FAO records decline in global Food Price Index

The global Food Price Index recorded its seventh consecutive decline in February, according to the Food and Agriculture Organization of the United Nations (FAO). The FAO Food Price Index, which tracks monthly changes in the international prices of a set of globally traded food commodities, averaged 117,3 points in February, down 0,7% from January and 10,5% from the same month a year ago.

The trend was driven by reduced prices of major grains, which outweighed sugar and meat price increases.

The FAO Cereal (Grain) Price Index decreased 5% in February to reach a level 22,4% below that of February 2023.

It said maize export prices dropped the most amid expectations of large harvests in South America and competitive prices offered by Ukraine, while international wheat prices declined mostly due to strong exports from Russia.

International rice prices declined 1,6% in February.

“The FAO Vegetable Oil Price Index decreased by 1,3% from January to stand 11% below its February 2023 value. International soya oil prices dropped markedly, underpinned by prospects of abundant soya bean outputs in South America, while ample global export availabilities of sunflower and [canola] oils pushed their prices down. World palm oil prices rose marginally in February due to seasonally lower production,” the FAO said.

The Sugar Price Index rose 3,2% in February, reflecting persistent concerns over Brazil’s upcoming output after a prolonged period of below-average rainfall as well as forecast production declines in Thailand and India. The FAO said the Meat Price Index rose 1,8% from January, with poultry meat rising the most, followed by beef.

The FAO Dairy Price Index increased 1,1%, led by higher import demand from Asian buyers for butter. Prices of milk powders and cheese also rose marginally.

Agbiz chief economist Wandile Sihlobo said there were ample grain supplies on the global market, with the 2023/24 global maize harvest forecast at 1,2 billion tons, up 6% year-onyear (y/y), according to data from the International Grains Council (IGC).

The IGC forecast that the 2023/24 global wheat harvest would reach 788 million tons, well above the long-term average levels, albeit down 1% y/y. “There is also a lot of rice globally, with the 2023/24 global harvest forecast at 511 million tons, well above the long-term average (but down 0,6% y/y). The 2023/24 global soya bean harvest is estimated at 391 million tons, up 5% y/y,” Sihlobo said.

He added that global production forecasts implied a general improvement in the stocks of these major commodities and a moderation in prices.

“The broad decline in grains and oilseed prices underpinned this moderation, again underscoring the importance of improved supplies in the 2023/24 season.”

Dawie Maree, head of Information and Marketing at FNB Agriculture, said the trend was a two-edged sword.

“It is good news in terms of food inflation forecasts for the consumers, especially in those commodities of which South Africa is a net importer, such as wheat and rice.

“But the flipside means that producers can expect downward pressure on commodity prices, if one considers that the majority of our local commodity prices are linked to the international market. If this decline in the index continues, we can expect that food inflation will stabilise, which in turn bodes well for interest rates on international level. It can be expected that international central banks might start considering lowering interest rates.”

However, local food inflation could be higher for longer, with the South African Reserve Bank forced to keep interest rates higher for longer, he said. –

‘PRODUCERS CAN EXPECT DOWNWARD PRESSURE ON COMMODITY PRICES AS LOCAL PRICES ARE LINKED TO THE GLOBAL MARKET’