By Gregory Meyer in New York and Emiko Terazono in London
The threat of food inflation, a serious concern for emerging countries last year, is starting to recede as high prices for grains restrain consumption and better crops in Europe and Russia replenish stocks.
The UN?s Food and Agriculture Organisation yesterday said its food index fell last month to its lowest level in more than a year, reflecting falls in inflation across Asian nations.
At the same time, the US reported that the country?s domestic production and stocks of corn, a key commodity for the global food chain, were higher than previously thought, sending prices sharply down.
Benchmark corn futures fell by their daily maximum limit to a three-week low of $6.11? a bushel, down more than 6 per cent. Wheat, which had previously been supported by expectations of low corn stocks, fell 6.4 per cent.
?There are a number of indicators that suggest that food inflation is going to abate,? said Richard Feltes at US-brokerage RJ O?Brien in Chicago.
Darrel Good, agricultural economist at the University of Illinois, said that consumers would see stable food prices. ?The increase in commodity prices that we have experienced in recent years has now been pretty much fully passed through to the consumer.?
The price of corn hit a record high of $7.99? in June. Prices have since fallen more than 23 per cent.
The drop in corn, wheat, rice, soyabeans and other agricultural commodities? prices pushed the FAO food index in December to its lowest since October 2010. The index, which measures a basket of food commodities, was at 211 points last month, down about 11 per cent from February?s all-time high.
The US Department of Agriculture said commercial silos and farmer grain bins held 9.64bn bushels of corn as of December 1, roughly 200m bushels more than analysts? expectations. The department?s quarterly stock data are closely watched by commodity traders, food companies and government officials because the US is the world?s leading corn grower and exporter, and so shapes global price trends.
The higher-than-expected level of stocks suggests that the sustained high prices over most of the last year have restrained corn consumption.
The USDA indicated that domestic feed and industrial demand for corn had declined slightly from a year ago, while exports have taken a hit from high prices. Implied demand for US corn in the most recent quarter dropped 6 per cent from a year ago, though global consumption is still expected to reach an all-time high this year.
? The Financial Times Limited 2012