World food price index unchanged despite uptick in sugar prices

By Onome Amuge.

The benchmark index of international food commodity prices remained relatively stable in September 2023,according to the Food and Agriculture Organisation (FAO). The FAO Food Price Index (FFPI) was 121.5 points in September, with no significant change from the previous month. This stability was driven by a decrease in the price of vegetable oils, dairy and meat, which offset increases in the price of sugar and cereal.

In September 2023, the FFPI was 14.6 points or 10.7 per cent lower than the same month a year ago and 38.3 points or 24.0 per cent lower than its all-time high in March 2022.

A breakdown of the FAO cereal price index showed that it stood at 126.3 points in September 2023, 1.3 points or 1.0 per cent higher than in August. This increase was mainly driven by a 5.3 per cent rise in international coarse grain prices. However, the index was still 21.6 points or 14.6 per cent lower than the same period a year ago, reflecting lower cereal prices in general.

After seven consecutive months of decline, international maize prices increased by 7.0 per cent in the month under review. This was due to a number of factors, including strong demand for Brazil’s supplies, slower farmer selling in Argentina, and increased barge freight rates on the Mississippi River in the United States, caused by low water levels. These factors combined to put upward pressure on maize prices in September.

Other coarse grains such as sorghum also saw their prices increase in September, following a similar trend to maize prices. However, barley prices remained largely unchanged. Overall, the prices of coarse grains showed some signs of recovery in September, though they remained below their levels from the same period in the previous year.

In contrast to the upward movement of maize and sorghum prices, the international wheat price index declined by 1.6 per cent in September, due to ample supplies in the Russian Federation. Wheat production prospects in the Russian Federation were revised up in September, contributing to the downward pressure on prices

The FAO All Rice price index fell slightly by 0.5 per cent month-on-month in September, though it remained 27.8 per cent higher than a year earlier. This decline was largely attributed to low import demand, though price falls were limited by India’s rice export restrictions and the thinning supply of rice stocks ahead of new-crop harvests in Asia.

The FAO vegetable oil price index averaged 120.9 points in September, down 3.9 per cent from the previous month. This was the second consecutive month of decline, driven by lower prices for palm oil, sunflower oil, soybean oil and rapeseed oil. These declines were attributed to a combination of factors, including improved crop production, increased production of alternative oils, and lower demand for vegetable oils for use in biofuels.

The main factor behind the decline in international palm oil prices in September was the seasonally high production in major producing countries in Southeast Asia, including Malaysia and Indonesia. This increase in supply has helped to offset the impact of ongoing geopolitical tensions and supply chain disruptions, leading to lower prices.

Sunflower oil prices also declined significantly due to farmer selling pressure and the harvest of sunflower seeds in the Black Sea region. Additionally, rapeseed oil prices decreased as a result of abundant global export supplies, while soy oil prices fell in spite of strong demand from the biodiesel sector. These factors combined to put downward pressure on vegetable oil prices in September.

The FAO Dairy Price Index averaged 108.6 points in September, down 2.3 per cent from August. This was the ninth consecutive month of decline, with prices also 23.9 per cent lower than the previous year’s value. The fall was attributed to weak demand for immediate and near-term delivery, despite healthy inventories in leading dairy-producing regions.

Despite this overall trend, prices for some dairy products saw an increase towards the end of September, driven by growing demand in Southeast Asia.

Furthermore, New Zealand’s increased export availability during its new production season, combined with subdued domestic demand in the European Union and the weakening of the Euro against the US Dollar, were all factors contributing to the overall downward trend in international dairy prices.

The FAO Meat Price Index averaged 114.2 points in September, down 1.0 per cent from August and 5.0 per cent from the previous year. The fall in prices was driven by weak import demand from major importing countries, especially China, and a global surplus of export supplies. These factors outweighed the support provided by rising import demand in Asia and the Middle East.

The decline in poultry meat prices was caused by a global surplus of supplies, especially in Brazil. Sheep meat prices also fell, although at a slower rate, as a result of ample supplies from Australia, despite steady demand from China and the Middle East. Conversely, robust import demand for lean bovine meat, particularly in the United States, contributed to a rebound in international beef prices despite abundant export supplies from Brazil and Australia.

The FAO Sugar Price Index reached its highest level since November 2010 in September, increasing 9.8 per cent from August. This increase was mainly due to concerns over the outlook for global sugar production in the 2023/24 season, as weather conditions associated with the El Niño phenomenon are expected to reduce production in key sugar producers such as Thailand and India.

In addition to weather concerns, higher international crude oil prices also contributed to the rise in sugar prices. However, these increases were limited by the record-large crop currently being harvested in Brazil, under favourable weather conditions, and the depreciation of the Brazilian Real against the US Dollar.