Food prices fall for the second consecutive month

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World food commodity prices declined modestly in May for the second consecutive month, although wheat and poultry prices pushed higher. This according to the Food and Agriculture Organization of the United Nations (FAO). The FAO Food Price Index averaged 157,4 points in May 2022, down 0,6% from April.

Food price index

The FAO Food Price Index averaged 157,4 points in May 2022, down 0,9 points (0,6%) from April, marking the second consecutive monthly decline, though still 29,2 points (22,8%) above its value in the corresponding month last year. The drop in May was led by declines in the vegetable oil and dairy price indices, while the sugar price index also fell to a lesser extent. Meanwhile, cereal and meat price indices increased.

Cereal price index

The FAO Cereal Price Index averaged 173,4 points in May, up 3,7 points (2,2%) from April and as much as 39,7 points (29,7%) above its May 2021 value. International wheat prices rose for a fourth consecutive month, up 5,6% in May, to average 56,2% above their value last year and only 11% below the record high reached in March 2008.

The steep increase in wheat prices was in response to an export ban announced by India amid concerns over crop conditions in several leading exporting countries, as well as reduced production prospects in Ukraine because of the war.

By contrast, international coarse grain prices declined by 2,1% in May but remained 18,1% above their value a year ago. Slightly improved crop conditions in the United States (US), seasonal supplies in Argentina and the imminent start of Brazil’s main maize harvest led to maize prices declining by 3%. However, these prices remained 12,9% above their level of May 2021. Similarly, international sorghum prices also fell in May, declining by 3,1%, while spill-over from the strength in wheat markets and concerns over crop conditions in the European Union (EU) boosted barley prices by 1,9%.

International rice prices increased for the fifth successive month in May. Quotations strengthened in all the major market segments, but monthly increases were least pronounced (2,6%) for the most widely traded Indica varieties amid ample supplies, especially in India.

Vegetable oil price index

FAO Vegetable Oil Price Index averaged 229,3 points in May, down 8,3 points (3,5%) month-on-month, yet remaining markedly above its May 2021 level. The monthly decline mainly reflects lower prices across palm, sunflower, soya and rapeseed oils.

International palm oil prices weakened moderately in May. Apart from demand rationing, the removal of Indonesia’s short-lived export ban on palm oil exerted additional downward pressure on prices, although a further price drop was contained by lingering uncertainties over the country’s export prospects.

Meanwhile, world price quotations for sunflower oil fell from recent record highs, with stocks continuing to accumulate in Ukraine, owing to logistical bottlenecks. International soya and rapeseed oil prices also declined somewhat in May, chiefly weighed by sluggish import demand in light of elevated costs in recent months.

Dairy price index

The FAO Dairy Price Index averaged 141,6 points in May, down 5,1 points (3,5%) from April, marking the first decline after eight consecutive monthly increases. However, it is still 20,5 points (16,9%) higher than its level in May of last year. World prices of all milk products fell, with milk powders declining the most, underpinned by lower buying interests on market uncertainties stemming from the continued lockdown in China, despite the persistent global supply tightness.

Butter prices also dropped significantly due to weaker import demand in tandem with some improvements to supplies from Oceania and limited internal sales in Europe. Meanwhile, robust retail sales and high demand from restaurants ahead of the summer holidays in the northern hemisphere prevented cheese prices from falling significantly, despite weakened global import demand.

Meat price index

The FAO Meat Price Index averaged 122 points in May, up 0,6 points (0,5%) from April. This movement set a new all-time high, driven by a steep rise in world poultry meat prices, more than offsetting declines in pork and ovine meat values. In May, poultry meat prices rose, reflecting the continued supply chain disruptions in Ukraine and recent cases of avian influenza amid a surge in demand in Europe and the Middle East.

Meanwhile, international bovine meat prices remained stable, as increased supplies from Brazil and Oceania were adequate to meet persistently high global demand. By contrast, world pork meat prices fell on high export availabilities, especially in Western Europe, amid lacklustre internal demand and expectations for releasing pork meat from the EU Commission’s Private Storage Aid scheme. International prices of ovine meat also dropped, reflecting the impact of currency movements.

Sugar price index

The FAO Sugar Price Index averaged 120,3 points in May, down 1,3 points (1,1%) from April. This marked the first decline after sharp increases registered in the previous two months. The recent monthly decline in international sugar price quotations was triggered by limited global import demand and good global availability prospects, mostly stemming from a bumper crop in India.

The weakening of the Brazilian real against the US dollar and lower ethanol prices resulted in further downward pressure on world sugar prices. However, uncertainties over the current season’s out-turn in Brazil, the world’s largest sugar exporter, prevented more substantial price declines.

Unlike other commodity groups, most prices utilised in the calculation of the FAO Meat Price Index are not available when the FAO Food Price Index is computed and published. Therefore, the value of the Meat Price Index for the most recent months is derived from a mixture of projected and observed prices.

This can, at times, require significant revisions in the final value of the FAO Meat Price Index, which could in turn influence the value of the FAO Food Price Index. – Food and Agriculture Organization of the United Nations

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