FAO: Global food prices reached all-time high in February

The Food and Agriculture Organisation (FAO) says global food prices reached an all-time high in February — driven by vegetable oils and dairy products. 

In a statement on Friday, FAO said the food price index (FPI), which tracks changes in the international prices of items of commonly traded food commodities, averaged 140.7 points in February, up 3.9 percent from January. 

The new figure is 24.1 percent above the previous year and 3.1 points higher than in February 2011.

“Concerns over crop conditions and adequate export availabilities explain only a part of the current global food price increases. A much bigger push for food price inflation comes from outside food production, particularly the energy, fertiliser and feed sectors,” said FAO economist Upali Galketi Aratchilage.

“All these factors tend to squeeze profit margins of food producers, discouraging them from investing and expanding production.”

According to the report, the February reading only partly incorporates market effects stemming from the conflict in Ukraine.

The overall rise in FPI was led by an 8.5 percent increase in the FAO vegetable oils price index, a new record high.

The report said it was principally due to sustained global import demand, which coincided with a few supply-side factors, such as lower soybean production prospects in South America.

The dairy price index averaged 6.4 percent higher in February than January, supported by lower-than-expected milk supplies in Western Europe and Oceania, as well as persistent import demand, especially from North Asia and the Middle East.

The report added that the cereal price index increased 3.0 percent over January due to rising quotations for maize and other coarse grains, caused by continued concerns over crop conditions in South America, uncertainty from Ukraine, and rising wheat export prices.

“World wheat prices increased by 2.1 percent, largely reflecting uncertainty about global supply flows from Black Sea ports. International rice prices increased by 1.1 percent, sustained by strong demand for fragrant rice from Near East Asian buyers and the appreciation of the currencies of some exporters against the U.S. dollar,” the report reads. 

“The FAO Meat Price Index rose 1.1 percent from January, with international bovine meat quotations reaching a new record high amid strong global import demand and tight supplies of slaughter-ready cattle in Brazil and high demand for herd rebuilding in Australia.”

The FAO sugar price index also declined by 1.9 percent amid favourable production prospects in India, Thailand and other major exporters, as well as improved growing conditions in Brazil.

FAO also published a preliminary forecast that shows worldwide cereal output may increase to 790 million tonnes this year.

It said anticipated high yields and extensive planting in North America and Asia should offset a likely slight decrease in the European Union and the adverse impact of drought conditions on crops in some of the North African countries.

“FAO has also updated its forecast for world cereal production in 2021, now pegged at 2 796 million tonnes, a 0.7 percent increase from the year before,” it added. 

“Global cereal utilisation in 2021/2022 is now seen at 2 802 million tonnes, a 1.5 percent annual increase. Global cereal stocks ending in 2022 are forecast to grow slightly over the year to 836 million tonnes.”