Falling grain, oilseed and dairy prices push index to lowest level since January 2014.
Source: Food and Agriculture Organization of the United Nations
ROME - The FAO Food Price Index decreased for a fourth consecutive month in July mainly due to a sharp decline in international prices for maize, wheat and certain oilseeds, reflecting ample supplies for these commodities.
Based on the prices of a basket of internationally-traded food commodities, the FAO Food Price Index averaged 203.9 points in July 2014, down 4.4 points (or 2.1 percent) from a revised value in June and 3.5 points (or 1.7 percent) below the July 2013 level.
"The lingering decline of food prices since March reflects much better expectations over supplies in the current and forthcoming seasons, especially for cereals and oils, a situation that is expected to facilitate rebuilding of world stocks," said FAO senior economist Concepción Calpe.
In contrast, meat prices rose for the fifth consecutive month in July, and those for sugar remained firm. The fall in quotations for grains, oilseeds, as well as dairy products pushed down the FAO Food Price Index to its lowest level since January 2014.
"Livestock product markets have their own dynamics: in the case of meat, beef in particular, many exporting countries are in a herd rebuilding phase, which is limiting availability for exports and sustaining prices," Calpe said. "As for dairy products, supplies available for trade appear to be abundant, which, along with a faltering import demand, has weighted on July's quotations," she added.
Sharp slide in cereal and oilseed prices
The FAO Cereal Price Index averaged 185.4 points in July, down 10.7 points or5.5 percent from June and as much as 36.9 points or 16.6 percent below the level one year ago.
In particular the fall in international prices for maize (down 9.2 percent from June) and wheat (down 5.8 percent) reflected excellent production prospects as well as expected abundant exportable supplies in the 2014/15 marketing season.
In contrast, rice prices edged marginally higher, on renewed import demand, especially as Thailand's sales from public reserves remained suspended.
The FAO Vegetable Oil Price Index averaged 181.1 points in July, down 7.7 points or 4.1 percent from June. The decline continued to be primarily driven by falling soy and palm oil prices.
Soy oil values fell mainly in response to record crop prospects for the United States as well as abundant supply in South America while palm oil quotations eased on persisting strength in Malaysia's currency and slow global import demand. Prices for rape and sunflowerseed oil also weakened, reflecting ample crop prospects for 2014/15.
The FAO Dairy Price Index averaged 226.1 points in July, down 10.3 points (4.4 percent) over June and 17.5 points (7.2 percent) less than the same period last year. Reduced import demand - including a decline in purchases of butter by Islamic countries during Ramadan - contributed to the downward trend in dairy prices.
Meat prices rise while sugar remains volatile
A continued strong demand for meat in Asia and particularly China, helped to edge up the FAO Meat Price Index which averaged 204.8 points in July, 3.7 points (1.8 percent) higher than its revised value in June and 25.4 points (14.1 percent) above the same period last year. Average prices for poultry and ovine meat also rose, while those for pig meat fell back somewhat from the all-time high registered in June.
The FAO Sugar Price Index averaged 259.1 points in July, marginally up by 1.1 points (0.4 percent) from June, and 20.2 points (8.4 percent) higher than in July 2013. International sugar prices have been relatively volatile over the last three months, amid uncertainty over the impact of a drought on sugarcane in Brazil, the world's largest producer and exporter and indications of below average monsoon rains in India, the second largest world sugar producer.