The recent softening in global prices of essential food items has come as a big relief for countries battling with high inflation.

Wheat, rice and edible oil prices have begun moving down from their past highs, as farmers continue to expand area under these crops in response to high prices. Speculators worldwide are now betting on falling prices.

"There has been a good response to high prices on the production side. Therefore, the coming harvest is good. Speculative elements in commodity trading are exiting since the downtrend has set in. This would help the government control part of the inflation. But energy prices continue to remain high and it is a worry," said Ashok Gulati, Asia director of the International Food Policy Research Institute.

The sharp rise in prices of food items had prompted governments worldwide to adopt measures like export ban and import duty relaxations.

While India has sufficient stocks of wheat, rice, and corn, and does not require to import these items, the significant slump in crude palm oil prices is certainly a reason to cheer.

The crash in palm oil prices is a big relief for the central government and consumers as the country meets half of its edible oil consumption through imports. This should percolate down to the retail level, said Gulati. Crude palm oil prices declined by about 30 per cent over last four weeks to $830 a tonne.

The United Nations Food and Agricultural Organization estimates the world's cereal production to increase by 2.8 per cent in 2008, reaching a record level of 2.18 billion tonnes.

The bulk of the increase is expected in wheat, which is forecast at 658 million tonnes, representing an 8.3 per cent increase from 2007. The risk of a wheat shortage has dissipated and speculators are now betting on falling prices.

Rice production is expected to rise by over 2 per cent to 444 million tonnes. Unlike in 2007, when much of the increase was concentrated in Asia, in 2008, producers in all regions have responded to high market prices in the first half of the year by increasing rice cultivation.

The recent decline in crude oil price has also eased the pressure on maize and palm oil, both of which are processed for alternative energy sources.