Global food prices hit 31-month high in July: FAO

Global food prices rose for a third consecutive month in July to hit the highest in 31 months, with hot and dry weather in North America and some other parts contributing to the situation, according to a report released by the Food and Agricultural Organisation (FAO) of the United Nations on Thursday.

The FAO data shows that average global food prices increased by 2.3 per cent in July against June, primarily driven by a sharp increase in the prices of rice, wheat, sugar, milk and cheese. FAO’s Food Price Index averaged 179.1 points in July, up by 3.9 points or 2.3 per cent from June. The latest rise put the Index nearly 16.6 points (10.2 per cent) above last year’s level and at its highest since January 2015.

“The Cereal Price Index averaged 162.2 points in July, up almost 8 points (5.1 per cent) from June and 14.1 points (9.5 per cent) from July 2016. Cereal prices have risen consistently over the past three months, driven by stronger wheat prices and, to a lesser extent, also firmer rice quotations. Wheat prices have jumped the most in July as continued hot and dry weather deteriorated spring wheat conditions further in North America, fuelling quality concerns, particularly for higher protein wheat,” the report said.

“Seasonal tightness also provided some support to rice quotations, although gains were capped by a slowdown in demand. Instead, maize values remained largely steady, as support provided by a more rapid pace of foreign purchases by China was outweighed by improved weather conditions in the United States,” it said.

Global wheat output in 2017 is forecast at 739.9 million tonnes (mt), 3.3 mt (0.4 per cent) below June expectations. The downward revision is almost entirely on account of smaller crops in the European Union and Ukraine where dry conditions are anticipated to reduce yields. The Vegetable Oil Price Index averaged 160.4 points in July, down 1.8 points (or 1.1 per cent) from June and marking the lowest level since August 2016.

The slide was driven by palm oil, the key commodity in the Index. International palm oil quotations continued to ease on good production prospects in Southeast Asia and weak global import demand, notwithstanding low inventory levels.

The Dairy Price Index averaged 216.6 points in July, up 7.6 points (3.6 per cent) from June and 74.3 points (52.2 per cent) above its value in July 2016. Despite this latest increase, the Index is still 21 per cent below its peak reached in February 2014.

International prices of butter, cheese and whole milk powder (WMP) increased, but those of skimmed milk powder (SMP) declined.

Tighter export availabilities pushed butter prices to a new high in July, widening the spread between butter quotations and other dairy products further.

While strong buying activity from Asian importers also underpinned cheese and WMP quotations, SMP prices were weighed down by slack demand and prospects of larger releases from the intervention stocks in the EU.

The Sugar Price Index averaged 207.5 points in July, up 10.2 points (5.2 per cent) from June, but still 26 per cent below its value a year earlier. July marked the first monthly increase in sugar prices since the beginning of the year.

The FAO data shows that average global food prices increased by 2.3% in July against June, primarily driven by a sharp increase in the prices of rice, wheat, sugar, milk and cheese