World food prices declined sharply in March, driven mostly by demand-side contractions linked to the effects of the COVID-19 pandemic and the drop in global oil prices due mostly to expectations of economic slowdown as governments roll out restrictions designed to respond to the health crisis, the UN food agency said in its latest monthly report.
The FAO Food Price Index, which tracks monthly changes in the international prices of commonly traded food commodiies, averaged 172.2 points during the month, down 4.3 percent from 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 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.
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