The UN FAO announced on Thursday morning that world food prices have continued on a downward trend which began in December 2014, though prices had previously held steady through the last quarter of 2014. According to the Food and Agriculture Organisation’s Food Price Index prices fell by 1.9 percent over January, compared to December 2014.

In January, FAO announced that 2014 averages meant prices had fallen year-on-year for the past three years.
 
On Thursday, UN analysts remarked that the continued decline reflects cereal production estimates; the UN’s food and farming arm raised its forecast for world cereal production to a new record high this month and noted that early indications for crops in 2015 are favourable.

The cereal output estimate for 2014 was raised to 2,534 million tonnes, driven higher by improved prospects for coarse grains, according to FAO's latest Cereal Supply and Demand Brief.

In addition to ample supplies, the price decline seen in recent months has also been influenced by healthy national inventories, the strong U.S. dollar and weak crude oil prices.

Nevertheless, cereal prices led the downwards trend last month; these were down 3.6 percent on the month in January, and now lie 34 percent below their peak price from June 2008. International wheat prices fell by 7 percent from December, reflecting ample supply conditions.

Prices of vegetable oils also fell significantly (2.9%) over the month. Low crude oil prices and ample supply of soy oil led prices lower (this situation makes biofuel manufacture less attractive). Meat prices remain high, but were driven lower over the month by the weakening value of pork.

For the first time in many months, dairy prices held steady in January. However, they remain 35 percent below their January 2014 level.

2015 season

Turning to the forthcoming 2015 season, FAO the winter wheat crops now in the ground in the northern hemisphere generally enjoyed propitious weather and more acreage was sown in North America and the Near East, offsetting some decreases in the Russian Federation and parts of Far East Asia.

Overall conditions for maize crops in the southern hemisphere are also satisfactory, although FAO noted that lower prices for maize has led to reduced plantings in South America.

Globally, 1,104 million tonnes of cereals will be used for food consumption, up 1.1 percent from the previous year, though cereal stocks are estimated to be 8 percent higher than last year. As a result, the global cereal stock-to-use ratio for 2014/15 should rise to 25.0 percent, its highest level in more than a decade and well above the historic low of 18.4 percent recorded in 2007/08, a time of volatile international food commodity prices.