather or currency fluctuations keep us far from claiming victory over food prices. We need to continue to pay close attention, since this progress can quickly be reversed if concerns become reality.”

According to the latest edition of Food Price Watch, the Bank’s Food Price Index in October 2013 was 12 percent lower than a year ago and 16 percent below the all-time peak in August 2012. Despite this decline, however, prices remain close to their all-time high.

Stronger demand for wheat, especially from China, a weaker U.S. dollar, and increasing concerns following the recent adverse weather have affected prices in a negative way, the index summary said.  Initially, price increases were almost imperceptible in August and September, but then increased sharply in October.  Global wheat stocks are expected to partially recover from last year’s declines, but major exporters’ closing stocks continue to remain low, still reflecting tight export availabilities. Rice and maize stocks, on the contrary, continue to be robust and are expected to remain that way through the end of the year.

This issue of the Food Price Watch also explores the role that extra-large scale farming, popularly known as super farms may play in boosting agricultural productivity and poverty reduction. The jury is still out on whether this trend has a positive or negative effect on boosting shared prosperity, especially in those countries with fragile institutions and poor oversight. Social, environmental and animal welfare concerns must be weighed with potentially promising benefits such as jobs and efficiency gains, the report said.

The World Bank Group is committed to boosting agriculture and agriculture-related investment. In 2013, new Bank Group commitments to agriculture and related sectors were $8 billion.

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