May sees another plunge in FAO global food price index

BY ONOME AMUGE

Global food commodity prices tumbled in May to mark a second consecutive monthly decline, led by a fall in sugar, dairy, corn and vegetable oils quotations, according to the latest food indices report by the Food and Agriculture Organisation of the United Nations (FAO).

The FAO food price index, which monitors monthly changes in the international prices of a basket of commonly-traded food commodities averaged 157.4 points in May 2022, 0.6 percent lower than 158.2 points recorded in April. However, it remained 22.8 percent higher year-on-year.

The FAO vegetable oil price index averaged 229.3 points in May, losing 3.5 percent compared to April, but remained markedly higher above its year-earlier level. Palm, sunflower, soy and rapeseed oils edged lower. The FAO attributed the drop to the removal of Indonesia’s short-lived export ban on palm oil and sluggish global import demand for soy and rapeseed oils following elevated costs in recent months.

Commenting on vegetable oil’s quotation decline, Máximo Torero Cullen, FAO chief economist, explained that export restrictions create market uncertainty and can result in price spikes and increased price volatility. Cullen remarked that the decrease in oilseeds prices reflected the consequence of an unlimited export flow.

The FAO dairy price index also fell, averaging 141.6 points in May, down 5.1 points or 3.5 percent month-on-month. This marked the commodity’s first decline after eight consecutive monthly increases. However, it remained 20.5 points or 16.9 percent higher than the level recorded in May 2021. As a result, prices of all milk products stood bearish, with milk powders recording the highest depreciation, with demand impacted by lower buying interests on market uncertainties stemming from the continued Covid-19 lockdown in China, despite the persistent global supply tightness. Butter prices also edged lower due to weaker import demand, improvements in supplies from Oceania and limited internal sales in Europe.

In a similar trend, the FAO sugar price index dropped 1.3 points or 1.1 percent from April at an average of 120.3 points, marking its first decline after sharp increases registered in the previous two months. The recent decline was attributed to India’s bumper output, which supported global availability prospects. The weakening of the Brazilian real against the U.S. dollar, along with lower ethanol prices, also weighed on world sugar prices.

On the other hand, the FAO cereal price index was up 2.2 percent from the previous month, led by wheat prices, which rose 5.6 percent month-on-month and 56.2 percent year-on-year, with international wheat prices averaging only 11 percent below the record high reached in March 2008. The steep price increase was attributed to an export ban announced by India and concerns over crop conditions in several leading exporting countries as well as reduced production prospects in Ukraine due to the ongoing war.

By contrast, international coarse grain prices fell 2.1 percent but remained 18.1 percent above their value year-on-year. Corn prices declined by 3.0 percent as slightly improved crop conditions in the U.S, along with seasonal supplies in Argentina and the imminent commencement of Brazil’s main corn harvest lowered the crop’s valuation, prices however remained 12.9 percent above their level of May 2021.

Similarly, international sorghum prices tumbled 3.1 percent in May, while rice prices in the global market rose for the fifth successive month as quotations firmed across all the major market segments.

Meanwhile, the FAO meat price index averaged 122.0 points in May, up 0.5 percent or 0.6 points, setting a new all-time high even as world bovine meat prices remained stable and those of pig meat fell. The climb was attributed to a steep increase in international poultry meat prices, reflecting continued supply chain disruptions in Ukraine and recent cases of avian influenza amid a surge in demand in Europe and the Middle East.