The FAO Food Price Index fell to a six-month low in July

The FAO Food Price Index averaged 203.9 points in July 2014, down 4.4 points (2.1 percent) from a revised value in June and 3.5 points (1.7 percent) below July 2013. While meat prices rose for the fifth consecutive month and sugar remained firm, sharp declines in grains, oilseeds and dairy quotations pushed down the FAO Food Price Index to its lowest level since January 2014.

The FAO Cereal Price Index averaged 185.4 points in July, down 10.7 points (5.5 percent) from June and as much as 36.9 points (16.6 percent) below one year ago. The recent sharp slide in cereal prices reflected significant falls in international prices of maize (down 9.2 percent) and wheat (down 5.8 percent), a reaction to excellent production prospects in many major producing countries and to the anticipation of abundant exportable supplies in the 2014/15 marketing season. On the other hand, rice prices edged marginally higher, on renewed import demand, especially as Thailand’s sales from public reserves remained suspended.

The FAO Vegetable Oil Price Index averaged 181.1 points in July, down 7.7 points (4.1 percent) from June and the fourth consecutive monthly decline. The slide in the index continued to be primarily driven by soy and palm oil. Soy oil values have fallen mainly in response to record crop prospects for the United States as well as abundant availabilities in South America. Palm oil quotations eased on persisting strength in Malaysia's currency and slow global import demand. Prices for rape and sunflowerseed oil also weakened, reflecting ample crop prospects for 2014/15.

The FAO Dairy Price Index averaged 226.1 points in July, down 10.3 points (4.4 percent) over June and 17.5 points (7.2 percent) less year-on-year. Prices continue to fall reflecting both, reduced import demand and abundant export availability. Following strong production growth this year, export supplies have increased in the EU, while the outlook is for a favourable start to the new season in Oceania. As for imports, purchases of butter by Islamic countries declined during Ramadan, as did those by the Russian Federation. For whole milk powder, limited purchases by China, the largest importer, contributed to a price drop. Quotations for cheese and skimmed milk powder also moved lower.

The FAO Meat Price Index averaged 204.8 points in July, 3.7 points (1.8 percent) more than its revised value in June and 25.4 points (14.1 percent) above last year. The increase was principally due to a strong rise of bovine meat prices in Australia, where herd rebuilding has reduced export supplies, and continued strong import demand in Asia, China in particular. Average quotations for poultry and ovine meat also rose, while those for pig meat fell back somewhat from the all-time high registered in June.

The FAO Sugar Price Index averaged 259.1 points in July, marginally up by 1.1 points (0.4 percent) from June, and 20.2 points (8.4 percent) higher than in July 2013. Over the past three months, international sugar prices have been relatively volatile, with no clear direction amid uncertainty associated with sugar production in Brazil, the world’s largest producer and exporter. Drought in that country has boosted sugar content in sugarcane, but at the same time reduced sugarcane yield, making it difficult to estimate overall sugar production for the 2014/15 season. Also, indications of below average monsoon rains in India, the second largest world sugar producer, and their effects on sugarcane added to the uncertainty.