FAO global food price index tumbles in third consecutive month

BY Onome Amuge

World food commodity prices plunged in June to record a third monthly drop in a row, led by a sharp decline in the international quotations of vegetable oils, cereals and sugar, but dairy and meat prices traded upwards, according to the latest food indices report by the Food and Agriculture Organisation of the United Nations (FAO).

The FAO food price index, which tracks monthly changes in the international prices of a basket of commonly-traded food commodities, averaged 154.2 points in June 2022, 3.7 points or 2.3 percent lower than 157.4 points recorded in May. However, it remained 29.0 points or 23.1 percent higher above its value in the same period of June 2021.

The FAO Cereal Price Index averaged 166.3 points in June, down 7.2 points or 4.1 percent from May, but still 36.0 points or 27.6 percent higher year-on-year.

Despite hovering around a near-record level in May, international wheat prices declined 5.7 percent in June, but still up 48.5 percent from their values the previous year. The decline in June, according to the FAO, was driven by seasonal availability from new harvests in the Northern Hemisphere, improved crop conditions in some major producers, including Canada, higher production prospects in the Russian Federation, and slower global import demand.

Also on a downward trend, international coarse grain prices fell by 4.1 percent in June, but were still 18.4 percent above their year-earlier values.

Downward pressure stemming from seasonal availability in top producers Argentina and Brazil, where maize harvests progressed quickly, and improved crop conditions in the US underpinned a 3.5-percent decline in world maize prices in June. Concerns over demand prospects amidst a global economic slowdown added to the downward pressure.

Sorghum and barley prices were also among coarse grains on a downward slope, falling by 4.1 percent and 6.1 percent, respectively, in motion with lower maize and wheat quotations.

Meanwhile, the FAO vegetable oil price index recorded the steepest decline as it averaged 211.8 points, down 17.4 points or 7.6 percent month-on-month, driven by lower prices across palm, sunflower, soy and rapeseed oils.

Similarly, international palm oil prices dropped for the third consecutive month as seasonally rising output of major producing countries coincided with prospects of increasing export supplies from leading producer Indonesia, amid high domestic inventories. Also, world sunflower and soy oil price prices slipped amid reduced global import demands.

On the other hand, FAO dairy price index averaged 149.8 points in June, gaining 5.9 points or 4.1 percent compared to May. Dairy quotation also rose as much as 29.9 points or 24.9 percent above its June 2021 value. June also marked a significant rise in the international prices of all dairy products, including milk powder prices which increased on strong import demand, persistent global supply tightness and low inventory levels, while international butter prices rebounded as market uncertainty over milk deliveries in the months ahead lent support to foreign purchases as well as internal demand in Europe.

The FAO meat price index set a new record high as it averaged 124.7 points in June, up 2.1 points or 1.7 percent from May. It also rose 14.0 points or 12.7 percent compared to its June 2021 value.

World prices across all meat types increased, with poultry prices reaching an all-time high, bolstered by the continued tight global supply conditions impacted by the war in Ukraine, coupled with the Avian Influenza outbreaks in the Northern Hemisphere.

Bovine meat prices also edged up as China lifted its import restrictions for purchases from Brazil, while pig meat prices recovered slightly on higher imports by several leading importers, except for China where purchases remained low.

International ovine meat prices also rebounded on lower exportable volumes from New Zealand, despite a decline in demand from Northern Asia.

The FAO Sugar Price Index averaged 117.3 points in June, down 3.1 points or 2.6 percent from May, marking its second monthly decline in a row and its lowest level since February.

The dip in quotation was attributed to the slowdown in global economic growth which weighed on international sugar demand in June. On the supply side, good global availability prospects continued to apply downward pressure on prices.

According to the FAO report, the weakening of the Brazilian real against the US dollar and lower ethanol prices in the South American country prompted producers to step up sugar production, contributing to higher supplies and lower world sugar prices in June.

However, uncertainties over the current season’s outturn in the world’s largest producer of the sweet commodity prevented more substantial price declines.