The index measures, monitors and tracks monthly changes in the international prices of commonly traded food commodities.
The report, released May 7, has shown that the FFPI averaged 165.5 points in April, down by 5.7 points or 3.4 per cent from March, the lowest since January 2019 . This was 3 per cent lower than April last year.
However, the sharp decline in April was said to mark the third consecutive month-on-month drop in the value of the FFPI, largely driven by the negative impacts of the coronavirus pandemic on the international food market.
According to the report, the recent fall in prices was not pronounced for the cereal sub-index, which declined only slightly, while other sub-indices of the overall Index were said to have registered significant month-on-month declines in April, in particular the sugar sub-index
“The April decline marked the third consecutive monthly fall in the value of the Index; largely attributed to several negative impacts on international food markets arising from the COVID-19 pandemic. Except the cereal sub-index, which declined only slightly, all the other sub-indices of the overall Index registered significant month-on-month declines in April, in particular the sugar sub-index,” the report reads.
The report also said the Sugar Price Index hit a 13-year low falling 14.6 percent from March, when it posted an even larger monthly drop.
It said the fall was caused by the collapse in the international crude oil prices which reduced demand for sugarcane to produce ethanol, as well as confinement measures imposed in a number of countries.
“The FAO Sugar Price Index hit a 13-year low, declining 14.6 percent from March, when it posted an even larger monthly drop. Collapsing international crude oil prices reduced demand for sugarcane to produce ethanol, diverting output to producing sugar and hence expanding export availability. Meanwhile, confinement measures in a number of countries spawned additional downward pressure on demand,” the report explained.
Vegetable oil, dairy, cereal, others
Also, the FAO Vegetable Oil Price Index declined 5.2 per cent in April, driven lower by falling palm, soy and rapeseed oil values.
This mainly stemmed from the shortfall in biofuel demand, declining demand from the food sector coupled with the higher-than-previously expected palm oil output in Malaysia and soy crushings in the United States of America.
The report says the FAO Dairy Price Index fell by 3.6 per cent, with butter and milk powder prices posting double-digit drops amidst increased export availability, mounting inventories, weak import demand and diminished restaurant sales in the northern hemisphere.
In a similar manner, according to the FFPI report, the FAO Meat Price index declined 2.7 per cent. It says a partial recovery in import demand from China was insufficient to balance a slump in imports elsewhere.
However, major producing countries suffered logistical bottlenecks and a steep fall in demand from the food services sector due to shelter-at-home measures.
According to Upali Galketi, the FAO senior economist, the COVID-19 pandemic is hitting both the demand and supply sides for meat, as restaurant closures and reduced household incomes lead to lower consumption and labour shortages on the processing side are impacting just-in-time production systems in major livestock producing countries.
However, the FAO Cereal Price Index declined only marginally, while the international prices of wheat and rice rose significantly as those of maize dropped sharply.
“International rice prices rose by 7.2 per cent from March, due in large part to temporary export restrictions by Vietnam that were subsequently repealed, while wheat prices rose by 2.5 percent amid reports of a quick fulfillment of the export quota from the Russian Federation. Prices of coarse grains, including maize, by contrast fell by 10 percent, driven down by reduced demand for its use for both animal feed and biofuel production,” the report said.
During the G20 meeting held last month, Qu Dongyu, FAO Director- General, reportedly told national leaders “to make sure that agricultural trade continues to play its important role in contributing to global food security and to avoid policies that stymie trade flows which underpins the food-supply systems.”
He said the FAO is closely monitoring prices and logistical issues for food commodities “with an eye to alerting countries of emerging problems that could exacerbate potential disruptions during the pandemic”.