The food prices in the world fell sharply in the month of March, as it got hit by a drop in demand associated to the coronavirus or COVID-19 outbreak and a plunge in the oil prices globally, the United Nations food agency stated on Thursday.

The Food and Agriculture Organization (FAO) food price index, that calculates the monthly changes forna basket of cereals, dairy products, meat, suguar and oilseeds had an avergae of 172.2 points last month ewhich is dfown by 4.3 percent on February.

Food prices fall

FOod pricing and value has had itsfairshareofupsanddowns

"The price drops are largely driven by demand factors, not supply, and the demand factors are influenced by ever-more deteriorating economic prospects," said FAO Senior Economist Abdolreza Abbassian.FAO also slightly increased its forecast for cereal production, predicting a crop totalling some 2.721 billion tonnes in 2019, up from a previous forecast of 2.719 billion and some 2.4 percent higher than the 2018 crop.

FAO's sugar price index posted the biggest fall, down 19.1 percent from the previous month. The drop was triggered by a reduction in consumption linked to the virus lockdowns seen in many countries, and lower demand from ethanol producers due to the recent dive in crude oil prices, the Rome-based agency said.

The vegetable oil price index slumped 12 percent, pushed down by sliding palm oil prices which was linked to a plunge in crude mineral oil prices and growing uncertainty over the impact of coronavirus on the market. "Oil prices have fallen by more than half during the past month, which catalyzes a large downward impact on biofuels, which are an important source of demand in the markets for sugar and vegetable oils," said FAO analyst Peter Thoenes.

Dairy price index dropped 3%

The dairy price index dropped three percent, driven by declining quotations and slowing global import demand for skim and whole milk powders, while the meat index fell by 0.6 percent. The cereal price index fell 1.9 percent, with rice prices bucking the downward trend, rising for the third month running, buoyed by stockpiling spurred by concerns over the pandemic and reports that Vietnam might introduce export bans.

FAO said Vietnam had since downplayed the reports. While FAO lifted its forecast for 2019 world cereal production, its estimate for 2020 wheat production remained unchanged at 763 million tonnes, close to last year's record level. "(This) coupled with ample inventories, will help shield food markets from turmoil during the coronavirus storm," FAO predicted.

(With agency inputs)