The global economic slowdown is causing the biggest drop in food prices since 2015.
The FAO Food Price Index dropped 4.3% in March, the United Nations’ Food & Agriculture Organization said Thursday. The biggest declines were in sugar and vegetable oils. Rice, a staple for millions of people in Asia, has risen for the past three months.
The main reason for the drop in the index was the plunge in crude oil, which has taken a hit from flight cancellations, cities on lockdown and a price war between Saudi Arabia and Russia. Many crops -- like sugar, corn and vegetable oils -- are processed into biofuels and have followed petroleum markets lower.
However, food prices don’t move uniformly around the world. The cost of wheat or rice is politically sensitive in many developing countries. In some countries, those key commodities have started to rise.
“The price drops are largely driven by demand,” said FAO Senior Economist Abdolreza Abbassian. “The demand factors are influenced by ever-more deteriorating economic prospects.”
The FAO said it’s closely monitoring prices and logistical issues for any supply-chain disruptions. Its index works as an indicator of potential food security concerns for developing countries, where food makes up a bigger share of overall household budgets.
While coronavirus has had limited impact on global food markets, it could pose a “serious threat” for some regions, the FAO’s Agricultural Market Information System said in a report Thursday.
The virus hasn’t spread widely in places with food insecurity, particularly sub-Saharan Africa. If it does, there’s a chance that harvests will shrink and more people will go hungry, the FAO said.
Despite logistical hurdles, food supplies are overall ample. Grains, the main component of the FAO food price index, declined 1.9%, partly thanks to “balanced and comfortable” supplies, the FAO said.
“While localized disruptions, largely due to logistical issues, pose challenges to food supply chains in some markets, their anticipated duration and magnitude are unlikely to have a significant effect on global food markets,” the FAO said.
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