FAO Food Price Index: Latest Trends, Global Impact & Key Insights
The Food and Agriculture Organisation (FAO) released its monthly Food Price Index (FPI) for May 2021 on June 3, 2021. In May 2021, the FOA Food Price Index averaged 127.1 points, which is an increase of 4.8% (5.8 points) from April 2021 and an increase of 39.7% (36.1 points) from May 2020.
While the actual figures may not be necessary for IAS Exam aspirants, understanding the reasons behind food price fluctuations can still be beneficial.
In this article, we will discuss the FAO Food Price Index, its latest trends, and the impact the FPI has globally. It highlights the FAO Food Price Index and its usefulness in the PH estimate of the global food situation and inflation. This article will be helpful for candidates preparing for the Civil Services Examination (UPSC Mains GS 3).
Latest News on FAO Food Price Index
The UN Food and Agriculture Organization (FAO) recently indicated that global food price trends increased in July to the highest level in over two years.
The FAO Food Price Index increase in May 2021 is the most significant month-over-month increase in the last decade (from a year-over-year sense) and the most significant month-over-month increase in price levels since October 2010.
The increase is mainly driven by significant increases in prices for vegetable oils, sugar, and cereals, as the cost of meat and dairy has remained stable.
Key Points:
- The FFPI was created in 1996.
- The goal is to track trends in global agricultural commodity markets and the world food situation.
- The base period is 2014-16.
What is the FAO Food Price Index?
The FAO Food Price Index is an index that refers to the monthly change in food price inflation trends of a basket of food products. The FAO Food Price Index (FFPI) monitors monthly fluctuations of the international prices of food commodities in five key groups, including:
- Cereals
- Vegetable Oil
- Dairy
- Meat
- Sugar
These five broad commodity groups are selected for FAO food price analysis based on their aggregate importance, generally and strategically, to global food security and trade. The price indices of these five commodity groups are averaged statistically following their average export shares over the period 2014-16, which weighs their contribution to the index.
- Base year: 2014- 2016.
Key Facts About the Food and Agriculture Organisation
Below are some key facts regarding the FAO:
1. The FAO is a specialized agency of the United Nations that directs international efforts to eradicate hunger and improve nutrition and food security.
2. Its aim is to end hunger, achieve food security and improved nutrition, and promote sustainable agriculture for all people so they have regular access to enough high-quality food to lead active, healthy lives.
3. It has 195 members (194 countries + European Union), and FAO has over 130 representations worldwide.
| Brief facts about FFPI – UPSC Prelims | |
| Who publishes the FAO Food Price Index (FFPI)? | Food and Agriculture Organisation (FAO) |
| How often is the FFPI published? | Monthly, every first Thursday of the month |
| What is the base period for calculating FFPI? | 2014-16 |
| When was the FFPI first introduced? | 1996 |
| Where is the FAO headquater? | Rome, Italy |
| What are the FAO sister organisations? | World Food Programme (WFP)International Fund for Agricultural Development (IFAD) |
| What are the reports published by the FAO? | State of the World’s Forests (SOFO)State of World Fisheries and Aquaculture (SOFIA)State of Agricultural Commodities Markets (SOCO)State of Food Security and Nutrition in the World (SOFI) |
Key Points of the FAO Food Price Index
This information is reflective of May 2021. The FAO releases the international food market index each month; this information will be updated or appended the month after data is published:
1. The FAO Cereal Price Index rose 6%, mainly driven by increased maize prices due to expected production cuts in Brazil. Wheat prices initially climbed but fell as crop conditions improved, while barley and sorghum prices also increased. Rice prices remained stable.
2. The FAO Vegetable Oil Price Index increased by 7.8%, driven by rising prices of palm, soy, and rapeseed oils due to slow production in Southeast Asia and increased demand for biodiesel feedstock.
3. The FAO Dairy Price Index increased 1.5%, boosted by EU demand for skim milk powder and China’s imports from New Zealand. Cheese prices stabilized, while butter prices declined due to higher supply.
4. The FAO Meat Price Index rose by 2.2% from the previous month, driven by higher import demand for all meat products from East Asian countries, particularly China.
5. The FAO Sugar Price Index rose 6.8% in April due to Brazil’s unfavorable weather affecting yields. Rising crude-oil prices and the stronger Brazilian Real also impacted exports, prompting India to boost sugar exports to stabilize prices.
Importance of the FAO Food Price Index
Below are some points that emphasise the importance of the FAO Food Price Index:
1. The world food price fluctuations are highly constant. For instance, the world population grew by 34% between 1996 and 2020, but net agricultural production grew by nearly 70% in constant value.
2. Likewise, while the price indicators that comprise the international food market index fell to near 60-year lows in 2000 and rose to near 45-year highs in 2011, nominal prices often exhibit considerable monthly fluctuations.
3. As a reference point for the direction of global food price trends, the FAO Food Price Index has provided a timely monthly measure to observe world food price fluctuations throughout time in both nominal and real terms amidst change and uncertainty.
Conclusion
In conclusion, the FAO Food Price Index is an important indicator of global food price trends and market dynamics. Recent food price inflation trends reflect significant factors such as supply fluctuations and rising demand. Understanding these trends is important for policymakers and consumers as they navigate food price inflation and its impact on food security.
The FAO’s ongoing monitoring of the international food market index helps stakeholders make informed decisions to promote sustainable agricultural practices and address the challenges posed by international food market fluctuations.
Frequently Asked Questions
A: The FAO food price index tracks the monthly change in international prices for a market basket of food commodities.
A: Food and Agriculture Organisation of the United Nations.
A: The FAO Food Price Index (FFPI) is a measure released monthly by the Food and Agriculture Organisation to understand the development in world agricultural commodity markets and to track the world food situation.
A: The index measures affordability and access to key food staples, and with rising prices, vulnerable populations are going to have an even greater challenge securing nutritious foods.
A: FFPI tracks the changes in international food prices for a basket of five commodities: Cereals, Vegetable oil, Dairy, Meat, and Sugar every month.
A: FFPI is an essential monthly measure of the state of international food markets and any changes in food prices, either nominally or in real form, over time.
A: FFPI represents affordability and the ability to access food staples, which challenge vulnerable populations because higher food prices make it more difficult for them to access nutritious food.
A: AI tools predict trends based on market data, enabling companies to optimize production lines, food prices, and supply chains, and meet consumer expectations for their products.