While prices remain high on local shelves –Global food prices decline

EVEN as the price of food remains very high on local shelves, with businesses giving a myriad of excuses for this – including the war in Ukraine and climate change – a release from the United Nations' Food and Agriculture Organization (FAO) is pointing to a decline in January of the benchmark index of international food commodity prices.

January was the tenth (10) consecutive month the FAO has noted a decline in the benchmark index.

The FAO Food Price Index, released last Friday, averaged 131.2 points in January, 0.8 per cent lower than the previous month and 17.9 per cent below its peak, reached in March 2022.

The index tracks monthly changes in the international prices of commonly-traded food commodities. The price indices for vegetable oils, dairy and sugar drove the January decline, while those for cereals and meat remained largely stable.

In January, the FAO Cereal Price Index was essentially unchanged (up a mere 0.1 per cent) from December and stood 4.8 per cent above its level of one year earlier.

International wheat prices declined by 2.5 per cent as production in Australia and the Russian Federation outpaced expectations. World maize prices rose marginally due to strong demand for exports from Brazil and concerns over dry conditions in Argentina.

International rice prices, however, jumped by 6.2 per cent from December, influenced by tighter availabilities, strong local demand in some Asian exporting countries and exchange rate movements.

The FAO Vegetable Oil Price Index declined by 2.9 per cent in January. World prices of palm and soy oils dropped amid subdued global import demand, while those of sunflower seed and rapeseed oils declined due to ample export availabilities.

The FAO Dairy Price Index averaged 1.4 per cent lower than in December, with prices trending down for butter and milk powders on lighter demand from leading importers and increased supplies from New Zealand.

World cheese prices rose slightly, driven by a recovery in food services and retail sales in Western Europe following the New Year holiday, as well as currency movements.

The FAO Meat Price Index moved fractionally in January (edging down just 0.1 per cent from December), as ample export availabilities weighed on poultry, pig and bovine meat prices, while ovine export prices rose due to stronger import demand.

The FAO Sugar Price Index dropped by 1.1 per cent from December. Strong harvest progress in Thailand and favourable weather conditions in Brazil outweighed the impact on prices due to concerns over lower crop yields in India, higher gasoline prices in Brazil, which support demand for ethanol, as well as the Brazilian real’s appreciation against the United States dollar.

In its new Cereal Supply and Demand Brief, also released Friday, FAO raised its forecast for world cereal production in 2022; however, global cereal supplies are still forecast to tighten in 2022/23.

Global cereal output in 2022 is now forecast at 2 765 million tonnes, or 1.7 per cent below the 2021 outturn.

Upward revisions for Australia and the Russian Federation now point to a record global output for wheat in 2022, while total coarse grains production is expected to decline by 3.3 per cent from the previous year. The forecast for world rice production was revised downward as lower-than-expected output in China more than offset upward revisions for Bangladesh and several other countries.

As a result, global rice output is now predicted to decline by 2.6 per cent from its all-time high in 2021.

Looking ahead to 2023, early indications point to likely area expansions for winter wheat cropping in the northern hemisphere, especially in the United States, driven mostly by elevated wheat prices. However, high fertilizer costs may affect application rates with adverse implications for yields.

In its new brief, FAO predicts international trade in cereals in 2022/23 to decline by 1.7 per cent from the previous year’s record level to 474 million tonnes.