The FAO Food Price Index continues its rise in May

The FAO Food Price Index (FFPI) continued to rise for the fifth consecutive month, averaging 172.4 points in May 2019, up 1.2 percent (2.1 points) from April but still 1.9 percent below its level in the corresponding month last year. While prices for sugar and oils fell, the other sub-indices registered increases in May, led again by strong month-on-month firming of prices of dairy products followed by cereals.

The FAO Cereal Price Index averaged 162.3 points in May, up 1.4 percent (2.2 points) from April. However, at this level, the index remained some 6 percent below its May 2018 value. The small month-on-month increase was entirely driven by a sudden surge in maize quotations in response to diminishing production prospects in the United States. By contrast, wheat price quotations were generally lower in May in view of good global supply prospects and adequate export availabilities. FAO's rice price index held steady for the third successive month, as a mild increase in aromatic quotations was offset by slight price declines in most other rice market segments.

The FAO Vegetable Oil Price Index averaged 127.4 points in May, shedding 1.3 points (or 1.1 percent) from April and lingering well below its year-earlier level. The drop mainly reflected lower values of palm oil, whereas prices of soy, sunflower and rapeseed oils appreciated modestly. The further drop in international palm oil quotations was tied to continued pressure from large inventory levels in leading exporting countries as well as falling mineral oil prices. In the meantime, soy and sunflower oil prices received some support from firm global import demand, while rapeseed oil values were underpinned by concerns over reduced crop prospects in the EU.

The FAO Dairy Price Index averaged 226.1 points in May, up 11.2 points (5.2 percent) from April, pushing the index 24.2 percent higher than at the start of the year and closer to a five-year high. A sharp upswing in cheese price quotations was mainly behind the strong increase in May, with other dairy products represented in the index also remaining above their January levels. The dairy price increase reflected robust global import demand amid tight export availabilities from Oceania, as drought conditions reinforced the seasonal decline in milk production. Concerns over milk production in Europe also provided support to prices.

The FAO Meat Price Index averaged 170.2 points in May, up marginally from April and continuing the moderate month-on-month price increases registered since the beginning of the year. In May, pig meat quotations continued to rise due to strong import demand, especially from East Asia, primarily driven by production declines associated with the spread of the African Swine Fever (ASF) in the region. Ovine meat prices also received a push from robust import demand, notwithstanding record export volumes from Oceania, while poultry meat prices remained stable reflecting well-balanced market conditions. By contrast, price quotations of bovine meat eased from the highs recorded in April, reflecting elevated global export supplies.

The FAO Sugar Price Index averaged 176 points in May 2019, down 5.8 points (3.2 percent) from April. The latest monthly decline in international sugar prices was largely driven by the prospects of increased sugar output in India, the world’s largest sugar producer. In addition, weaker international energy prices negatively affected international sugar prices by encouraging producers to process sugarcane into sugar instead of ethanol. Reports that Brazil sugar production in 2018/19 marketing year, which ended on 31 March 2019, registered a fall of 17 percent year-on-year, were not sufficient to offset the downward pressure on prices.