The Food and Agriculture Organization of the United Nations (FAO) reports a sharp rise in its Food Price Index. The index rose 4.8 points in March to 212.8 -- the highest level since May 2013. The index, based on the prices of a basket of internationally-traded food commodities, saw prices increase in all groups except dairy, which fell for the first time in four months (-2.5%). The greatest gains were seen in sugar (+7.9%) and cereals (+5.2%).
"The index was influenced, as expected, by unfavorable weather conditions in the U.S. and Brazil and geopolitical tensions in the Black Sea region," said Abdolreza Abbassian, FAO Senior Economist. "The Food Price Index looks at March trends. Since then, the initial fear over disruptions in grain shipments from Ukraine has subsided. Also, markets have started to discard any negative impacts that the current difficult domestic economic conditions may bear on plantings or harvests in 2014."
The FAO Cereal Price Index averaged 205.8 points in March, up as much as 10 points from February. It notes that wheat and corn prices "surged and imports were strong amid concerns over the effects of dry weather conditions on winter wheat in the United States, unfavorable weather in Brazil, and tensions in the Black Sea region."
The FAO Meat Price Index averaged 185 points in March, up 2.7 points. "Once again, weather came into play as higher beef prices were associated with dry weather conditions affecting production in both Australia and the United States. Pork also rose, in part on concerns over the effect of the Porcine Epidemic Diarrhea virus on export supplies in the United States," it states.
Meanwhile, FAO says improved outlooks for global cereal supplies and expectations for record trade in 2013-14 led to an increase in its global ending stocks estimate. But it expects global wheat production in 2014 to be down 2 MMT from its initial estimate to 702 MMT, down 2% from last year's record harvest.