F.A.O. Food Price Index hits highest level since May 2013

by Eric Schroeder
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ROME — The Food and Agriculture Organization of the United Nations said the F.A.O. Food Price Index was 212.8 in March, up 4.6 points, or 2.3%, from February, its highest level since May 2013.

“Last month’s increase was largely driven by unfavorable weather conditions affecting some crops and geopolitical tensions in the Black Sea region,” the F.A.O. said. “Overall, except for the F.A.O. Dairy Price Index, which fell for the first time in four months, all the other commodity price indices registered gains, with sugar and cereals increasing the most.”

The F.A.O. Cereal Price Index was at 205.8 points in March, up 5.2%, or 10 points, from 195.8 points in February. It was the index’s highest value since August 2013, but still ranked well below its value of 234.8 in March 2013.

“Last month’s strength stemmed from a surge in wheat and maize prices reflecting a strong pace in grain imports, growing concerns over the effect of continued dryness in the south-central United States on winter wheat crops, and unfavorable weather in parts of Brazil,” the F.A.O. said. “Geopolitical tensions in the Black Sea region, in particular uncertainties with regard to grain shipments from Ukraine, also provided a boost.  Rice prices were generally stable.”

The Meat Price Index averaged 185 points, up 2.7 points from 182.3 points in February, reflecting higher bovine meat prices, which were associated with dry weather conditions affecting production in both Australia and the United States. Prices for pigmeat also rose, the F.A.O. said, in part on concerns over the effect of Porcine Epidemic Diarrhea virus on export supplies in the United States.  Prices of poultry and ovine meat were only slightly stronger.

The Dairy Price Index averaged 268.5 points, down 6.9 points from February. The F.A.O. said demand for all dairy products has been affected by reduced purchases by China and uncertainty over trade with the Russian Federation. The dairy commodity subject to the sharpest price drop was whole milk powder, reflecting reduced buying interest from China, in particular, the F.A.O. noted.

The Sugar Price Index averaged 253.9 points in March, up 18.5 points from 235.4 points in February.

“Sugar prices kept strengthening amid concerns of declining export availabilities from Brazil and Thailand, due to drought and reduced sugarcane output, respectively,” the F.A.O. said. “The likelihood of sugar crops being adversely affected by El Niño later this year also contributed to the price surge.”

The Vegetable Oil Price Index was 204.8 points in March, up 7 points from February, driven primarily by a surge in palm oil. Additionally, tight inventories in Malaysia and the prospect of rising domestic consumption in Indonesia, the top palm oil producer and exporter, contributed to the strengthening in palm oil values, as did reports about a possible El Niño weather event later this year, the F.A.O. said. International prices for soy, sunflower and rape seed oil also firmed, the agency noted.

The Food Price Index consists of the average of five commodity group price indices weighted with the average export shares of each of the groups for 2002-04. In total, 73 commodity quotations considered by F.A.O. commodity specialists as representing the international prices of the food commodities are included in the overall index.
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