UN: food commodity see highest monthly rise

The surge in prices is led by sugar and followed by cereals, dairy and meat.

By Kanaga Raja

The international prices of a basket of food commodities rose by 4.2% in June, representing the largest monthly increase witnessed over the past four years, the UN Food and Agriculture Organisation (FAO) has said.

According to the FAO, its Food Price Index (FFPI) released in July averaged 163.4 points in June 2016, 6.6 points (4.2%) higher than in May, and one percent below the corresponding month last year.

Not only did the June increase mark the fifth consecutive monthly rise in the value of the FFPI, but it also represented the largest monthly increase witnessed over the past four years, said FAO.

The FAO Food Price Index is a trade-weighted index that tracks the monthly change in international prices of a basket of key food commodities.

FAO reported that with the exception of vegetable oils, the values of all the commodity sub-indices moved up in June, led by a surge in the price of sugar and more moderate increases for cereals, dairy and meat.

The FAO Cereal Price Index averaged 156.9 points in June, up 4.4 points (2.9%) from May, but still 3.9 percent below the June 2015 level, said FAO.

The increase was driven by a strengthening of maize prices, primarily due to a tightening of export supplies in Brazil.

“Wheat values rose during the first half of the month, before reversing course subsequently on reports of record yields in the United States and better than expected harvests in the Black Sea region.”

FAO said that international rice prices varied little from May levels, as upward pressure exerted by generally tight export availabilities was countered by subdued buying interest.

The FAO Vegetable Oil Price Index averaged 162.1 points in June, down 1.3 points (0.8%) from May, primarily reflecting lower quotations of palm oil, due to subdued global import demand and a seasonal recovery in production in Indonesia and Malaysia.

Underpinned

“By contrast, soy oil prices increased, underpinned by reduced export availabilities in South America and less favourable than initially anticipated production prospects for 2016/17.”

FAO said its Dairy Price Index averaged 137.9 points in June, up 9.9 points (7.8%) from May, with a rise in average monthly prices for all the dairy commodities that compose the Index.

“An uncertain outlook for the 2016/17 milk year in Oceania and a slowdown of monthly milk production growth in the EU in April caused quotations to strengthen. Despite the magnitude of the increase, the June rise only represented a recovery from the low prices prevailing in the preceding three months.”

The FAO Meat Price Index averaged 158.3 points in June, 3.8 points (2.4%) higher than its revised May value, as average quotations strengthened for the third consecutive month for all categories of meat, particularly those of pigmeat and ovine meat (lamb and mutton).

On the other hand, bovine and poultry meat registered smaller increases, said FAO, adding that in the European Union, a shortage of pigs for slaughter and lighter slaughter weights constrained supply and caused export quotations to move up strongly.

Similarly, reduced export supplies boosted quotations of sheep meat and bovine meat in Oceania.

Increase

According to FAO, poultry meat prices have exhibited a moderate but steady increase for the year so far, rising by 10% since January. Brazil in particular has experienced strong growth in sales, especially to Japan and Saudi Arabia.

The FAO Sugar Price Index averaged 276.0 points in June, up as much as 35.6 points (14.8%) from May.

“The surge mostly mirrored less positive production prospects in Brazil, the world’s largest sugar producer and exporter, following heavy rains which hampered harvesting operations and affected sugar yields. In addition, as wet weather tends to reduce the amount of recoverable sugar per tonne of cane, larger volumes of sugarcane output were reportedly diverted from sugar to ethanol production, lending further support to prices.”

Production

Meanwhile, in its latest Cereal Supply and Demand Brief, also released in July, FAO has forecast world cereal production for 2016 at 2,544 million tonnes, 0.6% (15.3 million tonnes) higher than the 2015 estimate and fractionally above the previous month’s forecast.

Prospects mainly improved for wheat, but also for rice and barley, while the maize production forecast was sharply cut, it said.

FAO revised downwards its expectations for global coarse grains production in 2016 by 8.2 million tonnes to 1,316.4 million tonnes, with the decrease being attributed mostly to a deteriorated outlook for Brazil, where dry weather impaired prospects for the second maize crop.

FAO also downscaled its expectations for maize output in China, as plantings contracted following reduced government support.

- Third World Network Features.