FAO chief expects food prices to fall further

Abu Dhabi | Reuters — World food prices are seen falling further this year having settled near their lowest in seven years pressured by slowing economic growth, the United Nations’ Food and Agriculture Organization’s (FAO) director general said Tuesday.

The FAO’s food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat and sugar, has fallen in each of the last four years.

It stabilized last month near a seven-year low as rises in vegetable oil and meat offset declining cereal, sugar and dairy prices.

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“The slowdown of the growth of the world economy, especially China, is putting a lot of (downward) pressure on commodities,” Graziano da Silva said during a visit to Abu Dhabi.

“We expect the price to continue to fall in real terms, not necessarily nominal terms, so it will depend a lot for each country on the exchange rate,” da Silva said.

Producers in countries such as Brazil have been shielded to some extent from the overall weakness in global prices by the weakness of their local currency.

“In the short-run this (weak food prices) will be a kind of compensation for the poorest that are buyers of food… but in the long run we would like to see prices recover again,” da Silva said.

“From experience we see long-term trends of falling prices of commodities mean also a reduction in the supply side.”

The FAO said this month that world cereal production and demand should be balanced in the 2015-16 season with both totalling 2.52 billion tonnes, leaving ending stocks virtually unchanged from a year earlier.

Reporting for Reuters by Nigel Hunt.

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