World food prices fell sharply in March, hit by a drop in demand tied to the coronavirus pandemic and a plunge in global oil prices, the United Nations food agency has said.
The Food and Agriculture Organization (FAO) food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat and sugar, averaged 172.2 points last month, down 4.3% on February.
"The price drops are largely driven by demand factors, not supply, and the demand factors are influenced by ever-more deteriorating economic prospects," said FAO senior economist Abdolreza Abbassian.
The FAO also slightly increased its forecast for cereal production, predicting a crop totalling 2.721 billion tonnes in 2019, up from a previous forecast of 2.719 billion and 2.4% higher than the 2018 crop.
Sugar Price Index
The FAO's sugar price index posted the biggest fall, being down 19.1% from the previous month. The drop was triggered by a reduction in consumption linked to coronavirus lockdowns seen in many countries, and lower demand from ethanol producers due to the recent dive in crude oil prices, the Rome-based agency said.
Vegetable Oil Price Index
The vegetable oil price index slumped 12%, pushed down by sliding palm oil prices, which was linked to a plunge in crude mineral oil prices and growing uncertainty over the impact of the coronavirus on the market.
"Oil prices have fallen by more than half during the past month, which catalyzes a large downward impact on biofuels, which are an important source of demand in the markets for sugar and vegetable oils," said FAO analyst Peter Thoenes.
Dairy And Meat Price Indices
The dairy price index dropped 3%, driven by declining quotations and slowing global import demand for skim and whole milk powders, while the meat index fell by 0.6%.
Cereal Price Index
The cereal price index fell 1.9%, with rice prices bucking the downward trend, rising for the third month running, buoyed by stockpiling spurred by concerns over the pandemic and reports that Vietnam might introduce export bans.
The FAO said that Vietnam has since downplayed the reports.
While the FAO lifted its forecast for 2019 world cereal production, its estimate for 2020 wheat production remained unchanged at 763 million tonnes, close to last year's record level.
Helping To "Shield Food Markets From Turmoil"
"[This] coupled with ample inventories will help shield food markets from turmoil during the coronavirus storm," the FAO predicted.