World Food Prices Drop to Lowest in Three Years on Grain Slide

(BusinessWeek) – World food prices fell for a fifth month in September to the lowest level in three years, with grain prices sliding as production of corn and rice is expected to exceed demand.

An index of 55 food items tracked by the FAO fell to 199.1 points from a revised 201.4 in August, the Rome-based United Nations agency wrote in an online report today. The gauge is down from a record 237.9 points in February 2011 and at the lowest level since September 2010.

The decline in food prices was driven by a 6.1 percent drop for grains, as all other components of the index rose, led by sugar, the FAO said. Global corn production will jump to 943.2 million metric tons in 2013-14 from 862.9 million tons in the previous period, the International Grains Council forecast last week.

“The sharp decline in September follows an already sizable drop registered in the previous two months, reflecting a generally favorable supply outlook, particularly for maize and rice,” the FAO said, using another name for corn.

The FAO’s grain price index fell to 197.7 points last month after sliding 7.5 percent to 210.6 in August, slipping to the lowest level since August 2010.

In a separate report, the FAO cut its outlook for 2013 world grain production by 3.1 million tons to 2.49 billion tons on a reduced outlook for wheat output, still rising 7.7 percent from 2.31 billion tons in 2012. The wheat outlook was lowered by 5.2 million tons to 704.6 million tons.

International wheat prices were mostly unchanged from August on rising demand and a reduced outlook for harvests in Southern Hemisphere growers, according to the FAO.

Sugar

The FAO’s sugar index rose 1.8 percent to 246 points, after unfavorable weather hampered harvesting in the center-south region of Brazil, the world’s largest producer of the sweetener. Rising demand in India due to festive seasons provided short-term price support, the UN agency wrote.

An index of meat prices advanced 0.9 percent to 175.7 points, while the FAO’s gauge for cooking oils and fats added 0.4 percent to 186.3 points. The dairy price index gained 0.7 percent last month to 240.7.

The global food-import bill will probably be stable this year at $1.094 trillion as cheaper sugar and cooking oil make up for rising prices of dairy, fish and meat, the FAO predicted in June.