January sees global food prices fall as sugar, vegetable oils decline

Onome Amuge

Global food prices witnessed a drop in January, with sugar and vegetable oil prices registering sharp declines, according to the Food and Agriculture Organisation (FAO)’s latest Food Price Index report.

The FAO’s monthly tracking of a basket of internationally traded food commodities revealed that the Food Price Index decreased to 124.9 points in January, compared to 127 points in December. Despite the monthly decline, the index was still higher than January 2022 by 6.2 percent, but it remained 22 percent below the March 2022 peak.

A 6.8 percent drop in global sugar prices from December 2022 drove the overall decline in food commodity prices, with the index registering a yearly decline of 18.5 percent in sugar prices. The fall was largely attributed to optimistic global supply prospects as well as favourable weather conditions in Brazil, the world’s largest sugar producer, and India’s decision to lift restrictions on sugar exports.

vegetable oil prices decreased by 5.6 percent in January, led by drops in palm and rapeseed oil prices, while soy and sunflower oil prices remained relatively steady. Despite this decline, vegetable oil prices were still 24.9 percent higher than January 2022.

January’s Food Price Index saw meat prices decrease by 1.4% from the previous month’s levels, while still registering an 8.1% rise from the same month a year ago. This reduction in meat prices was primarily driven by lower international prices for ovine (sheep and lamb), pig, and poultry meat, which offset the increase in bovine (cattle) meat prices.

Ovine, pig, and poultry meat prices fell as global supply improved and demand eased, leading to lower prices for these meats.

The FAO food price index reported a slight increase in cereal prices, up 0.3 percent in January compared to the previous month. However, on a year-on-year basis, cereal prices fell by 6.9 percent, remaining lower than January 2024 levels.

Despite slight drops in wheat export prices, maize prices climbed due to downward adjustments in US production and stock estimates. Meanwhile, rice prices decreased by 4.7 percent, driven by ample export supplies.

Dairy prices increased 2.4 percent in January from the previous month, recording a year-on-year rise of 20.4 percent. This uptick was driven primarily by a monthly surge in cheese prices, which offset the declines in butter and milk powder prices.

The rise in dairy prices was attributed to growing global import demand, spurred by recovering production in major dairy-producing countries and robust domestic retail sales. These factors, in turn, created a tighter supply-demand balance in the global dairy market, leading to higher prices.

Meanwhile, butter prices witnessed a decline, despite increasing demand from food processors in Europe and Oceania. The decline in butter prices was attributed to improved global supply, with production recovery in Europe helping to replenish stockpiles after a challenging start to the season.

Skim and whole milk powder prices also decreased due to production recovery in Europe and weak domestic and import demand.

According to a separate FAO report, global cereal production projections for 2024 were revised downward, with the forecast now standing at 2.840 billion from a previous estimate of 2.841 billion. This revision was primarily attributed to a lower forecast for US maize production.

The FAO revised its forecast for global cereal utilization in 2024/25, projecting a 0.9 percent increase to 2.869 billion tonnes, driven by higher domestic and international demand.

However, global cereal stocks are expected to decline by 2.2 percent at the end of the 2024/25 season, largely due to a projected contraction in US maize stocks

The FAO report predicts a decline in international cereal trade, with the 2024/25 season expected to see a 5.6 percent reduction compared to the previous year. This contraction in cereal trade is largely driven by reduced demand for barley, maize, and wheat from China.