World food prices are on an even keel after several years of volatility that began nearly a decade ago, two FAO economists said, crediting the strong dollar, lower petroleum prices and ample stockpiles around the globe. In a special feature in FAO’s semiannual World Food Outlook, they say stable and gradually falling prices are likely to continue. “Large price swings in international food markets over the past decade remain vivid,” write economists Adam Prakash and Friederike Greb. “But prices of food commodities have started to decline since the beginning of 2011.”
FAO’s Food Price Index recently fell to a six-year low. “Today, food is certainly cheaper than in the recent past,” say Prakash and Greb. “Current market fundamentals do not suggest a reversal in the downward price trends witnessed in most food markets, at least for the time being.” At its peak in 2011, the FAO index showed the cost of food was 1.4 times times higher than in 2002-04. “Lower food prices relative to incomes seem to be a boon in food security by making food acquisition more affordable.”
Good fortune for consumers may redound against farmers, says the FAO report, pointing to the cyclical structure of agriculture. “Falling output prices may well impinge on farmers’ profitability. Low returns could also reduce incentives for wider investment in agriculture, including rural infrastructure (e.g., roads, warehouses and port facilities), credit availability, input services, research and extension. Paradoxically, underinvestment in agriculture has often been cited as one of the causes for the sharp price hikes of the past decade, as it lowered the capacity of world agriculture to respond when most needed.”
The Food Price Index stood at 165.3 points this month, nearly one-fifth lower than a year ago, said FAO.