World food prices drop ‘sharply’ in March 2020
Weakening demand and falling oil prices due to the global coronavirus (COVID-19) pandemic has driven down international prices for major food commodities, FAO has announced.
World food prices declined sharply in March 2020, driven mostly by demand-side contractions linked to the effects of the COVID-19 pandemic and the drop in global oil prices due mostly to expectations of economic slowdown as governments roll out restrictions designed to respond to the health crisis, the Food and Agricultural Organization of the United Nations (FAO) has announced.
“The price drops are largely driven by demand factors, not supply, and the demand factors are influenced by ever-more deteriorating economic prospects,” said FAO Senior Economist, Abdolreza Abbassian.
The FAO Sugar Price Index decreased the most, down 19.1 percent from the previous month. According to FAO, causes include lower demand from out-of-home consumption linked to the confinement measures imposed by many countries, and lower demand from ethanol producers due to the steep fall in crude oil prices.
The FAO Vegetable Oil Price Index declined 12 percent in one month, said to stem primarily from falling palm oil prices linked to the plunge in crude mineral oil prices and rising uncertainties over the COVID-19 pandemic’s impact on vegetable oil markets worldwide. Soy and rapeseed oil prices followed the trend.
The FAO Dairy Price Index fell by three percent, driven by declining quotations and global import demand for skim and whole milk powders, reportedly due largely to disruptions in the dairy supply chains because of the containment measures aimed at controlling the spread of COVID-19.
The FAO Cereal Price Index in March declined 1.9 percent from February and stood at nearly its level of March 2019. International wheat prices declined, as the effects of large global supplies and broadly favourable crop prospects outweighed those of increased import demand from North Africa and some small export limitations imposed by the Russian Federation. Maize prices also declined due to both large supplies and much weaker demand from the biofuel sector.
International rice prices, by contrast, rose for the third consecutive month, with Indica quotations said to be buoyed by COVID-19 stockpiling.
The FAO Meat Price Index fell by 0.6 percent, led by drops in international quotations for ovine and bovine meats, for which export availabilities are large and trade capacity dampened by logistic bottlenecks. But pig meat quotations rose amid surging global demand and as processing facilities were hampered by the restrictions on the movement of workers.