F.A.O. food price index drops but remains higher than last year
BakingBusiness.com, November 8, 2011
by Jay Sjerven

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The Food and Agriculture Organization Food Price Index averaged 216 points in October, down 9 points, or around 4%, from September and down 22 points, or around 9%, from its peak of 238 points reached in February 2011. At 216 points, the index was at an 11-month low.

The food price index consists of the average of five commodity group price indices (meat, dairy, cereals, oils and fats, and sugar) weighted with an average export share of each of the groups for 2002-2004. While the index has declined steadily for the past four months, the F.A.O. cautioned prices generally remained higher than last year and remained very volatile.

The F.A.O. said the recent drop in the index was triggered by sharp declines in international prices of cereals, oils, sugar and dairy products. Meat prices declined the least. “An improved supply outlook for a number of commodities and uncertainty about global economic prospects is putting downward pressure on international prices, although to some extent, this has been offset by strong underlying demand in emerging countries where economic growth remains robust,” the F.A.O. commented.

The F.A.O. Cereal Price Index registered an 11-month low in October at 232 points. At the same time, cereal prices remained 5% higher than last year’s average. “Severe problems caused by flooding recently marred rice production in Thailand,” the F.A.O. said. “However, the impact on the international market has been limited so far given large reserves.”

The F.A.O. sugar price index averaged 361 points in October, down 5% from September and down 10% from the peak set in July 2011. “Large global supplies of sugar have put downward pressure on sugar prices since June,” the F.A.O. indicated. “Improved supplies also weighed on dairy markets (the dairy index was 204 points in October, down 5% from September), while strong palm oil output and record sunflower seed crops have driven prices down in the oils sectors in recent months (the fats and oils index in October averaged 233 points, down 13 points, or 6%, from September).”


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