COVID-19: World Food Prices Plummet in March

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Oluchi Chibuzor

World Food Prices declined in March according to a statement released by the Food and Agriculture Organisation (FAO) arm of the United Nation.

The drop in price was driven mostly by demand-side contractions linked to the effects of the COVID-19 pandemic and the drop in global oil prices, as governments rolled out measures to respond to the crisis.

FAO in its March report on Food Price Index, noted that weakening demand and falling oil prices due to the global pandemic drive down international prices for major food commodities.

The FAO Food Price Index, which tracks monthly changes in the international prices of commonly traded food commodities, averaged 172.2 points during the month, down 4.3 percent from February.

According to FAO Senior Economist, Abdolreza Abbassian, “The price drops are largely driven by demand factors, not supply, and the demand factors are influenced by ever-more deteriorating economic prospects.”

Meanwhile, the FAO Cereal Price Index in March declined by 1.9 per cent from February, and stood at nearly at its level of March 2019.

International wheat prices declined, as the effects of large global supplies and broadly favorable crop prospects outweighed those of increased import demand from North Africa and some small export limitations imposed by the Russian Federation.

Also, international rice prices, by contrast, rose for the third consecutive month and Maize prices also declined due to both large supplies and much weaker demand from the biofuel sector.

According to the FAO, “The FAO Sugar Price Index posted the biggest drop, down 19.1 percent from the previous month. Causes include lower demand from out-of-home consumption linked to the confinement measures imposed by many countries, and lower demand from ethanol producers due to the steep fall in crude oil prices.

“The FAO Vegetable Oil Price Index declined 12.0 percent in one month, mainly stemming from falling palm oil prices linked to the plunge in crude mineral oil prices and rising uncertainties over the pandemic’s impact on vegetable oil markets worldwide. Soy and rapeseed oil prices followed the trend.

“The FAO Dairy Price Index fell by 3.0 percent, driven by declining quotations and global import demand for skim and whole milk powders, due largely to disruptions in the dairy supply chains because of the containment measures aimed at controlling the spread of COVID-19.”