FAO Food Price Index Falls Sharply

June 8, 2012 06:42 AM

Led partly by a drop in the dairy product prices, international food price index is lowest since September 2011.

Retail, McDs, Wal Mart 4 08 016   CopyLed partly by a drop in the Dairy Price Index, global food prices fell sharply in May due to generally favorable supplies, growing global economic uncertainties and a strengthening of the U.S. dollar, the Food and Agriculture Organization (FAO) of the United Nations said June 7.
The FAO Food Price Index, measuring the monthly change in international prices of a basket of food commodities, fell by 4 percent in May. It averaged 204 points and was 9 points down from April. This was the lowest level since September 2011 and about 14 percent below its peak in February 2011.
"Crop prices have come down sharply from their peak level but they remain still high and vulnerable due to risks related to weather conditions in the critical growing months ahead," said FAO's grain analyst Abdolreza Abbassian.
The FAO Dairy Price Index averaged 164 points in May, down 22 points (12 percent) from April and the lowest level since October 2009. Cheese and butter retreated the most, followed by skim milk powder. By contrast, whole milk powder quotations were up, largely reflecting a tightening of supplies in Europe. The recent slide in international dairy prices, uninterrupted since the beginning of the year, mirrors a rebuilding of supplies in major export markets.
FAO at the same time raised the forecast for world cereal production by 48.5 million tonnes since May, mainly on the expectation of a bumper maize crop in the United States.
FAO's latest forecast for world cereal production in 2012 stands at a record level of 2 419 million tonnes, 3.2 percent up from the 2011 record.
The bulk of the increase is expected to originate mainly from maize in the United States amid an early start of the planting season and prevailing favorable growing conditions. As a result, the global coarse grain production is forecast at 1 248 million tonnes, a huge 85-millionton increase from the previous year.
However, with planting still to be completed and much of the crop at very early stages of development, the final outcome will depend greatly on weather conditions in the coming months.
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