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WORLD | Dec 4, 2022

Food prices fall for a sixth month in a row

/ Our Today

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Month-on-month decreases in the price indices for cereals, dairy and meat

Durrant Pate/Contributor

The Food and Agricultural Organization (FAO) of the United Nations world price index fell for a sixth month in a row in September, receding from all-time highs posted earlier this year after Russia invaded Ukraine.

The FAO reports that its price index, which tracks the most globally traded food commodities, averaged 135.7. This is virtually unchanged from October with month-on-month decreases in the price indices for cereals, dairy and meat, nearly offsetting increases in those of vegetable oils and sugar.

At this level, the index 0.3 per cent above its corresponding value in November 2021. The index has fallen from a record of 159.7 in March.

VARIOUS INDICES IN DETAILS

The FAO Cereal Price Index averaged 150.4 points in November, down 1.9 points (1.3%t) from October, but still 9.0 points (6.3%) above its value a year ago. World wheat prices registered a 2.8-per cent decline during the month of November, mostly driven by the rejoining of the Russian Federation in the Black Sea Grain Initiative and the extension of the agreement.

However, there was subdued import demand for supplies from the United States due to uncompetitive prices, and greater competition in global markets with increased shipments from the Russian Federation.

The FAO Vegetable Oil Price Index averaged 154.7 points in November, up 3.4 points (2.3%) after declining for seven consecutive months. The increase was driven by higher international palm and soy oil prices, more than offsetting lower rapeseed and sunflower oil quotations.

International palm oil prices rebounded in November, supported by renewed global import demand owing to competitive prices relative to those of other edible oils, as well as concerns over lower production potentials due to excessive rainfall in parts of major growing regions in Southeast Asia.

Meanwhile, world soy oil values rose slightly, chiefly underpinned by persistent, robust demand from the biodiesel sector, particularly in the United States of America. By contrast, international rapeseed and sunflower oil prices dropped in November, weighed by, respectively, expected ample global supplies and the extension of the Black Sea Grain Initiative.

The FAO Dairy Price Index averaged 137.5 points in November, down 1.7 points (1.2%) from October, marking the fifth consecutive monthly decline, but remained 11.6 points (9.2%) above its value a year ago. In November, international price quotations for skim milk powders fell the most, reflecting lower import demand, as buyers were well covered for their near-term needs coupled with increased export availabilities in Europe.

Whole milk powder prices dropped substantially, principally due to lower buying interest from China, only partially compensated by higher purchases by Southeast Asian countries. Meanwhile, world butter prices declined on weak import demand, impacted by high retail prices and market uncertainties about consumer purchases in the months ahead.

The FAO Meat Price Index averaged 117.1 points in November, down 1.1 points (0.9%) from October, also marking the fifth consecutive monthly decline, but remained 4.6 points (4.1%) above its value a year ago. In November, international bovine meat prices fell for the fifth month in a row, as increased export supplies from Australia added to already high supplies from Brazil, notwithstanding China’s continuing strong import demand. 

POULTRY MEAT PRICES ALSO RECOVERED

By contrast, world prices of all other meat types rebounded, with the price of ovine meat rising the most, driven by solid import demand, despite seasonally rising supplies from Oceania. International poultry meat prices also recovered, reflecting tighter global export supplies amid production setbacks in many large producing countries due to intensified avian influenza outbreaks.

The FAO Sugar Price Index averaged 114.3 points in November, up 5.7 points (5.2%) from October, marking the first increase after six consecutive monthly declines. The November rebound was mostly related to strong buying amid prevailing tight global sugar supplies due to harvest delays in key producing countries and the announcement by India of a lower sugar export quota.

Higher ethanol prices in Brazil, raising concerns over a greater use of sugarcane to produce ethanol, exerted further upward pressure on world sugar prices. Despite the November increase, international sugar price quotations remained 5.9 points (4.9%) below their levels in the same month of last year, weighed down by prospects of ample global supplies in the 2022-23 season.

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