FAO: Global food prices have declined — but still higher than last year

The Food and Agriculture Organisation (FAO) of the United Nations says global food prices declined further for the fifth month in a row in August.

Despite the latest drop, it said the prices were still nearly 8 percent higher than a year ago.

The UN agency, in its latest food price index released on Friday, said the prices of five commodities – cereals, vegetable oil, dairy, meat, and sugar – were lower in August than in July.

It said the index averaged 138.0 points last month, down nearly 2 percent from July, though 7.9 percent above its value last year.

FAO said the decline in cereal prices reflected improved production prospects in North America and Russia, and the resumption of exports from Black Sea ports in Ukraine.

It attributed the price drop to a landmark agreement to unblock Ukraine grain exports amid the ongoing war, signed in July by the country, Russia, Turkey, and the UN.

The organisation said the price of rice was stable on the average in August, while quotations for coarse grains, such as maize, increased marginally.

Meanwhile, vegetable oil prices decreased by 3.3 percent, which is slightly below the August 2021 level.

FAO said this was due to the increased availability of palm oil from Indonesia, due to lower export taxes, and the resumption of sunflower oil shipments from Ukraine.

It said although dairy prices saw a 2 percent drop, they remained 23.5 percent higher than in August 2021.

According to the report, the price of cheese increased for the tenth consecutive month, though milk prices “eased” following expectations of increased supplies from New Zealand, even amid projections of lower production in Western Europe and the US.

However, the price of meat declined by 1.5 percent but remained just over 8 percent higher than the value in August last year.

Similarly, international quotations for poultry fell amid elevated export availabilities, and bovine meat prices declined due to weak domestic demand in some top exporting countries, while pig meat quotations rose.

FAO said sugar prices also hit their lowest level since July 2021, largely due to high export caps in India and lower ethanol prices in Brazil.

“The August decline was mainly triggered by an increase in the sugar export cap in India, and lower ethanol prices in Brazil, which raised expectations of a greater use of sugarcane to produce sugar,” the report reads.

“However, the lower-than-earlier expected sugar production in Brazil in the first half of August due to adverse weather, along with persisting concerns over the impact of dry conditions on the 2022 crop in the European Union, prevented more substantial sugar price declines.

“The strengthening of the Brazilian real against the United States dollar also contributed to limiting the fall in world sugar prices (expressed in US dollars).”