Stronger cereals and dairy prices across the world are fuelling an increase in the rate of global food price growth, reports the Food and Agriculture Organisation (FAO) of the United Nations.
The FAO Food Price Index (FFPI) averaged 172.8 points in March 2018, 1.1% or 1.8 points higher than the February figure. It is the second consecutive monthly increase. The March 2018 index is 0.7% up on the figure for March 2017, indicating that the rate of food price inflation is increasing.
The latest increase, as for the previous month, is primarily driven by stronger international prices for cereals and dairy products and a slight increase for meat, while sugar and vegetable oils have decreased.
By commodity, the FAO Cereal Price Index averaged 165.6 points in March, a 2.7% rise from February and 12.1% higher year-on-year. The increase, which continues a trend over recent months, reflects weather concerns in the US, where there are dry conditions in the south western grain growing states, and in Europe, where prolonged cold, wet weather is delaying both winter crop development and spring crop plantings.
Corn prices have increased as wet weather in Argentina reduces yield potential there, while Asian purchases are reported to have kept international rice prices firm.
The FAO Dairy Price Index rose 3.3% to average 197.4 points in March, although the figure is only slightly above that of a year ago. FAO analysts say that lower than expected milk production in New Zealand, together with continued strong global import demand led to increased butter, cheese and whole milk powder prices, but skimmed milk powder prices suffered from overhanging global stocks and rising production.
The FAO Meat Price Index, at 169.8 for March, was little unchanged from February but 3% up on March 2017. Within the category, there sheep meat values increased through strong import demand from China, pig meat was up slightly as supplies tightened in Europe while poultrymeat values remained stable. However, cattle meat product prices eased due to subdued demand and the prospect of increased supplies from New Zealand.
A marginal drop in the FAO Vegetable Oil Price Index led to an index of 156.8 points in March, a marginal fall from the multi-month low in February. While there were modest falls for soy, rape and sunflower oils, this was balanced by higher prices of palm oil, which is the world’s most widely traded vegetable oil.
The Organisation predicts that palm oil prices will continue to firm, despite seasonal production increases, as robust international demand is leading to stock drawdowns in Malaysia and Indonesia. This is supported by the EU’s prospective resumption of palm oil-based biodiesel imports from Indonesia plus rising mineral oil prices.
Lastly, the FAO Sugar Price Index fell 3.4% month-on-month to average nearly 186 points in March 2018. This represents a 27.5% drop from a year earlier, reflecting falling sugar prices in line with substantial export availability. The weaker Brazilian Real and a relaxation of export rules by India until the end of the season have contributed to the oversupply.