Signs of an end to soaring food prices

from the Financial Times

By Javier Blas, Commodities Correspondent

The soaring food prices that have triggered global political and economic turmoil over the past year have finally shown the first tentative signs of stabilising.

The United Nation’s Food and Agriculture Organisation food price index, considered the best measure of global food inflation, saw its first decline in 15 months in April, as wheat, dairy, sugar and soyabean prices fell.

Jose María Sumpsi, the FAO’s assistant director-general, told the Financial Times earlier this week that with the exception of corn and rice, food inflation appeared to be “reaching its peak”, although he did not expect prices to start falling.

His comments, which are supported by other senior UN officials, and the drop in the index are the most encouraging signs since the global food crisis broke out last summer but they do not mean the problems are over.

The FAO index for April, to be published later this month, fell to 216.7 points, down from a revised 217 points in March, after rising 52 per cent in the past 12 months, according to an official who has seen the index.

The last time the FAO food index posted a monthly drop was in January 2007, but that proved a blip. This time officials are more confident that some prices will stop rising or even fall as farmers plant more crops to take advantage of record prices amid better weather than last year.

Agriculture experts warned prices could continue to rise because of the growing appetite for crops for the biofuels industry and bad weather, such as the cyclone in Burma.

They said retail prices could also keep climbing even if wholesale food inflation stabilises, as companies pass on previous increases to consumers.