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FAO Food Price Index falls but remains high

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Index in May was still 22.8% higher than same time last year.

The FAO Food Price Index (FFPI) averaged 157.4 points in May 2022, falling 0.9 points (0.6%) from April. While the decline marked the second consecutive monthly decline, the index was still 29.2 points (22.8%) above May 2021.

Vegetable oil, sugar, and dairy price indices were all lower, but cereal and meat price indices increased.

FAOFAO food price 5.22.jpg

The FAO Meat Price Index averaged 122.0 points in May, up 0.6 points (0.5%) from April, setting a new all-time high, driven by a steep rise in world poultry meat prices, which more than offset declines in pork 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 FAO reported. “Meanwhile, international bovine meat prices remained stable, as increased supplies from Brazil and Oceania were adequate to meet persistently high global demand.”

By contrast, FAO reported that world pork prices fell on high export availabilities, especially in Western Europe, amid lackluster internal demand and expectations for releasing pork from the EU Commission's Private Storage Aid scheme. International prices of ovine meat also dropped, reflecting the impact of currency movements.

The FAO Cereal Price Index averaged 173.4 points in May, up 3.7 points (2.2%) from April and as much as 39.7 points (29.7%) above its May 2021 value. International wheat prices rose for a fourth consecutive month, up 5.6% in May, to average 56.2% above their value last year and only 11% below the record high reached in March 2008. FAO said 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.

By contrast, international coarse grain prices declined by 2.1% in May but remained 18.1% above their value a year ago. Slightly improved crop conditions in the U.S., seasonal supplies in Argentina and the imminent start of Brazil's main maize harvest led maize prices to decline by 3.0%; however, they remained 12.9% above their level of May 2021.

International sorghum prices also fell in May, declining by 3.1%, while spillover from the strength in wheat markets and concerns over crop conditions in the European Union boosted barley prices by 1.9%.

International rice prices increased for the fifth successive month in May. Prices strengthened in all the major market segments, but monthly increases were least pronounced (2.6%) for the most widely traded Indica varieties, amid ample supplies, especially in India.

The FAO Dairy Price Index averaged 141.6 points in May, down 5.1 points (3.5%) from April, marking the first decline after eight consecutive monthly increases, but still 20.5 points (16.9%) higher than its level in May of last year.

“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,” the FAO noted.

Butter prices also dropped significantly, which FAO attributed to weaker import demand in tandem with some improvements to supplies from Oceania and limited internal sales in Europe. Meanwhile, robust retail sales and high demand from restaurants ahead of the summer holidays in the Northern Hemisphere prevented cheese prices from falling significantly, despite weakened global import demand.

The FAO Vegetable Oil Price Index averaged 229.3 points in May, down 8.3 points (3.5%) month-on-month but markedly above the year-ago level. FAO said the monthly decline mainly reflects lower prices across 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”

Meanwhile, world price quotations for sunflower oil fell from recent record highs, with stocks continuing to accumulate in Ukraine owing to logistical bottlenecks. International soy and rapeseed oil prices also declined somewhat in May, chiefly weighed by sluggish import demand in view of elevated costs in recent months.

The FAO Sugar Price Index averaged 120.3 points in May, down 1.3 points (1.1%) from April, marking the first decline after sharp increases registered in the previous two months. The recent 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, FAO explained.

“The weakening of the Brazilian Real against the U.S. dollar and lower ethanol prices resulted in further downward pressure on world sugar prices. However, uncertainties over the current season's outturn in Brazil, the world's largest sugar exporter, prevented more substantial price declines.”

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