Food prices remain high

Global food prices remained high in August according to the UN’s Food and Agriculture Organisation (FAO) food price index, maintaining the high level achieved last month as corn prices jumped in the US and rice prices increased in Cambodia.

With 213 points in August the food index was unchanged from July, but it was lower than the February 2011 peak of 238 points and still 18 points below August of last year.

In July, the food price index rose six per cent after declining the previous three months. Droughts in the US had caused corn prizes to soar.

Nina Brandstrup, FAO representative in Cambodia, said the high level should not be considered too dramatic. “Prices on the global market do not have an immediate affect on Cambodia,” she said. 

According to Brandstrup, it is important to look at the trend rather than only monthly results. 

FAO’s food price index measures the monthly change in international prices of a selection of food commodities. The index combines the average of five commodity group price indexes, weighted with the average export shares of each group for 2002-2004 being 100. 

The food index includes the FAO price indexes of cereal, oils/fats, meat, dairy and sugar. 

“On balance, we are pleased that the food index remains stable, and expect it to turn down in the near future,” Peter Brimble, ADB deputy country director for Cambodia and senior country economist, said. 

Although the index was unchanged, rice and wheat prices slightly increased, offsetting a slight decrease of corn, according to the FAO.

“Of course [a rice price increase] is affecting the Cambodian consumer,” Him Khortieth, communication officer at the Cambodian Centre for Study and Development in Agriculture, said. 

With Cambodzians consuming a lot of rice, consumers and buyers suffer from high prices. This time, however, producers and farmers are being hit by the increase. “Normally, if the rice price increases, it’s good for the producer because they earn more,” Khortieth said. “But we think that this time it’s not good for both consumer and farmer.” 

He said some of the producers in the provinces cannot produce enough rice for themselves and now have to draw on the market as prices are still high. 

According to Khortieth, the rice price increase has come at the wrong time and should rather affect the harvest season. During the harvest season, the price of rice usually decreases again. Having invested much capital into instruments and labour, they lose money because they sell their rice for a lower price.

“We want to have a rice increase during harvest season, only then they can benefit,” Khortieth said.    

A 2007-2008 rice price crisis drove many poor into food insecurity. World rice prices tripled in just six months, according to the FAO. 

According to Khortieth, rising wheat prices will not be a cause for big concern in Cambodia. “Compared to rice, there is no big impact,” he said. 

Brandstrup also said the main concern for Cambodia is the price of rice. 

But according to Brandstrup, rice price volatility is more serious than an increase in the price of rice. “For producers, volatility is a very serious situation,” she said. “Producers can’t plan ahead.” 

Brandstrup said while a very sudden sharp price increase is serious for producers, a slight increase can be an advantage because producers earn more. 

Since 2007 and 2008, the price of rice has not seen a sudden rise and has been “fairly stable,” she said. The price increased a little due to the expected impacts of a drought, but at the moment “we should not be overdramatic”, Brandstrup added.  

An ADB a working paper released at the end of August, suggested that a regional rice index and commodities exchange could prevent rice price volatility.

An exchange could bring more transparency in price discovery, the paper said. With a common rice index for the most popular grades of rice and crop futures and options could be traded on existing exchanges such as Hong Kong, mainland China or Singapore.