International food prices drop first time in 12 months

Prices of major food commodities captured in the FAO Food Price Index (FFPI) dropped in June for the first time in 12 months, as it averaged 124.6 points in June 2021, down 3.2 points (2.5 percent) from May, but still 31.5 points (33.9 percent) higher than its level in the same period last year.

As the Food and Agricultural Organisation of the United Nations (FAO) stated, “the decline in June marked the first drop in the FFPI following twelve consecutive monthly increases.” The drop reflected declines in the prices of vegetable oils, cereals and, to a lesser degree, dairy prices, which it says more than offset generally higher meat and sugar quotations.

The FAO Food Price Index (FFPI) is a measure of the monthly change in international prices of a basket of food commodities. It consists of the average of five commodity group price indices weighted by the average export shares of each of the groups over 2014-2016. The five commodity groups are cereal, vegetable oil, dairy, meat, and sugar.

The FAO Cereal Price Index averaged 129.4 points in June, down 3.5 points (2.6 percent) from May but still 32.7 points (33.8 percent) above its June 2020 value. After reaching their highest level in May since January 2013, international maize prices dropped by 5 percent in June, yet remained over 72 percent higher than in the same period last year.

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Among other coarse grains, international barley and sorghum prices also softened in June, falling by 2.2 percent and 4.9 percent, respectively. International wheat prices declined slightly (by 0.8 percent) in June, but remained above last year’s values by over 31 percent. International rice prices also fell in June, hitting fifteen-month lows, as high freight costs and container shortages continued to limit export sales.

The FAO Vegetable Oil Price Index averaged 157.5 points in June, falling by 17.2 points (or 9.8 percent) from May and marking a four-month low. The sizeable month-on-month drop mainly reflects lower prices of palm, soy and sunflower oils.

By contrast, international rapeseed oil quotations withstood the downward overall trend in vegetable oil prices, underpinned by prospects of recovering demand in the European Union on easing lockdown measures.

The FAO Dairy Price Index averaged 119.9 points in June, down 1.2 points (1.0 percent) from May, ending twelve months of uninterrupted increases. At this level, the index value stood 21.6 points (22.0 percent) above its value in the corresponding month last year. In June, international quotations for all dairy products represented in the index fell, with butter registering the highest drop, underpinned by a fast decline in global import demand and a slight increase in inventories, especially in Europe. Whole milk powder prices declined on reduced purchases by China and lower demand for spot supplies, while global export availabilities remained adequate to meet existing orders. International quotations for cheese and skim milk powder declined slightly also on reduced global import demand amid somewhat higher export supplies from major producing regions.

The FAO Meat Price Index averaged 109.6 points in June, up 2.2 points (2.1 percent) from its revised value for May, continuing the increases for the ninth consecutive month and placing the index 15.6 percent above the corresponding month last year, but still 8.0 percent below its peak reached in August 2014.

It was, however, noted that the value of the Meat Price Index for the most recent months is derived from a mixture of projected and observed prices. This can at times, require significant revisions in the final value of the FAO Meat Price Index, which could in turn influence the value of the FAO Food Price Index.

The FAO Sugar Price Index averaged 107.7 points in June, up slightly by 0.9 points (0.9 percent) from May, marking the third consecutive monthly increase and reaching a new multi-year high. Uncertainties over the impact of unfavourable weather conditions on crop yields in Brazil, the world’s largest sugar exporter, exerted upward pressure on prices.

On the other hand, good production and export prospects in India had partly offset the overall upward pressure on international sugar prices and prevented larger monthly increases.