The Global Food Price index based on the FOA indicates that the year-on-year growth of international food prices is declining and tuned to negative. The decline in the index in December was driven by a steep drop in the international prices of vegetable oils, together with some declines in cereal and meat prices, but partially counterbalanced by moderate increases in those of sugar and dairy.
This decline would be favorable to ease the pressure on Sri Lanka’s food inflation which is also declining but still at an unbearable level of 64%. The impact of domestic factors will also influence internal food inflation such as supply-side effects. But the mathematical base effect would probably over ride most of the other factors.