Markets

Another Fall for FAO Food Price Index

GLOBAL - The FAO Food Price Index has fallen for a third consecutive month, mainly on lower cereal and vegetable oil prices. The Dairy Index is also down slightly, while the Meat Index has risen due to reduced supplies of pork from porcine epidemic diarrhoea (PED).

8 July 2014

3 minute read

The FAO Food Price Index averaged 206.0 points in June 2014, down 3.8 points (1.8 per cent) from May and nearly six points (2.8 per cent), below June 2013. Last month’s decline, which was the third in succession, was largely the result of a marked drop in cereal and vegetable oil prices, following further improvements in global production prospects. Although sugar and dairy quotations also edged lower, the falls were far less pronounced. On the other hand, meat prices held steady.

The FAO Cereal Price Index averaged 196.2 points in June, down 10.9 points (5.2 per cent) from a revised value in May and 36.2 points (15.6 per cent) below last year. The slide was mainly caused by a weakening of wheat and maize quotations, both of which fell by close to seven per cent, a reflection of a further improvement in world crop prospects and diminishing concerns over disruption of shipments from Ukraine. By contrast, rice prices were marginally up from May, mostly reflecting the suspension of large public stock sales in Thailand.

The FAO Vegetable Oil Price Index averaged 188.9 points in June, down 6.4 points (3.3 per cent) from May and 4.6 points (2.4 per cent) below June 2013. Quotations for palm oil, the most widely traded edible oil, fell to a nine-month low last month, as seasonally high output coincided with subdued global import demand. Similarly, soy oil prices dropped to a four-year trough on abundant availabilities in South America and anticipation of a record world soybean production in 2014/15. Prospects of ample sunflower and rapeseed oil supplies in 2014/15 also weighed on the index.

The FAO Dairy Price Index averaged 236.5 points in June, down 2.5 points (1.0 per cent) over May and 9.7 points (4.0 per cent) less year-on-year. The decline in June was substantially less than in the previous three months, suggesting that the downward price adjustment may be coming to an end. At the product level, large supply of milk powders continued to weigh on the market, while a firm import demand has kept cheese prices on the rise.

The FAO Meat Price Index averaged 194.2 points in June, 1.4 points (0.7 per cent) more than in May and 14.6 points (8.1 per cent) above last year. The June increase of the index was principally due to a continuing strengthening of pig meat prices, as world supplies were constrained in recent months by an outbreak of Porcine Epidemic Diarrhoea (PED) virus in the United States. Bovine and ovine meat quotations also moved seasonally higher, while prices for poultry meat were little changed.

The FAO Sugar Price Index averaged 258 points in June, down 1.2 point (0.5 per cent), from May but still 15.4 points (6.4 per cent) up from last year. Despite this month’s marginal decline, the market remains concerned about the possible effects of a recurring El Niño weather anomaly that could exacerbate the anticipated fall of global output. Already, indications of below average monsoon rains are pointing to a possible production shortfall in India, the second largest world sugar producer after Brazil and top world sugar consumer.

Note: *The small revision since 2013 reflects slight changes to the IGC wheat index, which is used for the calculation of FAO cereal index.