FAO: World food price fall slows in November

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World food prices dipped month-on-month in November but remained at high levels with further scope to rise due to future supply concerns, the United Nations' food agency said on Thursday.

Global food prices measured by the UN's Food and Agriculture Organisation (FAO) hit a peak in February but have been falling since June as crops improved and concerns about global economic slowdown reined in demand growth.

"I'd rather say it is a slowdown in decline," FAO's senior economist Abdolreza Abbassian told Reuters after the FAO index of global food prices showed a one point monthly fall in November.

The index, which measures monthly price changes for a food basket of cereals, oilseeds, dairy, meat and sugar, averaged at 215 points in November, 10 percent below its peak in February but remained one percent above the November 2010 level, the FAO said in a statement.

"It is more stabilising at high levels than a downturn ... The upside risk is still there," Abbassian said in a telephone interview.

High food prices have helped fuel inflation and contributed to civil unrest and the Arab Spring earlier this year.

The European Central Bank cut interest rates by a quarter of a point on Thursday to counter the twin threats of recession and deflation in the euro zone, and is expected to unveil fresh measures to help banks hurt by the bloc's debt crisis.

The fall in November food prices was moderate with a 5 percent rise in vegetable oils cushioning a 6 percent fall in sugar. The prices of cereals, one of the main components of the FAO index, fell 1 percent from October, largely driven by a 3 percent fall in wheat prices.

GLOBAL GRAIN STOCKS IN FOCUS

Global grain stocks, beefed up after strong crops in Russia and some Asian countries, were at comfortable levels this season, Abbassian said.

Next season's supply situation remained uncertain with weaker grain crops expected in Ukraine and presidential elections in Russia which could influence Moscow's export policy, he said.

A considerable increase in the global grain output would be needed next year if demand kept rising, he added.

The Rome-based FAO put world cereals stocks at the end of the 2012 season at 511 million tonnes, up five million tonnes from the previous forecast and 10 million tonnes higher than the previous year.

The FAO has cut its 2011 world cereals output to 2.323 billion tonnes from a previous forecast of 2.325 billion tonnes due to reduced estimates of global rice and U.S. maize crops, but confirmed it was still a record and a 3.5 percent increase on 2010 output.

At this level, the 2011 cereal crop should be sufficient to cover the expected increase in utilisation in 2011/12 and also allow for a moderate replenishment of world reserves, it said.

The FAO raised its 2011 global wheat output estimate to a record 694.8 million tonnes, up 6.5 percent from 2010 and above a previous estimate of 691 million tonnes, due to bumper crops in some Asian countries and recovery in Russia and some other former Soviet states after drought last year.

FOOD INSECURITY HOTSPOTS

FAO said 33 countries around the world needed external assistance as a result of crop failures, conflict or insecurity, natural disasters and high domestic food prices.

In Somalia, food insecurity will remain critical in drought-affected areas until the harvest of short-season crops in early 2012, despite some improvement in food situation due to substantial humanitarian aid and favourable rains.

In the Horn of Africa as a whole, food insecurity is critical for some 18 million people in most drought-affected areas, including 4.6 million in Ethiopia, 4 million each in Somalia and the Sudan, 3.75 million in Kenya, 1.5 million in South Sudan and 180,000 in Djibouti are in need of emergency assistance, it said.

Total cereals import bill in the low income food deficit countries is expected to rise 3.4 percent to a record of $33 billion in the 2011/2012 marketing season due to increased import needs, the FAO said. (Reporting by Svetlana Kovalyova; Editing by Keiron Henderson and Alison Birrane)



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