The UN Food and Agriculture Organisation (FAO) has released its latest monthly food price index, which shows that ample supplies, falling energy prices and concerns over China’s economic slowdown have contributed to the sharpest fall in world food prices for almost seven years.  

The FAO’s index, which measures the price of a range of staple foodstuffs around the world, revealed that prices fell 5.2 percent between July and August. This is the steepest monthly drop since December 2008, which came off the back of the 2007-8 food price crisis that toppled a number of regimes worldwide.

Price drops were recorded across almost all food types. FAO also upped its world cereal production estimates in August.

Cereal prices fell 7 percent from July to August and 15.1 percent from the same time in 2014. Falling wheat and maize prices led the declines, reversing two consecutive months of moderate increases. Cereal prices dropped further in response to good production prospects for 2015/16.

Vegetable oil prices dropped too, which was largely down to palm oil prices reaching six-year lows.

Dairy prices continued to fall; the dairy industry’s weak situation, compounded by reduced export demand, has led to unrest in Europe. Further reductions in import demand from China, the Near East and North Africa led prices 9.1 percent lower in August. In contrast to the general downward trend, meat prices in August remained virtually unchanged from the previous month. Nevertheless, compared to the meat price index's historic peak in August 2014, overall prices were down by 18 percent.

Cereal production less than 1 percent below 2014 record

FAO increased its forecast for global cereal production in 2015. This now stands at 2,540 million tonnes, 13.8 million tonnes more than expected in July, but still 21 million tonnes (0.8 percent) below the 2014 record. Better prospects for coarse grains, wheat and rice were behind the increased estimates. FAO also upgraded its supply-demand brief, raising estimated cereal stocks.

As the harvest is nearing completion in the Northern Hemisphere, the global wheat production forecast for 2015 is becoming firmer, with 728 million tonnes now expected, 5 million tonnes more than previously foreseen.  The revision was driven by higher expectations for crops in Australia, the EU, the Russian Federation and Ukraine, more than offsetting a lower production forecast for Canada, where major growing areas continued to be affected by dry conditions.