Food Prices Decline but Remain High
November 26, 2013
Bad weather in South America, Black Sea countries, China and India warrant concern
WASHINGTON, November 26, 2013 - Global food prices declined by 6 percent over the last quarter, but are still not far from their historical peaks, according to the World Bank Group’s latest Food Price Watch report. Wheat markets remain tight; and weather-related concerns in Brazil, Paraguay, Argentina, Ukraine, and the Russian Federation may further drive up wheat prices over the next few months.
Domestic prices showed typically large variations across countries, mainly attributable to seasonal trends but also due to a combination of factors including bad weather, public procurement policies, local supply shortfalls and currency devaluations.
“Sustained declines in prices are welcome--we have a lot to be pleased about,” said Ana Revenga, Acting Vice President for the Poverty Reduction and Economic Management Network at the World Bank Group. “But these gains are fragile. Persistent concerns around erratic weather or currency fluctuations keep us far from claiming victory over food prices. We need to continue to pay close attention, since this progress can quickly be reversed if concerns become reality.”
According to the latest edition of Food Price Watch, the Bank’s Food Price Index in October 2013 was 12 percent lower than a year ago and 16 percent below the all-time peak in August 2012. Despite this decline, however, prices remain close to their all-time high.
Stronger demand for wheat, especially from China, a weaker U.S. dollar, and increasing concerns following the recent adverse weather have affected prices in a negative way. Initially, price increases were almost imperceptible in August and September, but then increased sharply in October. Global wheat stocks are expected to partially recover from last year’s declines, but major exporters’ closing stocks continue to remain low, still reflecting tight export availabilities. Rice and maize stocks, on the contrary, continue to be robust and are expected to remain that way through the end of the year.
This issue of the Food Price Watch also explores the role that extra-large scale farming, popularly known as “super farms” may play in boosting agricultural productivity and poverty reduction. The jury is still out on whether this trend has a positive or negative effect on boosting shared prosperity, especially in those countries with fragile institutions and poor oversight: social, environmental and animal welfare concerns must be weighed with potentially promising benefits such as jobs and efficiency gains.
How the World Bank Group is helping
The World Bank Group is committed to boosting agriculture and agriculture-related investment. In 2013, new Bank Group commitments to agriculture and related sectors were $8 billion. For IBRD/IDA, assistance to agriculture and related sectors has risen from an average of nine percent of total lending in FY10-12, to 12 percent in FY13.
- IFC made $4.5 billion in private sector investments across the food supply chain in FY13. These investments supported projects that promote access to finance, access to inputs like seeds, equipment and advice, and access to markets through infrastructure and food-processing facilities.
- The WBG supports the Global Agriculture and Food Security Program (GAFSP). Eight countries and the Bill & Melinda Gates Foundation have pledged about $1.3 billion over 3 years, with $1.1 billion received.
- The Global Food Price Crisis Response Program (GFRP) has reached 66 million people in 49 countries - through $1.6 billion in emergency support. As of July 2012, the Bank’s emergency response is channeled through IDA’s Crisis Response Window and the Immediate Response Mechanism.
- Boosting IBRD/IDA allocations to safety nets (rose sixfold from $1.2 billion in the FY06-08 pre-crises period to over $10 billion in FY09-12).
- Coordinating with UN agencies through the High-Level Task Force on the Global Food Security Crisis and with non-governmental organizations, and supporting the Partnership for Agricultural Market Information System (AMIS) to improve food market transparency.
- Advocacy for more investment in agriculture research–including through the Consultative Group on International Agriculture Research (CGIAR) – and monitoring trade to identify potential food shortages.
- Supporting improved nutrition among vulnerable groups: During the past decade (2003-2013), the International Development Association (IDA), the World Bank's fund for the poorest, has ensured that more than 210 million pregnant/lactating women, adolescent girls, and/or children under age five were reached by basic nutrition services. The Bank is also an active member of the Scaling Up Nutrition global movement Scaling Up Nutrition movement and supports the SecureNutrition Knowledge Platformhttp://www.securenutritionplatform.org/,which aims to improve nutrition through agriculture investments.
- IFC is launching the Global Irrigation Program (GIP), providing support to irrigation suppliers to increase availability and access for efficient irrigation equipment to better manage water use for agriculture.