CEM REPORT – Lagos | The index for world food prices went up in January, largely catalyzed by supply-side constraints for vegetable oils, the Food and Agriculture Organization of the United Nations (FAO) reported today.
The FAO Food Price Index (FFPI) is a measure of the monthly change in international prices of a basket of food commodities. It consists of the average of five commodity group price indices weighted by the average export shares of each of the groups over 2014-2016.
According to the report, the FAO Food Price Index averaged 135.7 points in January which is 1.1 percent higher than in December.
The FAO Vegetable Oils Price Index led the rebound in January, increasing by 4.2 percent month-on-month and reversing its December decline to reach an all-time high. Quotations for all major oils rose, also supported by rising crude oil prices. Palm oil prices were largely underpinned by concerns over a possible reduction in export availabilities from Indonesia, the world’s leading exporter, while soy oil prices were supported by robust import purchases, particularly from India, rapeseed oil prices were pushed up by lingering supply tightness, and sunflowerseed oil quotations were impacted by supply tightness and surging global import demand.
Cereal Price Index averaged 140.6 points in January, up marginally (0.1 percent) from December and 15.6 points (12.5 percent) above its level one year ago. World wheat prices eased in January, down 3.1 percent, with increased seasonal supplies from large harvests in Australia and Argentina. However, support from continued strong demand amidst tight global availability of higher-quality wheat along with uncertainty over exportable supplies, prevented prices from declining further.
By contrast, maize export prices were firmer in January, gaining 3.8 percent since December, mostly on concerns of persistent drought conditions in the southern hemisphere, namely Argentina and Brazil; spillover effects from the wheat market added upward pressure on maize prices. Among other coarse grains, international sorghum prices also rose in January, in line with maize price trends, while barley quotations were slightly lower. The completion of main-crop harvests in major suppliers and purchases by Asian buyers also raised international rice prices in January by 3.1 percent.
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Within the period under review, the FAO Dairy Price Index increased by 2.4 percent, its fifth consecutive monthly rise, with the steepest increases registered for skim milk powder and butter. Reduced export availabilities from Western Europe and below-average expectations for milk production in Oceania in the months ahead contributed to the tightening in global dairy markets, as did processing and transportation delays linked to COVID-19-related labour shortages.
Meat Price Index averaged 112.6 points in January, up slightly from December 2021, and lifting the index value 16.6 points (17.3 percent) above its corresponding month a year ago. In January, bovine prices reached a new peak, underpinned by strong global import demand exceeding export supplies, mainly from Brazil and Oceania, reflecting lower cattle supplies for processing.
Meanwhile, pig meat quotations rose slightly, as labour shortages and high input costs dampened global supply, countering the downward pressure from China’s slowdown in imports. By contrast, ovine and poultry meat prices softened further, as global exportable supplies outstripped import demand, despite constrained supplies stemming from COVID-19-related production and transportation delays, and avian flu outbreaks in some large poultry meat producing countries.
The FAO Sugar Price Index averaged 112.8 points in January, down 3.7 points (3.1 percent) from December, marking the second consecutive monthly decline and the lowest level in the past six months. The January decline in international sugar price quotations was mostly related to favourable production prospects and good harvest progress in major exporters, India and Thailand, and improved rains in key growing areas of Brazil.
In addition, lower ethanol prices in Brazil exerted further downward pressure on world sugar prices in January. However, the strengthening of the Brazilian Real against the US Dollar, which tends to restrain shipments from Brazil, the world’s largest sugar exporter, prevented more substantial sugar price declines.