Milan - Global food prices rose in March for a third successive month, driven by gains
in grains and vegetable oils, the United Nations’ Food and Agriculture
Organisation said on Thursday, putting food inflation firmly back on the
Food prices hit record highs in February 2011 and stoked protests
connected to the Arab Spring wave of civil unrest in some north African and
middle eastern countries. They then receded but started to grow again in
The index, which measures monthly price changes for a food basket
of cereals, oilseeds, dairy, meat and sugar, averaged 215.9 points in March, up
from a revised 215.4 points in February, FAO data showed.
Its Cereal Price Index averaged 227 points in March, up from
February, with maize prices showing gains, supported by low inventories and a
strong soybean market, the FAO said.
“You can see prices in the near term rising even further,” FAO’s
senior economist and grain analyst Abdolreza Abbassian told Reuters before the
The FAO also confirmed its earlier forecast for world wheat output
to fall 1.4 percent from last year’s record crop to 690 million tonnes in 2012.
Oil prices a factor
High oil prices have fanned inflationary concerns since the start
of this year. Consumer prices in the 17 nations sharing the euro were up 2.6% in March from a year ago, despite the region’s stumbling economy.
“The food price index has an extremely high correlation to oil
prices and with oil prices up it’s going to be difficult for food prices not to
follow suit,” said Nick Higgins, commodity analyst at Rabobank International.
Energy prices affect the production of fertilizers as well as costs
related to food distribution and farm machinery use.
“We really saw the (food index) declines in Q4 2011 as being
anomalous and related more to sell offs from the threats posed by the European
macroeconomic situation rather than agricultural fundamentals,” he said.
A US government report last week with lower than expected
estimates of grain stocks and reduced soybean and wheat plantings, added to
concerns about global grain supplies, driving a rally in US and European grain
Corn and soybeans are set to be the major drivers on world grain
markets until new crops are harvested. Strong price swings are expected due to
weather changes in major producing countries, Abbassian said.
More price volatility could come if US farmers decide to plant
more soybeans after being lured by high prices, he added.
US soybean futures rose about 7% in March and gained about
17% in the first quarter of this year spurred by concerns about tight
supplies as drought hit South America and smaller US plantings.
But FAO’s Abbassian said prices could fall in the second half of
this year with new crops easing market tension and driving full-year average
prices below the record levels of 2011.