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Food commodity prices fall for fifth consecutive year

FAO Food Price Index remained stable in December amid sharp fall in sugar prices.

Prices of major food commodities declined for the fifth year in a row in 2016, averaging 161.6 points for the year as a whole, some 1.5% below their 2015 levels, according to the U.N. Food & Agriculture Organization (FAO).

Bumper harvests and prospects for staple cereals offset upward pressure on FAO's Food Price Index from tropical commodities such as sugar and palm oil, where production was affected by El Nino.

In December, the index averaged nearly 172 points, unchanged from November.

The FAO Food Price Index is a trade-weighted index tracking international market prices for five key food commodity groups: major cereals, vegetable oils, dairy, meat and sugar.

According to the report, 2016 was marked by a steady decline in cereal prices, which fell 9.6% from 2015 and were down 39% from their 2011 peak. At the same time, sugar and vegetable oil prices rose over the year by 34.2% and 11.4%, respectively.

"Economic uncertainties, including movements in exchange rates, are likely to influence food markets even more so this year," FAO senior economist Abdolreza Abbassian said.

Cereals steady in December as dairy, vegetable oils rise

FAO's Cereal Price Index, which has been largely stable since September, increased 0.5% in the month of December, with rice and maize quotations firming up while larger-than-expected production estimates in Australia, Canada and the Russian Federation led to lower wheat prices.

FAO's Vegetable Oil Price Index rose 4.2% from November, capping a double-digit annual gain to reach its highest level since July 2014. Both palm oil and soy oil quotations rose, the former due to low global inventory levels and tight supplies, the latter on the prospect of rising use in the biodiesel sectors in North and South America.

The FAO Dairy Price Index also rose by 3.3% from November due primarily to higher prices for butter, cheese and whole milk powder and restrained output in the European Union and Oceania.

The FAO Sugar Price Index, while up almost a third over the year, declined 8.6% in the last month of 2016. The sharp drop was mainly driven by ongoing weakening of the Brazilian real against the U.S. dollar, along with a reported 18% jump in expected production in the Centre South, Brazil's main sugarcane-growing region.

The FAO Meat Price Index declined 1.1% from its revised November level. Its average value in 2016 was 7% below that of 2015 due mainly to declines in the international prices of bovine and poultry meats.

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