World food price index rebounds in July as vegetable oil jumps 12.1%

By Onome Amuge.

The benchmark index of international food commodity prices inched higher in July 2023, led by a surge in the vegetable oil index, partially offset by a significant decline in the sugar price index, and small decreases in the quotations for cereals, dairy and meat.

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 123.9 points in July 2023, 1.3 per cent higher than 122.3 points in June 2023, but remained 11.8 per cent below its value in the corresponding month of 2022.

The FAO vegetable oil price index averaged 129.8 points, up 14.0 points or 12.1 per cent from June, marking the first increase after seven months of consecutive declines.

“This pronounced increase in July was driven by higher world quotations across sunflower, palm, soy, and rapeseed oils. International sunflower oil prices rebounded by more than 15 percent month-on-month, primarily underpinned by renewed uncertainties surrounding the exportable supplies out of the Black Sea region after the decision taken by the Russian Federation to terminate the implementation of the Black Sea Grain Initiative,” the report showed.

World palm oil prices also rose markedly, reflecting prospects of subdued production growth in leading producing countries. Similarly, soy and rapeseed oils, international prices increased on continuing concerns over the production outlooks of soybeans in the U.S and rapeseed in Canada, respectively. The report disclosed further that rising world crude oil quotations also lent support to vegetable oil prices.

In contrast, the FAO Cereal Price Index was down 0.7 points as it  averaged 125.9 points in July, declining  0.7 points  from June and 21.3 points below its value in June 2022.

The slight decline was attributed to a fall in international coarse grain prices, which was down 4.8 per cent from June.

According to the FAO report, International maize prices continued their downward trend due to increased seasonal supplies from ongoing harvests in Argentina and Brazil and potentially higher-than-initially-anticipated production in the U.S, where conditions slightly improved and the planted area was revised upwards.

Among other coarse grains, world prices of sorghum declined in tandem with those of maize, while world barley prices were nearly stable, influenced by spillover effects from wheat markets. By contrast, international wheat prices rose by 1.6 percent, marking their first month-on-month increase in nine months, mainly driven by the uncertainty over Ukraine’s exports following the decision taken by the Russian Federation to terminate the implementation of the Black Sea Grain Initiative and the subsequent damage to Ukraine’s port infrastructure on both the Black Sea and the Danube River,” the report stated.This is as continued dry conditions in Canada and the U.S  also added pressure on prices.

Meanwhile, the FAO All Rice price index was up 2.8 per cent in July to reach its highest level since September 2011, driven mostly by price increases in the Indica market segment. In the market, India’s 20 July prohibition of non-parboiled Indica exports fostered expectations of greater sales in other origins, amplifying upward pressure already exerted on prices by seasonally tighter supplies and Asian purchases.

The FAO Vegetable Oil Price Index averaged 129.8 points in July, up 14.0 points (12.1 percent) from June, marking the first increase after seven months of consecutive declines.

Meanwhile, the FAO dairy price index recorded its seventh consecutive monthly decline, averaging 116.3 points in July, down 0.5 points  from June,, and 30.2 points below its value in June 2022.

However, whole milk powder prices recovered slightly, mostly influenced by exchange rate movements, despite steady production progress in New Zealand in line with seasonal trends. Following five months of steep declines, world cheese prices recovered slightly, reflecting somewhat strengthened food services sales and the impact of hot weather on seasonally declining milk supplies in Europe.

The FAO Meat Price Index also dipped,  averaging 117.8 points in July, down 0.4 points from June and remaining 6.3 points below its corresponding month a year ago. In a similar trajectory, international bovine meat prices fell, reflecting higher export availability in Oceania, coinciding with subdued import demand in Asian markets amid higher inventories and sluggish internal sales. Poultry meat prices also fell slightly due to increased supplies from leading exporters, despite the persistent impacts of the avian influenza outbreaks in major producing regions.

The FAO sugar price index recorded a second consecutive monthly decline as it averaged 146.3 points in July, down 5.9 points from June, but remained 33.4 points or 29.6 per cent above its level in the corresponding period of 2022.