According to FAO (Food and Agricultural organization of USA), The global food price index dropped to the highest in June, marking a major drop in the past two years. Cereals, dairy goods, vegetable oil, and sugar are all witnessing price decreases.
The Food Price Index (FFPI) is a monthly evaluation of the change in global rates of a variety of food items.
In May, the food price index was 124 points, but it declined to 122.3 points in June. In one month, the price index fell by 1.7 points.
According to FAO, the cereal price index dropped to 2.1 percent from May. It’s averaged to 126.6 points in June. This is due to increased wheat supplies from nations such as Argentina and Brazil.
The vegetable oil price index is down to 2.4 percent. This is due to the worldwide decline in the prices of palm oil and sunflower oil.
Dairy price index is down to 0.8 percent, the cause for the price reduction is due to abundance in export availability, particularly from Western European nations.
Sugar price index is down to 3.2 percent. It is due to the good harvest in the Brazil, and also a reduction in the import of sugar from China. China is also the world’s second largest importer of sugar.
The FAO meat price index remained unchanged from May.
Potential benefits of lower food prices for consumers
- Increased affordability: Lower food costs suggest that consumers may now get the same product at a lower cost. This has greatly aided financially weak families. The money saved can now be utilized to purchase additional necessities.
- Access to nutritious food: Because of high nutritional content and low price, individuals can incorporate these healthy food items more into their diet and enhance their well-being, potentially saving them from illnesses.
- Reduced food insecurity: Falling food prices can help alleviate food insecurity, which refers to the lack of consistent access to sufficient, safe, and nutritious food. The widespread problem of food shortages is going to decrease among the population, particularly among low-income households.
- Good for economic growth: When people spend less money on food, the money they save can be invested in other goods and services. This will benefit the local vendors, businesses and provide many new opportunities for employment. This will contribute to the overall growth of the country’s economy.
Effects on farmers
Falling food prices has many positives, but it also has some drawbacks: –
- Squeezed profit margins: The decreased food price has also resulted in a significant decrease in farmer’s profits. When the price of these food items declines, the profit earned by the farmers also squeezes. Small farmers, who are highly dependent on the crop production, would be more impacted by this problem.
- Shifts in crop choices: Farmers may also change their crop production choices as a result of reduced food prices. For example, farmers may produce other crops in place of sugarcane, cereals, and sunflower, whose prices are affected internationally. They will choose crops that are not affected and have higher profit margins than those crops.
- Potential to innovate: Lower food costs have the potential to encourage farmers and agricultural producers to innovate, enhance efficiency, and adopt new technology. Farmers may explore strategies to improve their production processes, cut expenses, and increase output in order to retain profitability. This can lead to improvements in agricultural practices, the adoption of sustainable farming methods, and enhanced resilience to market fluctuations.
Will the trend continue in future ?
The answer is unpredictable because, the continuance of the food price reduction next month will be determined by a number of factors, including supply and demand dynamics, weather conditions, trade policy, and economic developments. To acquire a comprehensive knowledge of expected pricing patterns, it is critical to regularly watch these aspects.
In conclusion, the recent decline in world food prices brings potential benefits for consumers, including increased affordability, improved access to nutritious food, and reduced food insecurity. However, this decline poses challenges and risks for farmers and agricultural producers, such as reduced incomes, profit margins, and competitiveness. Continued monitoring and policy responses are crucial to ensure food security, address vulnerabilities, and build resilience in the face of various uncertainties. It is important to consider factors like climate change, trade dynamics, and input costs while implementing targeted interventions. By staying informed, data-driven, and proactive, policymakers can navigate the complexities of the food system and work towards sustainable and equitable food security for all.