BETTER SUPPLIES TO DRIVE WORLD FOOD PRICES LOWER IN 2012

nina | March 28th, 2012 - 9:00 am

Improved grain supplies will help lower food prices this year after sharp rises in 2011, easing inflation concerns.

Over the next decade, however, prices are set to rise for major food and agricultural commodities.  Food prices are exptected in 2012 to be averaging perhaps slightly below 2011. We expect also slightly less volatility this year compared to last year because of better inventories.

World food prices hit a record high in February 2011, helping to cause unrest in some countries. Food and beverage companies will benefit from lower prices of agricultural commodities, such as grains and meat, after their profits were dented by high commodity costs last year. 

Global food prices rose 1 percent for the month of February, increasing for a second straight month and adding to inflation concerns. What distinguishes this year from last year is that we have better inventories for certain crops.

Weather in the major producing countries will be one of the main drivers for farm commodities in the next few months as crops go through planting and harvesting, with corn and soybeans seen firmly underpinned by bad crop weather.

On the contrary, sugar prices are expected to experience downward pressure until the middle of this year thanks to strong exports from Thailand and Russia.  The U.S. Department of Agriculture expects global crop prices to retreat sharply this year as farmers around the world expand production, bringing stability back to commodity markets and easing food inflation fears.

Food security is a problem which will not go away. We have some 1 billion people hungry. It will certainly be an issue in 2012 and beyond.

Climate change is set to be one of the biggest challenges for food security, with increasingly sharp weather changes making it difficult for farmers to make planting decisions and hitting sown crops.

Markets are becoming very unpredictable largely driven by unpredictable harvests.

Source:  Reuters, 3.12.12

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