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UN: Global food prices fall, still much higher than a year ago

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Food prices have dropped for the first time after eight months of continuous rise, the United Nations Food and Agriculture Organization (FAO) reported today, pointing out, however, that the prices are

Food prices have dropped for the first time after eight months of continuous rise, the United Nations Food and Agriculture Organization (FAO) reported today, pointing out, however, that the prices are still 37 per cent higher than they were in March of last year.

The FAO Food Price Index averaged 230 points last month, down 2.9 per cent from its peak in February.

“The decrease in the overall index this month brings some welcome respite from the steady increases seen over the last eight months,” said David Hallam, Director of FAO’s Trade and Market Division. “But it would be premature to conclude that this is a reversal of the upward trend,” he added.

“We need to see the information on new plantings over the next few weeks to get an idea of future production levels. But low stock levels, the implications for oil prices of events in the Middle East and North Africa and the effects of the destruction in Japan all make for continuing uncertainty and price volatility over the coming months,” said Mr. Hallam.

International prices of oils and sugar dropped the most, followed by cereals. By contrast, dairy and meat prices were up, although only marginally in the case of meat.

The Cereal Price Index averaged 252 points in March, down 2.6 percent from February, but still 60 percent higher than in March last year, according to the FAO update.

Last month was extremely volatile for grains, with international quotations first plunging sharply – driven largely by outside market developments such as the increased economic uncertainties accompanying the turmoil in North Africa and parts of the Near East, as well as the Japanese earthquake and tsunami – before regaining most of their losses.

Rice prices also fell as a result of abundant supplies in exporting countries and sluggish import demand.

The FAO Oils/Fats Price Index fell 19 points, or 7 per cent, in March, interrupting nine months of consecutive increases. The sugar price index averaged 372 points in March, down 10 per cent from the highs of January and February, while the dairy index averaged 234 points in March, up 1.9 per cent from February, and 37 per cent above its level in March 2010. The meat price index averaged 169 points in March, little changed from February.

The global production of cereals fell in 2010, resulting in falling stocks, while total cereals consumption is expected to reach a record level in the 2010/2011 period. While most indications point to increased cereal production in 2011, the projected growth may not be sufficient to replenish inventories, in which case prices could remain firm throughout 2011/2012 as well, according to FAO.