Food prices climb to a 15-month high

09.09.2016

Food prices in August rose to their highest level in 15 months as advancing dairy and palm oil markets outweighed weakness in grains, which have been depressed by prospects of bumper harvests in key growing regions.

The UN Food and Agriculture Organization’s monthly food price index climbed 1.9 per cent from the month before and almost 7 per cent from August 2015 — the highest level since May last year, with dairy, vegetable oils and sugar leading prices upwards.

Food prices, which have been falling for the past few years on plentiful supplies and favourable weather patterns, seem to have bottomed out, said Abdolreza Abbassian, senior grains economist at the FAO.

“With the exception of July, the index has risen every month this year,” he said.

Since the start of the year, the Rome-based organisation’s sugar price index has jumped 43 per cent, with vegetable oils rising 21 per cent, meat 12 per cent and dairy 7 per cent, as supply has fallen in the face of lower prices.

Cereals, including wheat, corn and rice, have been the only sector that has declined since January, falling almost 4 per cent.

In August, vegetable oils rose 7 per cent from the previous month, driven by strengthening palm oil due to lower than anticipated output in Malaysia and continued tightness in global inventories.

This has coincided with rising import demand in key importing countries, notably China, India and the EU. International prices of rapeseed oil also firmed, reflecting lower crop prospects in Europe.

Dairy prices rose almost 9 per cent from July, with strong increases in cheese, whole milk powder and butter. The market was supported by falling milk production in the EU.

The FAO sugar price index hit its highest level since October 2012 and as much as 75 per cent above the same month last year.

The latest surge in sugar prices was largely due to the strengthening of the Brazilian real, which has been appreciating against the US dollar.

Expectations of a significant supply shortage in global markets and prospects of reduced inventories in Asia also underpinned international sugar prices.

Cereals were down 3 per cent from July on seasonal harvest price pressure and exceptional harvest prospects for wheat and corn. International rice prices were lower on thin buying interest and the forecast of larger than expected crop harvests.


The Financial Times

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