Global food prices fell sharply in March

Global food prices fell sharply in March, prompted by a decline in demand related to the coronavirus pandemic and a slump in global oil prices, the United Nations Food Agency said Thursday.
The Food and Agriculture Organization (FAO) Food Price Index, which measures the monthly changes for a basket of cereals, oilseeds, dairy products, meat and sugar, averaged 172.2 points last month, a decrease of 4.3% corresponds to February.
"The price cuts are largely driven by demand factors rather than supply, and demand factors are impacted by increasingly poor economic prospects," said Abdolreza Abbassian, FAO Senior Economist.
The FAO has also raised its forecast for grain production slightly and forecasts a harvest of around 2.721 billion tons for 2019, compared to an earlier forecast of 2.719 billion tons and around 2.4% more than for the 2018 harvest.
The FAO's sugar price index saw its largest decline, down 19.1% from the previous month.The decline was triggered by a reduction in consumption associated with virus closures observed in many countries and lower demand from ethanol producers due to the recent drop in crude oil prices, the Rome-based agency said.
The vegetable oil price index plummeted 12%, which was depressed by falling palm oil prices coupled with a slump in crude oil prices and growing uncertainty about the effects of the corona virus on the market.
"Oil prices fell more than half last month, which catalyzes a sharp downward trend on biofuels, which are a major source of demand in the sugar and vegetable oil markets," said FAO analyst Peter Thoenes.
The milk price index fell 3%, reflecting declining prices and slowing global import demand for skimmed milk and whole milk powder, while the meat index fell 0.6%.
The grain price index fell 1.9%, with rice prices resisting the downward trend and rising for the third consecutive month, fueled by inventories triggered by pandemic concerns and reports that Vietnam could introduce export bans.
The FAO said Vietnam has now downplayed the reports.
While the FAO raised its forecast for global grain production in 2019, its estimate for wheat production in 2020 remained unchanged at 763 million tons and was thus close to the record level of the previous year.
"(This) combined with large inventory levels will help protect food markets from turbulence during the Coronavirus storm," the FAO predicted.