FOOD prices worldwide rose sharply higher last month as a result of weather-related events and increased demand, according to the U.N. Food & Agriculture Organization's (FAO) monthly Food Price Index.
The FAO Food Price Index for February 2014 averaged 208.1 points, registering its steepest increase since mid-2012. The latest index is 2.6% above January but 2.1% lower than last year.
"This month's increase follows a long period of declining food prices in general, but it's too early to say if this is a true reversal of the trend," FAO senior economist Concepcion Calpe said. "The weather is probably a major force driving up prices for certain commodities like sugar or wheat, but brisk demand is also an important factor underpinning maize, dairy and oil prices."
Prices climbed for all internationally traded food commodities — except for meat — with sugar, oils, cereals and dairy registering the strongest increases (Figure).
Concerns over the U.S. wheat crop and anticipated strong demand for coarse grains for both feed and biofuels, coupled with high Japanese rice prices, drove the FAO cereal price index 6.8 points higher, a 3.6% increase from January 2014. Still, cereal prices are 18.8% lower than last year.
Although it is early, FAO's first forecast for 2014 global wheat production is estimated to be 704 million metric tons, which is a 1.7% decrease from 2013 as wheat yields are expected to be back to normal after a record-setting year for Canada and European members of the Commonwealth of Independent States.
The Agricultural Market Information Service — an inter-agency platform established at the request of G20 agriculture ministers to enhance food market transparency and encourage coordination of policy action in response to market uncertainty — recently reported that despite the possibility that conflict in the Ukraine will slow down grain exports, bumper crops in several major producing countries will continue to boost global grain stocks for corn, wheat, soybeans and rice.
In comparison to last year, lower feed costs contributed to the marginal decline in meat and poultry prices. Pork and poultry registered declines, while beef prices remained at the same level.
In February, the FAO dairy index increased 2.9%, or 7.7 points, over January as result of continuing strong demand for all dairy products, especially in North Africa, the Middle East and Russia. Limited supplies have pressured prices upward, and as a result, the February index was 31.3% higher than the previous year.
Unfavorable weather conditions in Southeast Asia and South America and rising demand from biodiesel producers worldwide increased the vegetable oil price index 4.9% from January.
Similarly, concerns of crop damage from dry weather in Brazil and a predicted drop in output from India caused sugar prices to rebound in late February after a three-month decline.