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FAO: Global Market Analysis

November 2010

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In this issue of Food Outlook, the Food and Agriculture Organization of the United Nations reports on global supply and demand balances, and warns against further supply shocks as prices continue to rise.

International prices of most agricultural commodities have increased in recent months, some sharply. The FAO Food Price index has gained 34 points since the previous Food Outlook report in June, averaging 197 points in October, only 16 points short from its peak in June 2008. The upward movements of prices were connected with several factors, the most important of which were a worsening of the outlook for crops in key producing countries, which is likely to require large draw downs of stocks and result in tighter global supply and demand balances in 2010/11. Another leading factor has been the weakening of the United States Dollar (US Dollar) from mid-September, which continues to sustain the prices of nearly all agricultural and non-agricultural traded commodities. The increase in international prices of food commodities, all of which accruing in the second half of 2010, is boosting the overall food import bill in 2010 closer to the peak reached in 2008.

The pressure on prices to rise was first felt in the cereal market, most notably for wheat and barley, in August. This prompted FAO to call for an extraordinary meeting on 24 September 2010 to discuss the underlying causes and possible remedies. The meeting clearly identified the importance of reliable and upto-date information on crop supply and demand to cope with unexpected developments in world markets. More transparency and a better understanding of the role of commodity futures markets and government responses were also viewed as necessary to address price volatility. The full report of the meeting is included in the Special Feature section of this issue of Food Outlook.

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