Global food prices end 2021 in bullish territory despite December dip

GLOBAL FOOD COM MODITY prices declined slightly in December, impacted by a tumble in the international prices for vegetable oils and sugar, the Food and Agriculture Organisation of the United Nations (FAO) reported.

The FAO food price index, which tracks monthly changes in the international prices of the most commonly traded food commodities, averaged 133.7 points in December 2021, down 0.9 percent from November but still up 23.1 percent compared to December 2020.

Despite the December dip, the FAO Food Price Index for 2021 recorded a positive result, averaging 125.7 points, as much as 28.1 percent above 2020 figures, with all sub-indices averaging sharply higher than in the previous year, FAO stated.

In December 2021, the vegetable oil price index averaged 178.5 points, losing 3.3 percent from recent record highs set the previous month.

FAO said the decline was driven by weakening palm and sunflower oil prices, reflecting demand rationing.

On the contrary, soy and rapeseed oil values remained virtually unchanged month on month largely underpinned by strong import demand primarily from India and protracted global supply tightness.

Meanwhile, international palm oil prices traded lower in December, primarily reflecting subdued global import demand amid concerns over the Omicron Covid-19 variant.

“For 2021 as a whole, the FAO Vegetable Oil Price Index averaged 164.8 points, up as much as 65.8 percent from 2020 and marking an all-time annual high,” the report said.

The sugar price index averaged 116.4 points in December, shedding 3.1 percent from November to record a five-month low.

The FAO report explained that the December decline of sugar reflected concerns over the impact of the Omicron COVID-19 variant on global demand for the sweet commodity following the resumption of containment measures in many regions.

The drop in sugar prices was also attributed to the weakening of the Brazilian Real against the US dollar and lower ethanol prices which contributed to lowering world sugar prices in December.

For the year as a whole, the sugar price index averaged 109.3 points, up 37 percent from 2020, its highest since 2016.

“Throughout the year concerns over the reduced output in Brazil amidst stronger global demand for sugar underpinned the increase in prices,” the report noted.

The cereal price index also recorded a month-on-month loss as it averaged 140.5 points in December, down 0.6 percent from November.

The price decline was attributed to a fall in wheat’s export prices in the month, amid improved supplies following harvests in the southern hemisphere and slowing demand.

However, maize prices were strengthened, buoyed by strong demand and concerns over persistent dryness in Brazil, while sorghum prices also rose, partly influenced by maize markets but barley quotations softened slightly.

International rice prices also eased in December as demand plunged, and currencies weakened against the US dollar in various major suppliers.

“For 2021 as a whole, the FAO

Cereal Price Index averaged 131.2 points, up 27.2 percent from 2020 and the highest annual average registered since 2012.

“In 2021, maize and wheat prices were 44.1 and 31.3 percent higher than their respective 2020 averages, mostly on strong demand and tighter supplies, especially among major wheat exporters,” the report noted.

Rice was the sole major cereal to register a decline in prices in 2021, with quotations falling on average 4.0 percent below 2020 levels.

The weakness, according to the FAO, reflected ample exportable availability of rice, which heightened competition among suppliers and led them to seek to counter the impact of high freight costs and container shortages on demand by lowering prices.

On a more positive note, the dairy price index averaged 128.2 points in December, up 1.8 percent from November and 17.4 percent above its December 2020 value.

For the month, international quotations for butter and milk powders continued to increase, underpinned by high global import demand, coupled with tight export supplies, resulting from lower milk production in Western Europe and Oceania.

Commenting on the recent food price index, Abdolreza Abbassian, FAO senior economist, asserted that while normally high prices are expected to give way to increased production, the high cost of inputs, ongoing global pandemic and ever more uncertain climatic conditions leave little room for optimism about a return to more stable market conditions even in 2022.