FAO finds world food prices unchanged after consecutive monthly upticks

08 Jul 2024 --- World food prices remain consistent in June after three consecutive monthly spikes, as a surge in vegetable oil, sugar and dairy products prices offset a decrease in the price of cereals. Meanwhile, the meat index was “virtually unchanged” from May, says the Food and Agriculture Organization of the United Nations (FAO). 

The FAO Food Price Index averaged 120.6 points in June, the same as its revised figure for May. The index sits at 2.1% lower than its year-earlier value and 24.8% below its March 2022 peak of 160.3 points.

“Softer price tone” for cereals
The FAO Cereal Price Index in June went down 3.5 points (3%) from May and 11.4 points (9%) from its June 2023 value, with global export prices of all major cereals decreasing month on month. 

“The decline in wheat prices mostly reflected seasonal pressure from ongoing harvests in the northern hemisphere,” notes the organization.

Slightly improved production prospects in some major exporting countries like Kazakhstan and Ukraine and the “temporary import ban” implementation by Türkiye also contributed to the softer price tone.

For maize, export prices dropped in June due to progress in harvests in Argentina and Brazil. A “larger-than-previously-expected” planted area to maize in the US and good crop conditions in the US also contributed to the price decline. 

Meanwhile, world prices of barley and sorghum also fell.

Balance in meat supply-demand
The FAO Meat Price Index averaged 116.9 points in June, remained unchanged from May, 1.8% below its corresponding value a year ago.

A decline in international poultry meat prices was nearly offset by slight increases in ovine, pig and bovine meat prices.Abundant supplies from some leading producing countries brought down poultry meat prices, while ovine meat prices rose significantly due to the continued high import demand and despite ample export supplies, as farmers began “liquidating their herds in response to unusually dry conditions in parts of Australia,” flags the FAO.

Meanwhile, pig meat prices increased marginally due to a steady pace of imports, further underpinned by seasonally active internal sales, especially in North America.

Overall, world bovine meat prices remained “broadly stable,” notes the FAO, reflecting generally well-balanced global demand-supply conditions.

Vegetable oil and dairy price lifts
Higher quotations across palm, soy and sunflower oils lifted vegetable oil prices in June, leading to a 3.1% increase from May.

Reviving global import demand due to increased price competitiveness drove up palm oil prices, while soy and sunflower oil prices rose due to firm demand from the biofuel sector in the Americas and declining export availability in the Black Sea region.

On the other hand, the FAO Dairy Price Index rose by 1.2%, with international quotations for butter reaching a 24-month high. Increased global demand for near-term deliveries, strong retail sales, seasonally falling milk deliveries in Western Europe, and low inventory in Oceania drove this price surge.

Weather batters sugar
Lower-than-expected harvest of sugar during May in Brazil increased world sugar prices in June by 1.9% from May. This came after three consecutive monthly declines, but still down 21.6% from its value in June last year.

The drop in production has “heightened concerns over the potential impact of prolonged dry weather conditions on sugar production in the coming months,” flags the FAO.

Erratic monsoon rainfall in India, coupled with a “downward revision” to crop yield forecasts in the EU, also contributed to the overall upward pressure on world sugar prices. This was partly offset by the weakening of the Brazilian Real against the US dollar.

Concerns over food insecurity
Meanwhile, conflicts are generating severe levels of “acute food insecurity” especially in Yemen, where nearly 4.6 million people in government-controlled areas were estimated to be facing high levels of acute food insecurity, flags FAO’s latest Crop Prospects and Food Situation report.

Conflicts and droughts are leading to food insecurity and risk of famine in Yemen, the Gaza Strip and Sudan.Additionally, populations in the Gaza Strip and Sudan face the risk of famine. 

The report also predicts a rising production of cereals in Low-Income Food Deficit Countries 2024, but says growth is “uneven” around the 44-nation group.

“Of particular concern is the projected almost 20% annual drop in total cereal production in Southern Africa in 2024, due to widespread hot and dry conditions.”

Meanwhile, Zambia, usually a net exporter of maize, is forecast to import nearly one million metric tons this year. Although global maize suppliers are expected to be ample, most are yellow maize, while the global supply of white maize, a staple food in Southern Africa, is tight, the report noted.

Cereal output to reach an “all-time high” 
The FAO pegs the global cereal production to reach 2,854 million metric tons in 2024, a new “all-time high,” based on its Cereal Supply and Demand Brief.

The organization attributed its raised projections to a better harvest outlook for maize in Argentina and Brazil as well as Türkiye and Ukraine, which will offset downgrades to the outlook for Indonesia, Pakistan and several Southern African countries. 

It predicts the global rice production to reach a record 535.1 million metric tons and cereal total utilization to rise to 2856 million metric tons, up 0.5% from the previous year, led by rice and coarse grains.

World cereal stocks are projected to expand by 1.3% next year, leaving the global cereal stocks-to-use ration in 2024/25 “nearly unchanged” at 30.8%, notes the report.

Meanwhile, FAO’s forecast for international trade in total cereals remains unchanged at 481 million metric tons, representing a 3% decline from 2023/24.

By Insha Naureen