Sugar and cereal costs drive dip in global food prices in August, flags FAO

09 Sep 2024 --- Prices for food commodities decreased slightly in August owing to reduced prices for sugar, meat and cereals, according to the Food and Agriculture Organization of the United Nations (FAO).

Meanwhile, vegetable oils and dairy products recorded an increase. The Food Price Index, which tracks monthly fluctuations in the international prices of certain globally traded food commodities, averaged 120.7 points in August, slightly lower than the figures released in July.

Sugar prices fall as dairy spikes

Cereal prices fell by 0.5% from July, mainly due to a decline in global wheat export prices as production outweighed expectations in Argentina and the US, in addition to competitive supplies from the Black Sea region.

The maize prices experienced a small spike as heatwaves continued to impact harvests in parts of Europe and North America. The rice price index rose by 0.6% as prices of non-Indica varieties surged due to seasonal impacts and currency fluctuations of some exporter nations against the US dollar.

Vegetable oil prices spiked 0.8% from July and reached a 20-month high. The agency notes that this was due to a surge in palm oil prices, which could not offset dwindling prices for soy, sunflower and rapeseed oils.

Dairy commodities increased by 2.2% last month as costs of whole milk powder increased amid a rise in import demand for spot supplies. Cheese also recorded a global climb as demands for imported products surged. Butter quotations experienced an all-time peak mainly because of growing uncertainty over stable milk supplies in Western Europe.

The price index reveals that meat prices were down by 0.7% compared to July as poultry, pig and ovine meat prices slowed due to stagnant import demand, even though global prices for bovine meat prices shot up marginally.

Notably, sugar prices declined by 4.7% in August to reach their lowest level in about a year. The FAO attributes the fall to an improved production outlook for the upcoming sugarcane harvests in India and Thailand and lower international crude oil prices.

However, at the end of the month, sugar prices sharply increased due to fires ravaging sugarcane fields in key growing areas of Brazil.

Readjusting cereal outlook

The FAO also readjusted predictions for global cereal production in 2024, placing it at 2,851 million metric tons, almost at the same threshold as last year.

The new Cereal Supply and Demand Brief noted that this revision was due to lowered harvest expectations for coarse grains such as maize, mainly because of hot and dry weather conditions in the EU, Mexico and Ukraine.

Additionally, the FAO increased its forecast for global wheat production in 2024 and rice, which it now expects to peak at an all-time high of 537 million metric tons.

The agency pegs international cereal trade at 485.6 million metric tons, reflecting a 3.3% decline from 2023/24, driven mainly by lower traded volumes in coarse grains.