FAO global food prices fall for the second consecutive month

The benchmark index of international food commodity prices declined yet again in June 2023 to its lowest level in two years amid  sharp falls in quotations for sugar, cereals, vegetable oils and dairy products.

The Food and Agriculture Organisation of the United Nations (FAO) disclosed this in the latest  FAO food price index report, which monitors monthly changes in the international prices of a basket of commonly-traded food commodities.

According to the UN food agency , the global food price index averaged 122.3 points in June 2023, 21.7 per cent lower than 124.3 points recorded  in May 2023.

The June index marked the lowest score since April 2021, indicating a 23.4 per cent decline from an all-time peak reached in March 2022 following the start of Russia’s invasion of Ukraine.

According to the report, the FAO cereal price index averaged 126.6 points, down 2.7 points or 2.1 per cent from the previous month and as much as 39.7 points or 23.9 per cent below its value in the corresponding month of 2022.  The month-on-month decline reflected a fall in the world prices of all major cereals.   A fifth consecutive monthly decline in international maize prices was attributed to increased seasonal supplies from ongoing harvests in Argentina and Brazil. The report noted further that amid concerns over drought conditions, some rain at the end of the month in key maize producing areas of the U.S  lessened the pressure on maize markets.

Similarly,world wheat prices plunged by 1.3 percent in June, indicating  ample supplies in Russia, where also the wheat export tax decreased in the month of June, continued to weigh on prices, while improved crop conditions in the U.S  also contributed to the downward pressure on prices. International rice prices declined by 1.2 percent in June, following reduced  demand for non-Indica rice and efforts to attract export sales in Pakistan.

The FAO vegetable oil price index  averaged 115.8 points in June, down 2.9 points or 2.4 per cent month-on-month to record its lowest level since November 2020. The continued decrease of the index was attributed to lower world prices of palm and sunflower oils, which offset higher soy and rapeseed oil quotations.

International palm oil prices also fell significantly for the second consecutive month, mainly reflecting prospects of seasonally higher outputs from leading producing countries that coincided with lingering subdued global import demand.

World prices of sunflower oil also continued to decline amid ample global exportable supplies.On the other hand, international soyoil prices rebounded from the previous month, largely buoyed by concerns over excessive dryness in pockets of major growing regions in the U.S. Similarly, world rapeseed oil prices recovered moderately on unfavourable weather conditions in parts of Canada and Europe.

The FAO dairy price index averaged 116.8 points in June, down 1.0 points  or 0.8 per cent from May and 33.4 points or 22.2 per cent below its corresponding value a year ago.

“The decline in June was again led by lower international cheese prices, reflecting ample export availabilities, especially in Western Europe, where milk production tracked seasonally higher, while retail sales were somewhat subdued,” the report showed.

Whole milk powder prices fell slightly on lower import purchases by North Asian buyers and increased supplies, especially from New Zealand. By contrast, world butter prices increased, underpinned by active demand for spot supplies, mainly from the Middle East, and increased internal retail sales in Western Europe.  However, skim milk prices increased slightly on higher import purchases to meet short-term needs amid concerns over supplies in the months ahead during the seasonally declining production phase in Western Europe.

Meanwhile, the FAO meat price index was  virtually unchanged from May as it averaged 117.9 points in June.  Increases in international quotations for poultry and pig meats were nearly offset by declines in those for bovine and ovine meats. However, compared to its value in June 2022, the index was down 8.1 points or 6.4 per cent.  By contrast, international poultry meat prices increased further, reflecting high import demand from East Asia, especially for supplies from Brazil, amid the persistent supply challenges stemming from widespread avian influenza outbreaks. Pig meat prices also rose, supported by lingering tight supplies in leading producing regions, especially the European Union. By contrast, international bovine meat prices fell slightly due to increased exportable availability, especially in Australia. Similarly, ovine meat prices also fell on high supplies from Oceania.

The FAO sugar price index averaged 152.2 points, down 5.1 points or 3.2 pe rcent from May, marking the first decline after four consecutive monthly increases. However, international sugar quotations remained 34.9 points  or 29.7 per cent above their levels in the corresponding month of 2022.

According to the FAO report, the June decline in international sugar prices was mainly triggered by the good progress of the 2023/24 sugarcane harvest in Brazil and a sluggish global import demand, particularly from China, the world’s second largest importer of sugar.  The report however pointed out that  concerns over the potential impact of the El Niño phenomenon on the 2023/24 sugarcane crops, along with the strengthening of the Brazilian real against the United States dollar, limited the declines in world sugar prices.