Africa: Food Prices Drop, but Subsidies Still a Concern, World Bank Says

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Washington — Prices of internationally traded food commodities continued to fall from February to June for the third consecutive quarter since their historic peak in August 2012, according to the World Bank.

Some countries with weak safety nets are responding to price uncertainty by scaling up food subsidies that the World Bank says are counterproductive.

In its Food Price Watch, the Bank reports that increased food production combined with declining demand from large importers pushed overall prices down. However, prices remained high in some countries due to unstable weather conditions, dwindling supplies, currency devaluations and public procurements.

According to the Food Price Watch, grain prices decreased 2 percent from February to June, while prices of fats and oils were down 3 percent. Meanwhile, fertilizer prices decreased 8 percent.

Looking ahead, uncertainty in the international market remains.

WHEAT

The Bank said good wheat harvests are expected in 2013 from Australia, Europe, the Black Sea region and China because of good weather. However, wheat output in the United States is expected to decline as a result of slow plantings in May. With higher demand from major importers, and recent unfavorable weather in Central Europe, Russia and China, wheat stocks may not rebound.

Between February and June, the largest wheat price increases occurred in India, Ethiopia and Sudan. In contrast, wheat prices decreased 10 percent to 15 percent in the Democratic Republic of the Congo, Colombia and Afghanistan due in part to reduced import prices, according to the World Bank report.

MAIZE

Global maize production is expected to reach a new record in 2013 with major increases from China, Europe, Brazil, Argentina and the United States. However, due to late planting in the United States, the crop will be vulnerable to hot and dry weather during its most important maturation time, the Bank's report said.

RICE

Rice prices continued to decrease moderately due to good harvests in Thailand and Vietnam. High inventories in Thailand, Vietnam and India are forming the base of "comfortable" world rice inventories in 2013, the Bank's report says.

SUBSIDIES DEBATE

Recurring spikes in food prices have revived interest in government food subsidies, which were widely used by developing countries from the 1950s to the 1970s as a poverty alleviation strategy. But when poorly implemented, subsidies distort prices and agricultural production, boost fiscal deficits, do not help low-income people, and have been linked to corruption, the World Bank says.

RESPONSE TO PRICE VOLATILITY

In response to price volatility, the United States through its Feed the Future program and the World Bank have prioritized investing in agriculture and rural development, expanding public-private partnerships across the food supply chain, and improving nutrition among vulnerable populations.

Published quarterly, the Food Price Watch monitors food prices to help policymakers and people in the development community prepare for potential food crises.

A copy of the July 2013 report (PDF, 800KB) is available on the World Bank's website.

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