World Food Price Index rises in December for 7th month in a row

The Food and Agriculture Organization's World Food Price Index rose in December 2020 for the seventh month in a row. 

The World Food Price Index measures monthly changes  in international prices of a basket of food commodities such as  cereals, dairy products, oilseeds, meat and sugar. The index averaged 107.5 points in December in comparison to 105.2 in November.

The FAO had revised down its forecast last month for the 2020 cereal season for the third month in a row, bringing it down to 2.742 billion tonnes from a previous 2.75 billion tonnes.

Key Highlights 

•The World Food Prices had risen in December 2020 for the seventh consecutive month. Prices rose in almost all major categories except for sugar, as per the UN food agency.

•The vegetable oil prices continued to rise, increasing by 4.7% month-on-month in December after rising more than 14 percent in November. In comparison to 2019, it was up by 19.1 percent. 

•The increase in oil prices was due to supply restriction in major palm oil producing countries. Trade was also impacted by a sharp rise in export duties in Indonesia. The prices of soy oil also rose because of prolonged strikes in Argentina.

•The cereal prices also saw a modest 1.1 percent rise in December in comparison to November. Overall, it averaged 6.6 percent above 2019 levels. 

•The export prices of rice, wheat, maize and sorghum all had risen in December, moving higher due to concerns over growing conditions and crop prospects in North and South America as well as Russia. 

•The dairy price index also rose by 3.2 percent in December. In whole of 2020, it had averaged 1.0 percent less than 2019. The price rise can be attributed to a strong global import demand triggered by concerns over warmer conditions on Oceania's milk production as well as higher internal demand in Western Europe.

•The meat index also rose by 1.7% in December, while it averaged 4.5% below that of 2019. The poultry prices rebounded in December due to the impact of avian influenza outbreaks in Europe.  Pig meat prices fell slightly though due to  suspension of German exports to Asia following African Swine Fever outbreaks.

•Among other indexes, the average sugar prices fell by 0.6 percent in December but as a whole in 2020, the sub-index posted a 1.1 percent gain in comparison to 2019 levels. The gain reflects a surge in imports by China and increased demand for refined sugar from Indonesia.

Background

The World Food Price index averaged 97.9 points for the whole of 2020, which is a three-year high and a 3.1 percent increase from 2019. The index figure, however, was still down by more than 25 percent from its historical peak in 2011. 

The Food and Agriculture Organization(FAO) had revised its forecast for the 2020 cereal season for a third month in a row in December, reducing it to 2.742 billion tonnes from a previous 2.75 billion tonnes.