World Food Prices Edge Closer to Two Year High
03 Feb 2017 --- Food and Agriculture Organization of the United Nations (FAO) Price Index notably increased in January 2017 driven by surges in sugar and cereals.
The FAO Food Price Index - a trade-weighted index tracking international market prices for five major food commodity groups - averaged 173.8 percent in last month, its highest value in almost two years, marking a 2.1 percent increase from its revised December value and 16.4 percent above its 2016 January level.
While 2016 marked the fifth consecutive year the index has fallen, January marked its sixth monthly increase in a row.
In terms of sugar, the Price Index went up 9.9 percent from December due to expectations of a protracted supply tightness in Brazil, India and Thailand.
The FAO Cereal Price Index rose 3.4 percent from December to a six-month high, with wheat, maize and rice values all increasing.
Wheat markets reacted to unfavourable weather conditions hampering this season's crops as well as reduced plantings in the US, while higher maize prices mostly reflected strong demand and uncertain crop prospects across South America.
International prices of rice also rose, in part due to India's ongoing state procurement program, reducing the quantities available for export.
The FAO Vegetable Oil Price Index increased 1.8 percent, due mostly to low global inventory levels of palm oil coupled with a slow production recovery in Southeast Asia. Soy oil prices, by contrast, eased on expectations of ample global availability.
The FAO Dairy Price Index was unchanged from December, a marked departure from the 50 percent increase it posted between May and December last year. The FAO Meat Price Index was also practically unchanged, with a rise in bovine meat quotations - the result of herd rebuilding in Australia - offset by lower prices of ovine and other meats.
Worldwide inventories of cereals are on course to reach an all-time record level by the end of seasons in 2017, according to FAO's latest Cereal Supply and Demand Brief.
Global cereal stocks are estimated at 681 million tons, up 1.5 percent from their December forecasted level and 3 percent from the previous season. World wheat inventories would likely hit a new record of 245 million tons, marking an 8.3 percent annual increase. Coarse grain stocks are forecast to grow by 0.7 percent to reach their second-highest level on record, while rice stocks are set to decline slightly although ending the season at a near-record 170 million tons.
