Global Food Prices Fall for Fifth Consecutive Year

13 Jan 2017 --- For five years in a row the prices of major food commodities have declined, according to the FAO Price Index. And ‘economic uncertainties’ like unstable exchange rates are expected to influence food markets even more during the coming year, says FAO senior economist Abdolreza Abbassian.

The FAO Food Price Index is a trade-weighted index tracking international market prices for five key food commodity groups: major cereals, vegetable oils, dairy, meat and sugar. Prices averaged 16.6 points for 2016  as a whole - 1.5 percent below levels in 2015. In December, the Index averaged nearly 172 points, unchanged from November.

The production of tropical commodities like sugar and palm oil was impacted by El Nino which put upward pressure on FAO’s Food Price Index, but this was offset by bumper harvests and prospects for staple cereals. 

Cereal prices fell 9.6 percent from 2015 and were down 39 percent from their 2011 peak, while sugar and vegetable oil prices increased over the year by 34.2 percent and 11.4 percent, respectively.

FAO's Cereal Price Index, increased 0.5 percent in the month of December, with rice and maize quotations firming up while larger-than-expected production estimates in Australia, Canada and Russian led to lower wheat prices.

A breakdown of the commodities

FAO's Vegetable Oil Price Index rose 4.2 percent from November, capping a double-digit annual gain to reach its highest level since July 2014. Both palm oil and soy oil quotations rose, the former due to low global inventory levels and tight supplies, the latter on the prospect of rising use in the biodiesel sectors in North and South America.

The FAO Dairy Price Index also rose, by 3.3 percent, from November, due primarily to higher prices for butter, cheese and whole milk powder and restrained output in the European Union and Oceania.

The FAO Sugar Price Index, while up almost a third over the year, declined 8.6 percent in the last month of 2016. The sharp fall was mainly driven by an ongoing weakening of the Brazilian Real against the U.S. dollar, along with a reported 18 percent jump in expected production in the Centre South, Brazil's main sugarcane-growing region.

The FAO Meat Price Index declined 1.1 percent from its revised November level. Its average value in 2016 was 7 percent below that of 2015, due mainly to falls in the international prices of bovine and poultry meats.