Food prices climb to new heights

Food prices climb to new heights

Weather and Black Sea political tension push food prices to 10-month highs.

UNSEASONABLE weather in key growing areas and political unrest in the Black Sea region contributed to a higher global Food Price Index last month, the highest level since May 2013, according to the U.N. Food & Agriculture Organization (FAO).

"The index was influenced, as expected, by unfavorable weather conditions in the U.S. and Brazil and geopolitical tensions in the Black Sea region," FAO senior economist Abdolreza Abbassian said.

The FAO Food Price Index climbed to an average of 212.8 points in March, up 4.8 points, or 2.4%, from the previous month (Table).

The Agricultural Market Information System (AMIS), which reviews influences on the global marketplace, reported that while the unusual weather in some major growing areas and conflict in the Black Sea region will not directly affect supply and demand in the current season, they will influence crops to be harvested in the upcoming months and add uncertainty to some markets.

"The Food Price Index looks at March trends. Since then, the initial fear over disruptions in grain shipments from Ukraine has subsided. Also, markets have started to discard any negative impacts that the current difficult domestic economic conditions may bear on plantings or harvests in 2014," Abbassian said.

The index, based on the prices of an array of internationally traded food commodities, showed price increases in all groups except dairy, according to FAO.

Although the cereal price index averaged 205.8 points in March, 5.2% higher than in February and its highest value since August 2013, it remains significantly below last year, falling 34.6 points, or 14.4%, since March 2013.

The recent boost to cereal prices was fueled by a strong pace in grain imports, especially for wheat and corn, scaled-backed soybean production in Brazil due to unfavorable weather and rising concerns over grain shipments from Ukraine.

According to AMIS, ample rice and corn will be available in 2014 due to higher production last year resulting in large stocks. The global soybean supply should still be sufficient enough to meet demand despite Brazil's production problems. On the other hand, wheat production is anticipated to decline in 2014, but world supplies remain abundant.

Since many cereal crops have yet to be planted, FAO's early outlook for 2014 provides projections only, pegging world wheat production at 702 million metric tons, 2% lower than last year, and global rice production at 500.7 mmt, up 0.8% from 2013.

Dry weather conditions in Australia and the U.S. kept beef prices higher, while concerns over the impact of porcine epidemic diarrhea virus on supplies drove pork prices to record-high levels. As a result, the meat price index climbed 2.7 points to an average of 185 points.

The price decline for dairy products, in particular for whole milk powder, for the first time in four months was a result of China reducing purchases, reservations over trade with Russia and New Zealand's good start to its dairy year.

Sugar saw the largest increase in prices, rising 18.5 points over February. Drought in Brazil and Thailand has created concern over the availability of sugarcane in the upcoming year.

For the remainder of the year, the potential impact of El Nino weather patterns will most likely spur a surge in world food prices, especially for cereal crops and sugar.

 

FAO food price index*

 

Food Price

 

 

 

Vege-table

 

 

Index

Meat

Dairy

Cereals

oils

Sugar

2000

91.1

96.5

95.3

85.8

69.5

116.1

2001

94.6

100.1

105.5

86.8

67.2

122.6

2002

89.6

89.9

80.9

937.

87.4

97.8

2003

97.7

95.9

95.6

99.2

100.6

100.6

2004

112.7

114.2

123.5

107.1

111.9

101.7

2005

118.0

123.7

135.2

101.3

102.7

140.3

2006

127.2

120.9

129.7

118.9

112.7

209.6

2007

161.4

130.8

219.1

163.4

172.0

143.0

2008

201.4

160.7

223.1

232.1

227.1

181.6

2009

160.3

141.3

148.6

170.2

152.8

257.3

2010

188.0

158.3

206.6

179.2

197.4

302.0

2011

229.9

183.3

229.5

240.9

254.5

368.9

2012

213.3

182.0

193.6

236.1

223.9

305.7

2013

209.8

184.1

242.7

219.2

193.0

251.0

March

214.8

185.2

228.8

240.5

196.7

262.0

April

216.9

186.6

258.8

230.7

194.0

252.6

May

214.6

180.0

253.5

234.8

194.3

250.1

June

211.9

179.7

246.2

232.3

193.5

242.6

July

207.5

179.4

243.6

222.3

186.7

239.0

Aug.

204.5

182.4

247.6

206.8

181.8

241.7

Sept.

203.7

186.1

250.2

195.0

184.3

246.5

Oct.

206.6

187.3

251.1

196.6

188.0

264.8

Nov.

205.7

185.7

250.8

194.3

198.5

250.6

Dec.

205.8

185.6

264.1

191.5

196.0

234.9

Jan. 2014

202.5

182.2

267.7

189.0

188.6

221.7

Feb. 2014

208.0

182.3

275.4

195.8

197.8

235.4

March 2014

212.8

185.0

268.5

205.8

204.8

253.9

*Food Price Index consists of the average of the five commodity group price indices, weighted with the average export shares of each of the groups for 2002-04.

Source: U.N. Food & Agriculture Organization.

 

Volume:86 Issue:15

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