FAO food price index ticks in March on higher vegetable oil prices

• Reverses seven-month slide

Onome Amuge

The Food and Agriculture Organization (FAO) has for the first time in seven months, reported an increase in the world food commodity index, with prices rising by 1.1 per cent in March. The primary drivers of this increase was attributed to the rising costs of vegetable oils, dairy products, and meat.

Despite the recent uptick in the FAO Food Price Index, the overall trend over the past six months has been one of declining prices. The March reading, which came in at 118.3 points, was higher than the previous six months but still 7.7% lower than March of last year. 

The FAO Vegetable Oil Price Index was the driving force behind the overall increase in March, rising 8.0 per cent from the previous month and reaching a one-year high. 

International palm oil prices rose sharply in March, driven by lower output in Malaysia and Indonesia, the two largest producers of palm oil. At the same time, domestic demand in Southeast Asia was strong, further boosting prices. Meanwhile, soyoil prices recovered from their multi-year lows, driven by growing demand from the biofuel sector in Brazil and the U.S.

The FAO dairy price index rose 2.9 per cent month-on-month, marking its sixth consecutive month of increases. Cheese and butter prices led the way, buoyed by strong demand and tight supplies. 

The FAO Meat Price Index also increased 1.7 per cent against the previous month, with poultry, pig, and bovine meat prices all rising.

The FAO Cereal Price Index, which tracks global cereal prices, declined by 2.6 per cent in March, with wheat prices leading the way. Export prices for wheat fell due to strong competition among major exporting countries, including the European Union, Russia, and the United States. This was further exacerbated by canceled purchases by China. 

Although the FAO Cereal Price Index declined overall, maize prices actually increased in March. This was due to a combination of factors, particularly logistical challenges in Ukraine. Meanwhile the FAO All Rice price index declined 1.7 per cent amid subdued global import demand.

The FAO sugar price index declined by 5.4 per cent in March, driven by a number of factors. The biggest factor was an upward revision to India’s production forecast for the 2023/24 season, which led to an increase in expected global sugar supplies. In addition, the harvest season in Thailand recorded a significant improvement, resulting in increased supplies and lower prices. 

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