Global food prices are set to decline further in 2012 as a weaker world economy dampens consumer demand while food supplies rise, the World Bank said on Tuesday, warning that a possible rise in oil prices could reverse the trend.
The World Bank said prices have declined steadily but volatility has increased, including among staples like wheat, maize and rice. In some countries, domestic food prices are higher than levels in 2010, keeping pressure on poor households that spend the bulk of their income on food.
The World Bank increased its monitoring of global food prices in 2009 during a food and energy price crisis that hit food-importing countries the hardest and highlighted the chronic underinvestment in agriculture in developing countries.
The World Bank said its 2011 annual food price index shows prices are still 24 per cent higher than in 2010 despite some decline. Global prices fell 8 per cent in the three months from September to December 2011, ending the year 7 per cent below December 2010 levels.
"The worst food price increases may be over but we must remain vigilant," said Otaviano Canuto, the World Bank Group's vice president for Poverty Reduction and Economic Management. "Prices of certain foods remain dangerously high in many countries, leaving millions of people at risk of malnutrition and hunger."
The Bank warned, however, that the steady decline in global food prices could be halted if weather patterns change, or if world oil prices rise, pushing up price volatility and demand for biofuels.
Price volatility adds uncertainty and keeps prices high because farmers are unsure how to price their products.
The World Bank's sister organization, the International Monetary Fund, warned last week that global crude oil prices could rise as much as 30 per cent if Iran halts exports as a result of US and European Union sanctions.
Iran has threatened to block the Strait of Hormuz shipping route, which handles 20 per cent of oil traded globally.