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Global food price index fall 2.3% in June over supply surge in cereal, veg oil: FAO

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Global food price index fall 2.3% in June over supply surge in cereal, veg oil: FAO

Highlights

Food price index still over 23% higher on year

Vegetable oil prices fall 7.6% on month

Cereal index down 4.1% on month

Global food prices dipped 2.3% in June, falling for the third consecutive month after reaching a record high in March, the UN's Food and Agriculture Organization said in a report July 8.

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The FAO's food price index averaged 154.2 points in June, down 3.7 points from May led by a slump in vegetable oil and cereal prices as supply surged during seasonal harvests across the world.

The index, which has tracked monthly changes in the international prices of a basket of food commodities since 1990, remained 23.1% higher on the year. Food prices had dipped 0.6% the previous month, pulled lower by a price fall in the same commodities.

"Although food prices have dropped, it remains close to record high of March. Factors that drove global prices high are still at play, especially strong global demand, adverse weather, high production and transportation costs, and supply chain disruptions due to pandemic, compounded by uncertainties from ongoing war," said FAO chief economist Maximo Torero Cullen in the report.

Poor prices push down veg oil index

The FAO vegetable oil price index fell to 211.8 points in June, down 7.6% on the month driven by lower prices of palm, sunflower, soybean, and rapeseed oils -- the most traded vegetable oils globally.

Seasonally high production at origins combined with demand rationing at destinations due to high prices pushed sunflower and soybean oil prices down in June, the FAO said.

The crude palm oil FOB Indonesia price stood at $1,180/mt on July 1, down 28% from $1,650/mt on June 1, according to S&P Global Commodity Insights data, as Indonesian vegetable oil sellers looked to clear out stocks built up from a three-week ban on exports in May.

The FAO sugar index fell 2.6% from May, with slowing global economic growth weighing on demand.

On the other hand, the indices for both dairy and meat prices rose during the period, from 145.8 and 119.3 points to 149.8 and 124.7 points, respectively. The FAO attributed the increase in global dairy product prices to low milk production in Europe, aggravated by an early summer heat wave.

The surge in meat prices was "underpinned by the continued tight global supply conditions impacted by the war in Ukraine and the avian influenza outbreaks in the Northern Hemisphere."

Better supply hopes weigh on cereal prices

The FAO cereal price index fell 4.1% to 166.3 points in June due to a sharp decline in wheat, corn and coarse grain prices. However, the index remained nearly 28% higher on year.

Wheat prices fell by 5.7% in June, likely due to improved crop conditions in Canada, Russia and poor import demand at higher prices, the FAO said.

The FAO cut its global wheat output forecast for the 2022-23 marketing year (April-March) slightly to 770.3 million mt from 770.8 million mt a month ago. However, it increased its global wheat export view to 190.6 million mt against 188.9 million mt seen earlier.

Wheat prices, assessed by Platts, with origins in Canada, Russia, and Australia declined by between 7% and 19% during June, according to S&P Global Commodity Insights data.

For corn, prices saw a 3.5% decline due to increased availability of the crop in Argentina and Brazil where the harvest has progressed quickly, according to the FAO. Improved crop conditions in the US also weighed on the prices, it added.

According to the FAO, coarse grain prices also fell 4.1% in line with lower wheat and corn prices.

For MY 2022-23, the FAO has increased its view for global coarse grain output by 6 million mt to 1.5 billion mt. It has also raised its view for global coarse grain exports to 222.8 million mt in June from 220 million mt seen in May.

Corn prices, assessed by Platts, with origins in Brazil, Argentina, and the US fell between 7%-13% during June, according to S&P Global data.