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Food prices fall at year’s end, but still at record highs

Bumper crops of cereals, sugar and oils led to a sharp decline in the FAO Food Price Index as 2011 drew to a close, but the Index’s average for the year was still a record high, and FAO analysts said near-term trends were difficult to predict.

December saw the FPI shed 5 points, or 2.4 percent, from November, finishing the year at 211 points. That represented a 27 point, or 11.3 percent fall from its peak in February 2011.

FAO analysts said that three factors contributed to the decline in the Index. First, increased output of wheat, rice, maize, sugar and edible oils helped push prices down. Second, demand was slowing because of weak economic conditions in some major markets. In a related trend, several countries in Asia had been rebuilding and replenishing stocks of key grains such as rice. Lastly, a strengthening of the US dollar in recent weeks effectively pushed prices down.

Although concerns were rife earlier in 2011 that food prices might sharply rise because of a historic drought in China’s wheat-growing region and devastating floods in the rice basket of Southeast Asia, bountiful harvests in other areas more than made up for crop losses in regions affected by severe weather and fluctuating climatic conditions.