Global food prices retreats marginally in April from record high levels: FAO

Global food prices have eased slightly from all-time high levels in March largely driven by the cool down in vegetable oil and cereal price index, the UN's Food and Agriculture Organization said in report May 6.

The FAO Food Price Index averaged 158.5 points in April, down 1.2 points from an all-time high in March. The retreat was mainly due to a fall in the price of vegetable oils and cereals and was contained by a surge in meat, dairy, and sugar prices.

Food prices shot to their highest in March after Russia's invasion of Ukraine as markets priced in stoppages from the two major grains and oilseed exporters.

With food supply chains straining to keep up with demand, rising food costs drove inflation higher across the world, pinching household budgets, food security concerns and even civil unrest in some parts of the world.

"The small decrease in the index is a welcome relief, particularly for low-income food-deficit countries, but still food prices remain close to their recent highs, reflecting persistent market tightness and posing a challenge to global food security for the most vulnerable," said FAO Chief Economist Máximo Torero Cullen.

Vegetable oil shed 5.7 % from March

In April, vegetable oil prices saw the steepest decline among the basket of food items considered for the food price index, FAO said May 6, driven by a decline in palm, soybean and sunflower oil markets.

The FAO Vegetable Oil Price Index averaged 237.5 points in April, down 5.7% from the record high registered in March, but much higher than last year's level of 162.19 points.

Physical prices of palm, soybean and sunflower oils touched record-highs in March according to S&P Global but were weighed down by April due to demand rationing amid high costs as well as reduced purchasing from second largest vegetable oil buyer China.

However, a surprise ban on all palm oil exports by Indonesia restarted a rally in vegetable oil markets, with trade sources estimating that the move by the world's largest producer and exporter of palm oil could create a 1.5 million mt gap between supply and demand over the coming month.

Cereals remain 34% high despite 0.7 points slide

Global cereals prices remained elevated in April, despite a slight fall month on month, according to FAO. The cereal price index average in April was at 169.5 points, down from the record high of 170.1 points in March. The index was still over 34% higher on year.

Cereal prices decreased in April due to a 3% drop in corn prices and slight fall in sorghum prices, FAO added. According to FAO, corn prices have decreased due to supply pressure from ongoing harvests in Argentina and Brazil. However, FOB prices of corn from Ukraine, the US, Brazil, and Argentina have between 2% and 5% month on month, according to S&P Global.

For coarse grains, the FAO has increased its estimates for global trade in the marketing year 2021-22 to 228.7 million mt, 2.4 million mt up from the previous month. On the other hand, global wheat prices remained largely steady in April due to continued global supply shortages, the report added.

"Continued blockage of ports in Ukraine and concerns over 2022 crop conditions in the United States of America kept prices elevated," the report added. However, the price increases were capped by increased shipments from India and higher-than-expected exports from Russia, the report said.

Platts assessments of FOB prices of Australian, Russian, and Ukrainian wheat by S&P Global rose around 4% month on month. The FAO also increased its global wheat trade estimates for MY 2021-22 by more than 1 million mt to 191 million mt in its April report.

The global price index for meat increased 2.2% from March to a new record high driven by high prices of poultry, pig and bovine meat. While poultry meat supplies were disrupted from export disruptions in Ukraine and avian influenza outbreaks, the pig meat prices surged on prolonged low supply of slaughter pigs against high demand.

Higher ethanol prices in Brazil with strengthening of its currency against US Dollar also drove sugar prices by 3.3 % amidst concerns of slow start to 2022 harvest in Brazil, the world's largest sugar exporter, the FAO said. FAO Dairy Price Index bumped up 0.9 % led by tightness in supply as milk output in western Europe and Oceania as it tracked below seasonal levels.