Alongside lower oil prices and a stronger US dollar, strong cereal production is one of the main factors influencing the FAO’s assessment of international food prices in its biannual report. The authors of the report, published on 8 October, point to the supply and demand balance of cereal crops remaining comfortable in the 2015/2016 marketing season.

While world production is expected to fall below last year’s record, supplies will be almost sufficient to meet the projected demand, requiring only a small reduction in global stocks by the end of the season.

Against this backdrop, the authors write, cereal prices have remained under downward pressure, a trend which began as far back as 2011.

Global cereal production in 2015 is projected to stand at 2.534m tonnes, approximately 1% below the 2014 record. This is mainly due to the forecast for rice production and coarse grains being cut, by 0.4% to 493m tonnes (in milled terms) and by 1.8% to 1.306m tonnes, respectively.

By contrast, world wheat production is forecast at 735m tonnes, marginally above last year’s record.

World cereal trade in 2015/16 is forecast at nearly 364m tonnes, 2.9% below the 2014/15 record. Most of this season’s forecast contraction in world cereal trade stems from expected sharp drops in wheat and coarse grains shipments, while trade in rice is anticipated to rebound in 2016.

“The takeaway message here,” the authors write, “is that statistically, the most recent shifts in behaviour foresee downward price momentum with lower volatility. This is particularly evident for predominantly storable commodities such as cereals, but less so for more perishable commodities such as meat and dairy products.”

An aid to food security

The report also says that lower food prices relative to incomes will be an aid to food security – by making food acquisition more affordable. “This is particularly pronounced in developing countries where food purchases typically account for a significant share of overall household income of the poor,” it says. However, the authors do factor in the unpredictability of extreme weather events and how these can affect food production and security.

In conclusion, the authors warn that, unlike other markets, food prices affect one of the most fundamental rights: the right to food. They say this makes “continued vigilance necessary” in today’s world.

Lowest level in six years

The FAO Food Price Index (FPI) has fallen, almost uninterruptedly, for the past 18 months, with the pace of decline gathering momentum. For instance, the FPI lost around 50 points (a quarter of its value) in the past 12 months alone and recently slumped to its lowest level in six years, 155 points, in August 2015.