Stronger U.S. dollar, declining oil prices and large supply of grain contributed to a drop in global food prices in December, according to the Food and Agriculture Organization of the United Nation’s (FAO) monthly calculation of the food price index.
FAO's Food Price Index is a trade-weighted index that tracks prices of five major food commodity groups on international markets. It aggregates price sub-indices of cereals, meat, dairy products, vegetable oils and sugar.
Despite the FAO’s sub-index for meat rose to all-time highs with annual average of 199 points, the overall food price index for 2014 dropped 3.7% from 2013 at averaged 202 points, marking the third consecutive annual decline.
For the month of December, the Food Price index averaged 188.6 points, 1.7% below from the previous month with all commodity prices noted lower except cereals.
Anxiety over export restriction for wheat by the Russian Federation boosted the cereal price up slightly from November 2014. The FAO cereal price index averaged 183.9 points in December, up 0.4%. For the most part, the price of all cereals moderated with an annual average index of 192 points, down 12.5% from 2013.
Abundant export supplies weighed on global dairy prices in December with the dairy price index declining 4.1 points to averaged 174 points for the month. A slower pace for international milk sales coupled with increased production worldwide drove the 2014 dairy price index down 7.7% from 2013 to yearly average of 224.2 points.
Although meat prices were the only commodity group that penciled an increase annual average for 2014, the sub-index in December did fall 1.9% to 204 points. In spite of this, at 204 points, this index is near its monthly record highs, and on a full-year basis rose 8.1% in 2014 from 2013.
The FAO vegetable oil prices index also fell in December to an averaged 161 points, down 2.4% from November as the slump in crude oil depressed demand for palm oil. Falling to a 5-year low, the index in 2014 averaged 181 points, down 6% from 2013, with palm oil, the vegetable oil with the highest weight in the Index.
Ample sugar supplies caused the December sugar price index to fall 11 points to 219 points from November. Similar, the index in 2014 dropped 3.8% lower than 2013, averaging 241 points.