Rising prices of cereals, meat and dairy products have pushed the global food price index up by 1.4 per cent compared to last month and 7.0 per cent compared to last year.
According to the UN Food and Agriculture Organization (FAO), the rise in the Food Price Index – a measure of the monthly change in international prices of a basket of food commodities – was largely because of surging prices of high-protein wheat due to deteriorating crop conditions in the United States.
The FAO Food Price Index 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 with the average export shares of each of the groups for 2002-2004.
Latest Monthly Data:
The FAO Food Price Index (FFPI) averaged 175.2 points in June 2017, up 2.5 points (1.4 percent) from May and 11 points (7 percent) above its level a year earlier. June marked the second successive month of increase in the value of the FFPI. The rise was driven by relatively large increases in dairy and cereal prices. Meat quotations also firmed, while those of sugar and vegetable oils dropped.
The FAO Cereal Price Index averaged 154.3 points in June, 6.2 points (4.2 percent) above its May level and representing a one-year high. Wheat quotations increased the most, largely reflecting a surge in high-protein wheat values due to deteriorating crop conditions in the United States, while strong import demand exerted upward pressure on international rice prices. By contrast, record harvests in South America kept maize prices under downward pressure.
The FAO Vegetable Oil Price Index averaged 162.1 points in June, down 6.5 points (or 3.9 percent) from May, when prices experienced a short-lived rebound. The slide in the index mainly reflects falling palm and soy oil values. International palm oil quotations dropped by a full 7 percent (marking a 10-month low), primarily because of good production prospects in Southeast Asia. Soy oil values dropped as South American bumper harvests bolstered global availabilities, while forecasts point to a near-record global output in 2017/18. Rapeseed and sunflower oil values also dropped, contributing to the overall fall in the index.
The FAO Dairy Price Index averaged 209 points in June, up 15.9 points (8.3 percent) from May. This increase pushed the Index close to the highs registered during the last three years, although it is still 24 percent below its peak reached in February 2014. Prices of all dairy products that constitute the index rose, but butter price increased the most, rising 51.2 points (14.1 percent) from May to an all-time high. Limited export availabilities of dairy products in all major producing countries caused the prices of butter, cheese and skim milk powder to rise significantly, contributing also to stronger whole milk powder prices.
The FAO Meat Price Index averaged 175.2 points in June, up 3.2 points (1.8 percent) from May, marking the sixth consecutive month of moderate price increases. Limited export supplies in Oceania, coupled with strong buying interest, underpinned bovine and ovine meat prices in June, while solid import demand lent some support to pig meat prices. By contrast, poultry quotations continued to be affected by concerns over the spread of Avian Influenza in Europe, Asia and Africa.
The FAO Sugar Price Index averaged 197.3 points in June, down nearly 31 points (13.4 percent) from May and marking a 16-month low. International sugar prices have fallen steadily since February, with the continued decline reflecting large export availabilities, in particular robust Brazilian supplies. Weak import demand has exerted further downward pressure on quotations, especially as purchases by the world’s leading importer, China, have slowed following the imposition of high import tariffs.
FAO Meat Price Index: 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.
Background:
The FAO Food Price Index (FFPI) was introduced in 1996 as a public good to help in monitoring developments in the global agricultural commodity markets. The only major modification made to it – until now – was in 2009, when its base period was updated to 2002–2004.
During the significant price hikes in 2008, the FFPI gained prominence as an indicator of potential food security concerns for vulnerable developing countries. Since then, with the exception of 2009 and 2010, prices of agricultural commodities have remained at relatively high levels compared with those prior to 2008.
In order to determine whether there was a need to revise the base period again to reflect changes in trading patterns post 2007, the FFPI was recalculated based on different reference years. This provided an opportunity to review commodity coverage and price quotations.
It also allowed to make comparisons with other price indices that may have more desirable properties than the Laspeyres form of the FFPI and to assess the relevance of the index as a possible indicator for food security concerns.