World food costs dropped to a four-year low amid record grain harvests and falling prices for sugar and milk.
A measure of 73 food prices from around the globe slid to 192.6 points last month, the lowest level since August 2010, according to a report today from the United Nation’s division on agriculture. The index has fallen 20 percent since a record in 2011 and is below a peak in 2008, when surging costs for wheat and rice sparked riots from Haiti to Egypt.
The decline in food costs is part of a broader slump in commodities with oil trading near a five-year low after OPEC refused to cut production last week and strength in the dollar reducing the appeal of metals. The European Central Bank today cut its forecasts for inflation through 2016 and President Mario Draghi said policy makers will gauge the need for further stimulus at the beginning of 2015.
“We may begin to see falling food prices over the coming months as lower commodity prices currently begin to feed their way through to consumers,” Hamish Smith, a commodities economist at researcher Capital Economics, said by phone from London. “Oil prices will also add to reduced levels of inflation. It’s quite good for consumers who’ll have additional money to spend.”
Increasing supplies of milk, butter and cheese for export and less demand from Russia and China sent a gauge of dairy prices down 3.4 percent last month to lowest since July 2012, according to the report from the UN’s Food & Agriculture Organization. Milk futures on the Chicago Mercantile Exchange have dropped 8.4 percent this year.
The return of rainfall to Brazilian sugar plantations pushed prices lower last month, with sweetener prices down 8 percent since November 2013, the FAO said.
While the FAO’s index of grain prices increased 2.6 percent in November, it’s still below this year’s peak in April. Wheat reached a four-year low in September before rebounding on concern that harsh winter weather will hurt Russian crops.
The Agricultural Market Information System raised its forecasts today for global wheat, corn and soybean production for the growing year that started on July 1. Combined output of the crops will reached a record 2.05 billion metric tons, according to a report from the group set up by Group of 20 agriculture ministers.
The decline in the UN food index doesn’t necessarily mean that all consumers are benefiting from cheap prices, according to Abdolreza Abbassian, a senior economist with the FAO. For countries that have seen their currency weaken against the dollar this year, there’s a chance that they’re paying more to import crops, he said by phone today.
“The decline that we’re seeing is not going to be all that pronounced for poorer nations,” according to Abbassian. “I don’t think that we could say that we’re out of the woods and that situation for poorer and developing countries has brightened up tremendously.”