The UN Food and Agriculture Organisation’s Food price index dropped to an 11-month low in October, the agency revealed today. The decline of 4 percent reflects sharp falls in grain, sugar and oils prices. However, on releasing its findings, the FAO warned that prices remain generally higher than last year and are still volatile. image expired

The drop, triggered by sharp declines in international prices of cereals, oils, sugar and dairy products, showed prices last month were still some 5 percent above the same period last year. The index, which has been falling since June, now stands nine percent below its all-time peak of 238 points from February this year. Meat prices also declined, though these fell by the smallest amount.

FAO analysts said, "An improved supply outlook for a number of commodities and uncertainty about global economic prospects is putting downward pressure on international prices, although to some extent this has been offset by strong underlying demand in emerging countries where economic growth remains robust."

The agency speculated agricultural commodity prices could remain below their recent highs for the next few months. The FAO said, "In the case of cereals, where a record harvest is expected in 2011 [3.7 per cent higher than 2010], the general picture points to prices staying relatively firm, although at reduced levels, well into 2012."

However, the FAO said volatility was likely to continue to affect food prices as unstable markets mean agricultural commodity prices remain volatile. The agency said the resultant high food prices are putting pressure on Least Developed countries (LDCs), who have seen their food import bill soar by almost a third from last year.

Globally, wheat production rose by the highest amount, at6 per cent, according the FAO’s latest biannual Food Outlook. It forecast a 3.3 percent increase in world cereal inventories from their reduced opening levels, to 507 million tonnes by the end of seasons in 2012.

At this level, the world cereal stocks-to-use ratio for 2011/12 is expected to approach 22 percent, up only slightly from 2010/11. The agency said it believes that world annual cereal food consumption is expected to keep pace with population growth, remaining steady at about 153 kg per person.