FAO Food Price Index Drops in December

January 10, 2013 12:11 AM

The FAO Food Price Index dropped for the third consecutive month in December 2012, edging down 1.1% to 209 points. The drop was led by declines in prices of major cereals and oils and fats. This is up from the lowest 2012 value of 200 points posted in June, but lower than the 2012 average of 212.

  • The FAO Cereal Price Index averaged 250 in December, down 6 points (2.3%) from November. In 2012, the index averaged 241, or 2.4% below 2011. After surging over the July to September 2012 period, on production uncertainties and tightening supplies, cereal export quotations dropped because of weaker demand for feed and industrial uses. In December, maize prices fell sharply, as large export supplies in South America relieved pressure from tight availabilities in the United States. Rice prices also dipped in December, on expectation of good harvests, but wheat values changed little under subdued trade activity. 
  • The FAO Oils/Fats Price Index averaged 197 in December, down 4 points (1.9%) from November, the fourth consecutive month of decline and the lowest level since September 2010. The main reason for the fall in December is the continued build-up of large global inventories of palm oil – as abundant production in Southeast Asia coincided with a protracted weakness of import demand.  The decline in the index  would have been even stronger  without the prospect of both a tight global supply and demand situation for soybean oil during the next two to three months and lower than anticipated availabilities of sunflower-seed oil.  For 2012 as a whole, the index averaged 225, which compares with 252 in 2011.
  • The FAO Meat Price Index averaged 176 in December,  down marginally from November. Quotations of all meat categories remained close to their November level, except pig meat, which fell by 3 points (2.0%).  The Index averaged 175 points in 2012, the second highest annual value after 2011 when it averaged 177 points.  The most notable price change in 2012 was a fall of 8.3 percent in the index for ovine meat from the 2011 record.  Overall, the meat sector has had to focus on productivity gains, as increased feed costs have not been associated with higher product prices. 
  • The FAO Dairy Price Index averaged 197 in December, 2  points (0.9%) higher than in November. In the last quarter of 2012, dairy prices stabilized, after having risen from mid-year lows. The average value of the Index during 2012 was 189, down sharply from 221 in 2011. Overall, the dairy market remains well-balanced; however, it is increasingly susceptible to supply changes depending on  pasture conditions – especially as southern-hemisphere producers assume an increasing role in supplying the world market - and on feed availability and affordability.
  • The FAO Sugar Price Index averaged 274 in December, down marginally from November and  its lowest value since August 2010. The FAO index averaged 306 in 2012, down 17.1% from the previous year. The expectation of a third consecutive increase in global production and large export availabilities in the 2012-13 marketing season, notably in Brazil, have put international prices under downward pressure for much of the second half of 2012.


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