Food prices drop to four-year low – UN agency

Global food prices continued to dip for the fifth month straight reaching their lowest level since September 2010, the United Nations agriculture agency reported today.

The Food and Agriculture Organization’s (FAO) price index – which measures monthly changes in the global price of a basket of meat, dairy, cereals, oils and fats, and sugar – averaged 196.6 points in August 2014 which is a 7.3 point (3.6 per cent) decrease compared to July. With the exception of meats, prices for all of the commodities measured by the index dipped markedly.

According to a statement to the press, FAO’s sub-index for dairy products averaged 200.8 points in August, down 25.3 points (11.2 per cent) versus July and 46.8 points (18.9 per cent) compared to a year ago- the result of abundant supplies for export coupled with reduced import demand.

Russia’s prohibition at the beginning of the month on imports of dairy products from several countries helped depress prices, while slackening imports of whole milk powder by China (the world’s largest importer) also contributed to market uncertainty.

Meanwhile, the vegetable oils sub-index clocked in at 166.6 points in August, 14.5 points (8 per cent) less than the previous month and the lowest level since November 2009. Sugar prices averaged 244.3 points last month, down by 14.8 points (5.7 per cent) from July.

FAO’s price index for cereals averaged 182.5 points in August, down 2.8 points (1.5 per cent) from last month and 24.2 points (11.7 per cent) versus August 2013.

With 2014 being another record year for wheat production, prices for the staple grain continued to slide in August, reaching their lowest value since July 2010. Similarly, near ideal growing conditions in key producing areas, coupled with abundant stocks, have seen maize prices retreat to a four year low, the index reported.

However, the price of rice rose in August, reflecting increased import demand, lower-than-expected releases from stockpiles by Thailand, and unfavourable weather in Asia.

“Rice prices appear to be ample worldwide, but stocks are very much concentrated in a small number of countries, and often owned by Governments. This means that these countries can very much influence world prices, by deciding whether to let those supplies flow to the market or not,” said FAO economist Concepción Calpe.

Meanwhile, FAO’s monthly Cereal Supply and Demand Brief, also released today, has upped the Organization’s forecast for 2014 world cereal production by 14 million tonnes. At 2.5 billion tonnes, the projection would be 0.5 per cent short of last year’s record.

Wheat production is now expected to reach 716.5 million tonnes – also just shy of last year’s record harvest. Wheat crops in China, the Russian Federation, Ukraine and the United States are now projected to be larger than previously anticipated.

Production in Argentina, Brazil, China, the European Union, India, and Russia has increased significantly, offsetting reductions in Australia, the United States and especially Canada – where the latest official forecast points to a decline of almost 10 million tonnes (26 per cent).

In addition, rice production outlook has worsened compared to July by about 3 million tonnes, as an erratic rainfall pattern and concerns over weather impacts on crops early next year marred prospects in China, India, Indonesia, the Philippines and Sri Lanka.