WASHINGTON: Global prices of farm commodities like wheat and rice may decline by 11 per cent in 2012 due to a slowdown in demand and improved supply prospects, in part because high prices have led to greater investment, according to the World Bank.
"As supply conditions improve, agricultural prices are expected to decline 11 per cent in 2012," the World Bank said in its bi-annual 'Global Economic Prospects' report.
A number of assumptions underpin the outlook, it said. "First, is that energy and fertiliser prices are projected to experience moderate declines. Second, it is assumed that the supply outlook during the 2011-12 crop year will improve. Third, no policy responses similar to the ones during 2008 will take place," it said.
According to the World Bank's forecast, wheat and maize prices are expected to average 9 per cent and 12 per cent lower than their 2011 levels of over USD 300 per tonne, while rice prices are anticipated to decline by 6 per cent.
On rice prices, the multilateral agency observed that India's decision to allow export of non-basmati rice along with good crop prospects elsewhere in the region, are likely to keep grain prices in check.
Among edible oils, global prices of soyabean and palm oil projected to dip by 16 per cent and 20 per cent, respectively. Similarly, prices of cocoa, coffee and tea are likely to fall by 11 per cent, 17 per cent and 4 per cent, respectively, in 2012, it said.
However, the maximum drop in prices are seen to be in cotton and rubber by 30 per cent each on strong supply and weakening demand, it noted.
The report also mentioned that investment in commodities has been increasing and though this is not expected to affect long-term trends, such activity may induce higher price variability.
Investment in commodities is set reach a record level of an estimated USD 450 billion as of the fourth quarter of 2011, it added.
On global supply of agricultural commodities, the report said the US Department of Agriculture ( USDA), in its first assessment for the 2011-12 crop year, projected that world supply conditions will improve this year.
Maize production is expected to rise by 6.4 per cent over the previous crop year, wheat output by 3.3 per cent and rice production by 1.4 per cent, it said.
Source : economictimes.indiatimes.com