Global food prices fall for third consecutive quarter

PHOTO | EITAN ABRAMOVICH | FILE Food and vegetables at a market in Bogota.  AFP

In Summary

• The World Bank Food Price Watch 2013 report shows that increased production, declining imports, and rising stocks exerted downward pressure on export price
• Domestic prices, nonetheless, followed seasonal trends, with wide variations in some countries

By LILIAN OCHIENG'
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The prices of internationally traded food declined for the third consecutive quarter since their peak in August last year as domestic food costs followed seasonal trends.

The World Bank Food Price Watch 2013 report shows that increased production, declining imports, and rising stocks exerted downward pressure on export prices. Global prices, however, remained tight for maize.

This is in contrast to a November 2012 World Bank report that showed stability in internationally traded food prices. Prices remained stable, though at high levels, after the July price rises marked a new all-time record.

“The prices of grains behaved differently during the period, with sustained increases in wheat, decreases in maize, and mixed patterns for rice,” the report said last year.

Domestic prices, nonetheless, followed seasonal trends, with wide variations in some countries. There were large increases in domestic prices between February and June 2013. This was attributed to unfavourable weather conditions, dwindling supplies, currency, devaluations, and large public purchases.

Kenya, Ethiopia, Sudan, Congo, Somalia, and Libya were affected, according to the report.

Countries with high poverty rates and weak safety nets are now responding to this chronic volatility by scaling up consumer food subsidies but these are often counter-productive, the quarterly Food Price Watch reported.

FOOD SUBSIDY

“Reforming poorly designed food subsidy programmes are a policy priority, leading the way to smart subsidies that target the most needed and complement existing safety nets,” World Bank Group’s acting vice-president, poverty and economic management, Mr Jaime Saavedra, said during the release of the report.

He said the programmes lack transparency and accountability in implementation and do not benefit poor people. “These programmes can be very costly and prone to corruption, and waste scarce fiscal resources.”

According to the report, food subsidies represent about 0.7 per cent of the regional gross domestic product (GDP) of the Middle East and North Africa, or $22 billion annually. When electricity and fuel subsidies are included, the share of GDP spent on consumer subsidies rises to a whopping 7 per cent, a total spending of $212 billion a year.

In countries like Egypt, Jordan, and Morocco, food subsidies alone represent between 1.2 and 1.8 per cent of GDP, considerably above the resources spent on such subsidies in most of the rest of the world.

“Between February 2013 and June 2013, the largest wheat price increases took place across monitored markets in Ethiopia (19 per cent) and Sudan (14 per cent) due to several reasons ranging from procurement policies to seasonal trends, low supplies, and currency depreciation” stated the report.

This happened as expectation of bumper crops this year led to a decline in international cereal prices. Wheat costs retreated most because of seasonal harvesting pressure from the northern hemisphere crops.