If global food indices are descending, why are local food prices rising?

The trends of ten international food commodity indices from 2006 onwards.

The main chart plots the course of the Food and Agriculture Organisation (FAO) Food Price Index and nine other international food price indices. These are FAO’s cereals index, the International Monetary Fund’s (IMF) food index, the International Grains Council (IGC) wheat index, the IGC’s rice index, the UN Conference on Trade and Development’s (UNCTAD) two wheat indices, Unctad’s rice index, the World Bank’s (WB) food index and WB’s grains index.

Consumer price index trends 2006 to 2013 for five South Asian countries

The familiar FAO blue pair for 2013 August

On the main chart, after 2008 December four stages are marked. The first stage is 2008 December to 2010 July, when the indices describe a plateau but which is very much higher than where they were through 2006. The second stage is 2010 July to 2011 April, which corresponds to the second global food price rise and when all these indices rose in concert. The third stage is 2011 April to 2012 September when they all declined to another plateau which nonetheless is higher overall than the last one (stage one), but which rose steeply for a short while towards the end of the stage. The fourth stage is still current, from 2012 June, which is seeing a gradual decline in all the indices to the point they were in 2011 August-September.

I have appended to the main chart the counterpoint of the consumer price indexes from South Asian countries – Nepal, Sri Lanka, Bangladesh, Pakistan and India. The question that follows, when reading the main chart with ten indices and the CPI chart for South Asia, is why the CPI trends do not follow the international grains trends. One of the major factors (which charting this data cannot reveal, as the FAO Food Price Index does not) is the extent to which the industrialisation of prmary crops sets the retail price in the markets of Colombo or Chittagong or Karachi or Mumbai or Kathmandu. Primary crop – that is, cereals, pulses, fruit and vegetable, milk and dairy – is being moved internally, processed, packaged, moved again, retailed in modern convenience stores to a much greater degree than was the case a decade ago. Those costs lie outside what the FAO-IGC-IMF-Unctad-WB indices can describe. But we need to urgently – within these countries and as a group – share methods to gauge and monitor these costs and document their impacts on households.