Global food prices fall for the first time in 12 months

Global food commodity prices fell in June for the first time in 12 months, led by vegetable oils, cereals, and dairy, the Food and Agriculture Organisation of the United Nations (FAO) has said.

Details of this were highlighted in the FAO Food Price Index report released on Thursday.

The index tracks the international prices of the most commonly traded food commodities.

The FAO Food Price Index averaged 124.6 points in June 2021, down 2.5 per cent from May, but still 33.9 per cent higher than its level in the same period last year.

“The decline in June marked the first drop in the Index following twelve consecutive monthly increases,” it said. “The drop in June reflected declines in the prices of vegetable oils, cereals and, to a lesser degree, dairy prices, which more than offset generally higher meat and sugar quotations.”

The FAO Vegetable Oil Price Index averaged 157.5 points in June, falling by 9.8 per cent from May and marking a four-month low.

“The sizable month-on-month drop mainly reflects lower prices of palm, soy, and sunflower oils.

“After rising for twelve consecutive months, international palm oil quotations retreated in June, chiefly influenced by prospective seasonal production gains in leading producing countries and a lack of fresh import demand.

“Meanwhile, subdued global import demand also exerted downward pressure on soy and sunflower oil prices,” it said.

In the case of soy oil, expectations of lower-than-earlier anticipated uptake from biodiesel producers in the United States of America further weighed on prices.

“By contrast, international rapeseed oil quotations withstood the downward overall trend in vegetable oil prices, underpinned by prospects of recovering demand in the European Union on easing lockdown measures,” the report said.

According to the report, the FAO Cereal Price Index averaged 129.4 points in June, down 2.6 per cent from May but still 33.8 per cent above its June 2020 value.

“After reaching their highest level in May since January 2013, international maize prices dropped by 5.0 per cent in June, yet remained over 72 per cent higher than in the same period last year.

“Maize prices in Argentina fell with increased supplies from recent harvests as a result of higher-than-earlier expected yields.

“Despite drought damage, ongoing harvests also put downward pressure on maize prices in Brazil.

“In the United States of America, maize prices fell towards the end of the month as rainfall improved crop conditions in some areas.

“Among other coarse grains, international barley and sorghum prices also softened in June, falling by 2.2 per cent and 4.9 per cent, respectively.

“International wheat prices declined slightly (by 0.8 per cent) in June, but remained above last year’s values by over 31 per cent,” it said.

It said a favourable global outlook supported by improved production prospects in many key producers outweighed upward pressure from dry conditions affecting crops in North America. International rice prices also fell in June, hitting fifteen-month lows, as high freight costs and container shortages continued to limit export sales.

In the report, the FAO Dairy Price Index averaged 119.9 points in June, down 1.0 per cent from May, ending twelve months of uninterrupted increases.

“At this level, the index value stood 22.0 per cent above its value in the corresponding month last year.

“In June, international quotations for all dairy products represented in the index fell, with butter registering the highest drop, underpinned by a fast decline in global import demand and a slight increase in inventories, especially in Europe.

“Whole milk powder prices declined on reduced purchases by China and lower demand for spot supplies, while global export availability remained adequate to meet existing orders.

“International quotations for cheese and skim milk powder declined slightly also on reduced global import demand amid somewhat higher export supplies from major producing regions,” the report said.

The report said the FAO Meat Price Index averaged 109.6 points in June, up 2.1 per cent from its revised value for May, continuing the increases for the ninth consecutive month and placing the index 15.6 per cent above the corresponding month last year, but still, 8.0 per cent below its peak reached in August 2014.

“In June, price quotations for all meat types represented in the index rose, primarily underpinned by firm global import demand, as increases in imports by some East Asian countries compensated for a slowdown in China’s meat purchases, especially of pig meat.

“Tightening export supplies also provided price support across all meat products, reflecting multiple factors, including low poultry meat inventories in the United States of America, limited supply of slaughter-ready animals in Brazil and Oceania, and some recovery in food services sales in major exporting countries,” it said.

According to the report the FAO Sugar Price Index averaged 107.7 points in June, up slightly by 0.9 per cent from May, marking the third consecutive monthly increase and reaching a new multi-year high.

ForecastMeanwhile, the FAO said the World cereal inventories are expected to rise for the first time since 2017/18.

It said global cereal production in 2021 has been lowered marginally to 2 817 million tonnes.

The report said that the world cereal utilisation in 2021/22 has been lowered by 15 million tonnes from the previous month to 2 810 million tonnes, nevertheless still 1.5 per cent higher than in 2020/21.