FAO: Global food import costs to hit five-year low

10-May-2015 - Last updated on 11-May-2015 at 11:10 GMT

Food prices are likely to stay under downward pressure due to large supplies and a strong US dollar, the FAO says

Global food import costs are set to reach their lowest level in five years during 2015, even as volumes remain the same or rise slightly, according to the Food and Agriculture Organisation (FAO).

FAO’s food price index, which tracks the prices of major food commodities on international markets, is at its lowest level since June 2010, and 19.2% lower than a year ago. It declined 1.2% in April compared to March. The index tracks vegetable oils, sugar, cereals, meat and dairy products.

The overall drop in food import costs is due to exceptionally high cereal stocks, combined with predicted large harvests, “a bit down from last year's record but nearly 5 percent above the average of the past five years”, according to the FAO’s latest Food Outlook report.

“Several years of solid harvests and stockpiling mean most basic food commodities are in surplus. As a result, the projected drop in cereals output is not expected to impact availability of food for consumption,” FAO said.

It added: “International food prices are likely to stay under downward pressure due to large supplies and a strong US dollar.”

FAO senior economist Abdolreza Abbassian said the organisation expects the coming year to be similar to the current situation, in that it will be characterised by ample cereal supply, and reserves are likely to act as a buffer against any sudden shortfalls.

“Looking at individual commodities covered by the index, the sharpest decline we had in April was in dairy, which lost about 6.7% from March. …The meat index, however, was the only one that showed a slight increase, and this increase was associated with the supply situation of certain meat, which was a little bit more restricted than a month earlier. Dairy values and sugar were also down,” he said.

Main uncertainties ahead include how the weather could affect crops, and the broader global economic situation, which could influence exchange rates, and therefore global prices.

Abbassian also highlighted the influence of aquaculture, saying it was “increasingly becoming the dominant driver in the fisheries sector”, a trend that is likely to continue into the next year.