Global Food Prices steady in August

Global Food Prices remained virtually unchanged last month, as indicated by the FAO Food Price Index (FFPI) for August 2018.

The FAO Food Price Index for August averaged 167.6 points, virtually unchanged from its revised estimate for July but down 9.6 points (5.4 percent) from its level in the corresponding period last year.

While cereals and, to a lesser extent, meat values were firmer in August, the values of the other sub-indices, namely sugar, vegetable oils and dairy products, dropped.

The FAO Cereal Price Index averaged 168.4 points in August, representing a rebound of 6.5 points (4.0 percent) over July and of 15 points (10 percent) from August 2017.

Wheat prices rose the most, by over 8 percent month-on-month, largely on tighter export availabilities in view of deteriorating crop prospects, especially in the EU and the Russian Federation. International maize quotations also firmed, up by more than 3 percent from July, influenced by a slower pace in sales by Argentina and Brazil as well as the spill over from rising wheat values.

By contrast, international rice prices eased, amid efforts to attract buyers and free space for new crop arrivals.

The FAO Vegetable Oil Price Index averaged 138.2 points in August, down 3.7 points (2.6 percent) from July and hitting the lowest monthly average in 35 months.

The drop in August was mainly driven by falling values of palm, soy and sunflower oils. International palm oil price quotations declined for the fifth consecutive month on persistently weak global import demand and the accompanying accumulation of inventories in major producing countries.

Lower quotations of soy oil mostly reflected strong crushing activities in the United States and Brazil, while the favourable crop outlooks in the Black Sea region underpinned the fresh fall in sunflower oil prices.

The FAO Dairy Price Index averaged 196.2 points in August, down nearly 3 points (1.5 percent) from the previous month, marking the third consecutive month of decline.

Price quotations of butter, Skim Milk Powder (SMP) and Whole Milk Powder (WMP) fell for the second successive month, while those of cheese rebounded marginally from the dip in July. The recent price trend reflects limited market activities, not unusual for this period of the year, as well as market uncertainty surrounding the eventual size of export availabilities.

While milk production growth could be adversely affected in parts of Europe and Australia due to droughts, New Zealand is expected to produce more milk in the 2018/19 season than had been projected earlier.

The FAO Meat Price Index averaged 166.3 points in August, only slightly changed from the revised value for July but 4.6 percent below its level in the same month last year.

The meat price index values for June and July were adjusted significantly, primarily on recent official Brazilian downward revisions to bovine meat export data for those months. In August, increases in the price quotations of pigmeat and ovine meat were offset by slight decreases in poultry and bovine meat quotations.

Price quotations of ovine meat strengthened for a third consecutive month on solid import demand amid continued weak offerings from Oceania, while those of pigmeat increased due to strong import interests from China amid slow supply responses in Europe. High export availabilities from the United States underpinned bovine price weakness, while weakening import demand caused poultry values to drop.

The FAO Sugar Price Index averaged 157.3 points in August, down 8.9 points (5.4 percent) from July, the lowest level in a decade.

The decline in August was largely the result of the continued depreciation of the currencies of Brazil and India against the US dollar. As major exporters of sugar, shipments from Brazil and India become more competitive when their currencies weaken against the US dollar, which leads to increased supply of sugar in world markets.

Concerns over production prospects in the EU and Asia, notably India and Indonesia, were not sufficient to offset the currency-induced downward pressure on international sugar prices.