Extension of Black Sea Grain Initiative contributes to world food price drop

07 Apr 2023 --- The benchmark index of international food commodity prices declined for the twelfth consecutive month in March, according to the Food and Agriculture Organization of the United Nations (FAO). This was driven by declines in world quotations for cereals and vegetable oils.

The FAO Food Price Index averaged 126.9 points in March 2023, down 2.1% from the previous month and 20.5 below its peak in March 2022. 

A mix of ample supplies, subdued import demand and the extension of the Black Sea Grain Initiative contributed to the drop. 

Declines in wheat prices 
The FAO Cereal Price Index declined 5.6% from February, with international wheat prices falling by 7.1%, pushed down by strong output in Australia, improved European Union crop conditions, high Russian Federation supplies, and ongoing exports from Ukraine from its Black Sea ports. 

World maize prices fell by 4.6%, due partly to expectations of a record harvest in Brazil. Rice eased by 3.2% amid ongoing or imminent harvests in major exporting countries, including India, Vietnam and Thailand. 

The FAO Vegetable Oil Price Index averaged 3% lower than the previous month and 47.7% below its March 2022 level. This comes as ample world supplies and subdued global import demand pushed down soy, rapeseed and sunflower oil quotations. 

The FAO Cereal Price Index declined 5.6% from February, with international wheat prices falling by 7.1%.That more than offset higher palm oil prices, which rose due to lower output levels in Southeast Asia due to flooding and temporary export restrictions imposed by Indonesia. 

“While prices dropped at the global level, they are still very high and continue to increase in domestic markets, posing additional challenges to food security. This is particularly so in net food importing developing countries, with the situation aggravated by the depreciation of their currencies against the US dollar or the Euro and mounting debt burden,” stresses Máximo Torero, FAO Chief Economist.

Dairy drops but sugar edges up
The FAO Dairy Price Index declined 0.8%, while butter prices increased due to solid import demand. At the same time, cheese dipped due to slower purchases by most leading importers in Asia and increased availability in leading exporters. 

The FAO Sugar Price Index rose 1.5% from February to its highest level since October 2016. The positive outlook for the sugarcane crops about to be harvested in Brazil limited the upward pressure on prices, as did the decline in international crude oil prices, which reduced demand for ethanol. 

The FAO Meat Price Index inched up by 0.5%. International bovine meat quotations rose, influenced by increasing internal prices in the US on expectations of lower supplies moving forward. 

In contrast, prices of pig meat rose due to increased demand in Europe before the Easter holidays. 

Despite avian influenza outbreaks in several large exporting countries, world poultry meat prices fell for the ninth month on subdued global import demand. 

Edited by Gaynor Selby