In a development that may bring some relief to consumers worldwide, the FAO has released its latest food price index, which shows a decline in the cost of commonly-traded food commodities to its lowest level in nearly three years, driven by significant declines in cereals and meat prices.
The index, which measures monthly changes in the international prices of a set of globally-traded food commodities, averaged 118 points in January, down one per cent from December and 10.4 per cent from its corresponding value a year ago, its lowest level since March 2020.
The FAO cereal price index declined by 2.2 per cent in January. The drop was attributed to falling prices for wheat and maize, which were driven by increased competition among exporters and the arrival of new harvests in the southern hemisphere. In addition, improved crop conditions in Argentina and the U.S led to larger supplies of maize, further contributing to the decline in prices. In contrast to the overall decline in cereal prices, the cost of rice rose by 1.2% in January. The increase was driven by strong demand for high-quality Indica rice from Thailand and Pakistan, and additional purchases by Indonesia.
Despite the overall decline in food prices, the FAO vegetable oil price index rose slightly in January, by 0.1 per cent compared to December. While the index was still 12.8 per cent lower than a year earlier, this was largely due to opposing trends in the prices of different oils. Palm and sunflower seed oil prices rose, while the prices of soy and rapeseed oils declined.
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The FAO report noted that a number of factors contributed to the rise in palm oil prices. Seasonal declines in production in major producing countries, such as Indonesia and Malaysia, were seen as key drivers. In addition, unfavourable weather conditions in Malaysia reduced palm oil output and contributed to higher prices. Meanwhile, import demand for sunflower seed oil has pushed prices up slightly. Soy and rapeseed oil prices have declined, due to expectations of large supplies from South America and Europe, respectively.
In a departure from the trends seen in other commodities, the FAO dairy price index remained largely unchanged in January, compared to the revised December value. However, the index still stood 17.8 per cent lower than a year earlier. International prices for butter and whole milk powder rose, mostly due to increased demand from Asian buyers. But this increase was offset by declines in the prices of skim milk powder and cheese. Overall, the FAO Dairy Price Index has remained volatile in recent months, as global dairy markets continue to be affected by a range of factors, including weather conditions, exchange rate movements, and changes in demand from major importing countries
According to the FAO report, the FAO meat price index fell for the seventh month in a row, declining 1.4 per cent from December. The index has been affected by a number of factors, including abundant supplies from leading exporting countries, which have driven down international prices for poultry, bovine and pig meat. However, the price of ovine meat increased, driven by strong demand from importers and lower supplies of animals available for slaughter in Oceania.
The FAO Sugar Price Index increased 0.8 per cent in January compared to the previous month. This increase was driven by concerns over the impact of below-average rains in Brazil on sugarcane crops that will be harvested from April onwards. In addition, unfavourable production prospects in Thailand and India also contributed to the rise in the index.