Global food prices fall for second consecutive month in May

Global food commodity prices fell in May for the second consecutive month, the Food and Agriculture Organisation of the United Nations (FAO) has said.

The fall was led by declines in the vegetable oil and dairy price indices, while the sugar price index also fell to a lesser extent, according to details highlighted in the Food Price Index report released on Friday.

The index tracks the international prices of the most commonly traded food commodities.

The report said the FAO Vegetable Oil Price Index averaged 229.3 points in May, down 3.5 per cent month-on-month, yet remaining markedly above its year-earlier level.

It said the monthly decline mainly reflects lower prices across the palm, sunflower, soy, and rapeseed oils. International palm oil prices weakened moderately in May.

“Apart from demand rationing, the removal of Indonesia’s short-lived export ban on palm oil exerted additional downward pressure on prices, although a further price drop was contained by lingering uncertainties over the country’s export prospects,” the FAO said.

According to the report, the FAO Dairy Price Index averaged 141.6 points in May, down 3.5 per cent from April, marking the first decline after eight consecutive monthly increases, but still 20.5 points (16.9 per cent) higher than its level in May of last year.

It said world prices of all milk products fell, with milk powders declining the most, underpinned by lower buying interests on market uncertainties stemming from the continued lockdown in China, despite the persistent global supply tightness.

Butter prices also dropped significantly due to weaker import demand in tandem with some improvements to supplies from Oceania and limited internal sales in Europe.

The FAO Sugar Price Index averaged 120.3 points in May, down 1.1 per cent from April, marking the first decline after sharp increases registered in the previous two months. The report said that the monthly decline in international sugar price quotations was triggered by limited global import demand and good global availability prospects, mostly stemming from a bumper crop in India.

Other indices rise

The report said the FAO Cereal Price Index averaged 173.4 points in May, up 2.2 percent from April and as much as 29.7 percent above its May 2021 value.

It said international wheat prices rose for a fourth consecutive month, up 5.6 per cent per cent, to an average of 56.2 per cent of their value last year and only 11 per cent below the record high reached in March 2008.

“The steep increase in wheat prices was in response to an export ban announced by India amidst concerns over crop conditions in several leading exporting countries, as well as reduced production prospects in Ukraine because of the war,” it said.

“By contrast, international coarse grain prices declined by 2.1 per cent in May but remained 18.1 per cent above their value a year ago. Slightly improved crop conditions in the United States of America, seasonal supplies in Argentina and the imminent start of Brazil’s main maize harvest led maize prices to decline by 3.0 per cent, however, they remained 12.9 per cent above their level of May 2021.”

Similarly, the report said international sorghum prices also fell in May, declining by 3.1 per cent, while spillover from the strength in wheat markets and concerns over crop conditions in the European Union boosted barley prices by 1.9 per cent.

Meat Price Index averaged 122.0 points in May, up 0.5 per cent from April, setting a new all-time high, driven by a steep rise in world poultry meat prices, more than offsetting declines in pig and ovine meat values.

“In May, poultry meat prices rose, reflecting the continued supply chain disruptions in Ukraine and recent cases of avian influenza amid a surge in demand in Europe and the Middle East,” the report said.

Outlook

FAO said the world cereal utilisation is forecast to decline marginally in 2022/23, by around 0.1 per cent from 2021/22 to 2 788 million tonnes, marking the first contraction in 20 years.

The decline mainly stems from foreseen decreases in the feed use of wheat, coarse grains and rice, while global food consumption of cereals is expected to increase, keeping pace with world population trends, it said.

In the same vein, world trade in cereals is forecast to decline by 2.6 per cent from the 2021/22 level to 463 million tonnes, a three-year low, even as prospects for international trade of rice remain positive.

The new forecasts point to a drop in inventories, resulting in the world cereal stocks-to-use ratio dropping to 29.6 per cent in 2022/23 from 30.5 percent in 2021/2022.

“This new level would be the lowest in nine years, but still well above the 21.4-per cent low registered in 2007/08,” it said.