Global food prices dropped sharply last month, following gradual easing during the spring, according to the UN Food and Agriculture Organisation, which monitors the price of a range of staple items and issues monthly reports. The FAO said easing prices this month are in response to “favourable supplies, growing global economic uncertainties and a strengthening of the US dollar.”

The FAO’s Food Price Index, created based on its measurements, fell by four percent between April and May. This is the index’s lowest level since September 2011 and remains 14 percent below its peak in February last year. Commenting on the falling grocery prices, FAO grain analyst Abdolreza Abbassian said, "Crop prices have come down sharply from their peak level but they remain high and vulnerable due to risks related to weather conditions in the critical growing months ahead."   

Despite weather concerns in several global regions, FAO also raised its forecast for world cereal production today by 48.5 million tonnes. The raise, based principally on the expectation of a bumper maize crop in the United States, brings the organisation’s forecast for world cereal production back up to a record level of 2,419 million tonnes for 2012; the new forecast is 3.2 percent higher than 2011’s record production levels

US maize is expected to account for the bulk of the increase, thanks to favourable growing conditions in the region. As a result, the global coarse grain production is forecast at 1 248 million tonnes, a huge 85 million tonnes increase from the previous year. Nevertheless, FAO analysts admitted that the growing season is still in its early stages and weather events may see forecasts altered.

With the main northern hemisphere rice crops now in the ground in several countries, the forecast of global rice production in 2012 is also firmer, pointing to a 2.2 percent increase from 2011, bringing world production to 490 million tonnes, mostly reflecting larger plantings in Asia.

For wheat, latest indications point to a contraction of about 3 percent in production in 2012, to 680 million tonnes, largely on weather concerns, although production is still well above average for the past five years.

Demand is expected to increase this year, as the global population continues to rise, with analysts predicting 2 per cent more cereal utilisation in 2012. Feed ustilisation is also set to increase, this time by 3.8 per cent as diets change in several global regions to include more meat and dairy. In Europe, meat and dairy consumption is contracting slightly and worldwide food policy experts have questioned the long term sustainability of such a dietary shift ahead of the Rio +20 Summit later this month.

Overall, food consumption is expected to increase by just over 1 percent, largely keeping pace with world population growth and, at the current forecast level, world cereal production will easily exceed the anticipated utilisation and significantly replenish world cereal stocks, according to FAO experts.

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