Weather, increased demand pushes global food prices to highest level in months

Global food prices in February rose to their highest level since mid-2012 as a result of unfavourable weather and increased demand, the United Nations food agency today reported.

In a news release, the UN Food and Agriculture Organization (FAO) said its most recent Food Price Index, which measures the monthly change in international prices of a basket of 55 food commodities, including meat, dairy, sugar, and cereals, averaged 208.1 points. That is about 5.2 points, or 2.6 per cent, higher than the slightly revised index for January.

“This month's increase follows a long period of declining food prices in general. But it’s too early to say if this is a true reversal of the trend,” said Concepción Calpe, FAO Senior Economist.

“The weather is probably a major force driving up prices for certain commodities like sugar or wheat, but brisk demand is also an important factor underpinning maize, dairy and oil prices,” Mr. Calpe added.

The Rome-based agency also noted a spike in wheat and corn prices which it attributed to recent developments in Ukraine, “though the February increase in the Index cannot be entirely attributed to those events.”

Cereals averaged 195.8 points last month, up 6.8 points or 3.6 per cent from the previous month.

With some winter wheat crops already developing, FAO’s first forecast for world wheat production in 2014 stands at 704 million tonnes. This is a 1.7 per cent drop from the 2013 record but still the second largest crop ever, according to the ‘Cereal Supply and Demand Brief.’

The latest estimate for world cereal production for 2013 stands at a record 2.5 billion tonnes, an increase of 13 million from the February forecast and 9 per cent more than the 2012 level.

The rise is due to a significant revision in the estimates for Australia and also upward revisions to the figures for wheat and coarse grains in China.

Vegetable oils rose 9.2 points to an average of 197.8 points in February, amid concerns over unfavourable weather in Southeast Asia and South America, and buoyant demand worldwide, including demand for palm oil from biodiesel producers.

Dairy’s average of 275.4 points in February is 7.7 points higher over January. Meat averaged 182.6 points in February, up less than a point since the revised January level.

Following a three-month decline, sugar prices recovered, prompted by concerns of dry weather in Brazil and recent forecasts pointing to a potential drop of output in India. The FAO Sugar Price Index averaged 235.4 points last month, up 13.7 points, or 6.2 per cent, from January.