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Food prices start falling except for milk

Friday, 12 July 2013
Food prices start falling globally and even in Sweden too where recently it was analysed that Sweden was one of the most expensive places in Europe to eat. However, the fall in prices will not affect milk.

After last year's drought in Europe and the U.S., record harvests has been observed this year such that world food stocks are said to being replenished. The supply of rice, corn, soybeans and wheat are expected to reach record according to the U.S. Department of Agriculture, reports Bloomberg News.

Rice is a staple food for billions of people and now the world is producing more rice than we can eat. Therefore, the analysts expect that the price will fall by some 13per cent by year-end.

“The stocks are so big, I don’t think anyone can talk about a bottom in prices,” said Geneva-based Mamadou Ciss, the president of Alliance Commodities SA, who has traded rice for almost three decades to Bloomberg. “There is oversupply for sure in the world. The crops are pretty good everywhere.”

The rice dealer also said that governments subsidies are encouraging more production even as prices decline and inventories expand. Thailand, once the biggest exporter, spent 588.7 billion baht ($18.9 billion) stockpiling 27 million tons of milled rice since October 2011 under a policy that paid farmers as much as 50 percent more than local prices. Domestic output will expand 4.5 percent to 21.1 million tons in 2013-2014, the USDA estimates.

Thailand lost about 137 billion baht through the buying program in the last crop year, according to a government estimate, and Moody’s Investors Service said last month the policy is undermining efforts to balance the budget by 2017. The government kept the purchase price at 15,000 baht a ton this month, reversing a proposal to lower it to 12,000 baht, and said that it would keep selling from stockpiles.

China, the world's largest consumer, this year will buy a record amount of imported rice because it is cheaper than the Chinese produced. The discovery of toxic cadmium in rice from southern China also contributes to the increased demand for imported rice.

U.S. Department of Agriculture tracks that wheat production will rise 6 percent to 696 million tonnes, the second largest forecasted in history. For soybeans and corn it is expected to reach properly impressive record.

Back home in Sweden, the past 12 months has seen food prices in Sweden rise by 3.5 percent. Maria Luthström, Head of Axfood says that the falling prices of commodities should feed through to the stores.
"When our suppliers change their prices, it will noticeable to the consumer, both increases and decreases, "she says of the changes but also stress that commodity prices are not the full cost of a product. "Commodity prices in a product such as bread is just part of the cost, "said Maria Luthström.
Other competitors such as Coop or the Cooperative have similar message. "We will start negotiations with vendors when we see commodity prices change," they say

As for Milk, prices have rebounded from last summer's nadir and now there are signs that farmer would see increased profitability as a result. Now prices are increasing again. The demand is higher than production added to drought in New Zealand and Australia. Since last summer, the price paid to farmers has increased by around Skr0.30 cents per litter. Net income is now around Skr1.70 per liter.
by Scancomark.com Team

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