International Food Prices Drop for Third Month in a Row

World food prices continue to decline for the third month in a row during April, as the economic and logistical impacts of the COVID-19 pandemic resulted in significant contractions in demand. The Food and Agricultural Organization of the United Nations (FAO) Food Price Index, which tracks international prices of the most commonly-traded food commodities, averaged 165.5 points in April, 3.4 percent lower than the previous month and three percent lower than April 2019.

The FAO Sugar Price Index hit a 13-year low, declining 14.6 percent from March, when it posted an even larger monthly drop. Collapsing international crude oil prices reduced demand for sugarcane, diverting output to producing sugar and hence expanding export availabilities. Meanwhile, confinement measures in several countries created additional downward pressure on demand.

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The Vegetable Oil Price Index declined 5.2 percent in April, driven lower by falling palm, soy and rapeseed oil values. Reduced biofuel demand played a role, as did declining demand from the food sector along with higher-than-previously expected palm oil output in Malaysia and soy crushings in the US.

The Dairy Price Index fell by 3.6 percent, with butter and milk powder prices posting double-digit drops amid increased export availabilities, mounting inventories, weak import demand and diminished restaurant sales in the northern hemisphere.

The Meat Price index declined by 2.7 percent. Even though important demand from China prompted a partial recovery, it was not enough to balance a slump in imports elsewhere. But due to shelter-at-home measuress, major producing countries suffered logistical blockages and a steep fall in demand from the food services sector.

“The COVID-19 pandemic is hitting both the demand and supply sides for meat, as restaurant closures and reduced household incomes lead to lower consumption and labor shortages on the processing side are impacting just-in-time production systems in major livestock producing countries,” said FAO Senior Economist Upali Galketi Aratchilage.

By contrast with the other indices, the FAO Cereal Price Index declined only marginally, as international prices of wheat and rice rose significantly while those of maize dropped sharply. International rice prices rose by 7.2 percent from March, due in large part to temporary export restrictions by Vietnam that were subsequently repealed. However, prices of coarse grains, including maize, fell ten percent, hit by reduced demand for both animal feed and biofuel production.