World food prices slump for first time in a year

Photo: EPA

United Nations food agency (FAO) announced that world food prices posted in June their first fall in 12 months. The decline in prices was largely driven by cheaper vegetable oils in addition to cheaper cereals and dairy products, Reuters elaborated. FAO also said that worldwide harvests of cereals would result in almost nearly 2.817bn tonnes in 2021. That estimate is slightly weaker than previously forecast, but still on course to hit an annual record.

The Food and Agriculture Organization's food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat and sugar reached 124.6 points last month compared to a revised 127.8 in May. The May figure was previously given at 127.1. On annual basis, prices were up 33.9% in June.

FAO's monthly vegetable oil price index slumped 9.8% in June, partly on the back of a fall in palm oil prices, which were hit by expectations of output rises in leading producers and a lack of fresh import demand. Soy and sunflower oil quotations also dropped.

The cereal price index dropped 2.6% in June month-on-month, but was still up 33.8% on annual basis. Maize prices fell 5.0%, partly because of higher-than-expected yields in Argentina and improved crop conditions in the United States. International rice prices also fell in June, touching 15-month lows, as high freight costs and container shortages continued to limit export sales, FAO said.

Dairy prices slipped 1.0% on a monthly basis, with all components of the index easing. Butter recorded the largest drop, hit by a rapid decline in global import demand and a slight increase in inventories, especially in Europe. The sugar index posted a 0.9% month-on-month gain, reaching its highest level since March 2017.

FAO said uncertainties over the impact of unfavourable weather conditions on crop yields in Brazil, the world's largest sugar exporter, pushed prices up. The meat index rose 2.1% from May, with quotations for all meat types rising as increases in imports by some East Asian countries compensated for a slowdown in China's meat purchases. FAO said the slight fall in its estimate for world cereal production this year was principally triggered by a sharp cut to the Brazilian maize production forecast as prolonged periods of dry weather weighed on yield expectations. Global wheat production prospects also retreated this month, as dry weather in the Near East hurt yield prospects there. By contrast, the forecast for global rice output in 2021 edged up. The forecast for world cereal utilization in 2021/22 was cut by 15 million tonnes from the previous month to 2.810 billion tonnes, still 1.5% higher than in 2020/21.

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