United Nations: Food commodity prices fall for fifth year in a row, says FAO
Published in SUNS #8381 dated 17 January 2017

Geneva, 16 Jan (Kanaga Raja) -- The prices of key food commodities fell for the fifth consecutive year in 2016, averaging 161.6 points for the year as a whole, a decline of 1.5 percent from the previous year, the UN Food and Agriculture Organisation (FAO) has said.

In its latest Food Price Index, FAO said that while prices of sugar and vegetable oils rose significantly in 2016, falling prices in cereal, meat and dairy markets kept the Index below its 2015 average.

The Index averaged almost 172 points in December 2016, unchanged from November with strong gains in the prices of vegetable oils and dairy largely offsetting a fall in sugar and meat quotations.

"Economic uncertainties, including movements in exchange rates, are likely to influence food markets even more so this year," said FAO senior economist Abdolreza Abbassian.

The FAO's Food Price Index is a trade-weighted index that tracks international market prices for major cereals, vegetable oils, dairy, meat and sugar.

FAO's Cereal Price Index averaged 142.1 points in December, up just 0.5 percent from November and broadly stable since September.

According to FAO, international rice prices increased somewhat in December, sustained by official measures put in place in Thailand to prop-up local prices and also strong demand for supplies from Pakistan.

While maize quotations also firmed in December, mostly on weather concerns and brisk demand, wheat values weakened as a result of larger-than-expected production estimates in Australia, Canada and the Russian Federation as well as good crop prospects in Argentina.

Overall, said FAO, the Cereal Price Index averaged around 147 points in 2016, down 9.6 percent from 2015 and as much as 39 percent from its peak in 2011.

The FAO's Vegetable Oil Price Index averaged 183 points in December. The Index gained 7.4 points (or 4.2 percent) from November and reached its highest level since July 2014, primarily driven by palm and soy oils.

For palm oil, low global inventory levels and protracted supply tightness continued to bolster prices, while soy oil quotations firmed on both weather concerns in Argentina and the prospect of rising uptake by the biodiesel sector in the United States, Brazil and Argentina.

FAO said that for the year as a whole, the index averaged nearly 164 points, up 11.4 percent from 2015 but well below the values recorded in the preceding five years.

Meanwhile, the FAO's Dairy Price Index averaged 192.6 points in December, up 6.2 points (3.3 percent) from November, mainly on account of moderate rises for butter, cheese and Whole Milk Powder (WMP), while quotations for Skimmed Milk Powder (SMP) remained stable.

Restrained milk production in the European Union and Oceania and buoyant international and domestic demand continued to underpin the market, said FAO.

While the Index average for 2016 was 4 percent lower than the previous year, international dairy prices staged a substantial recovery from mid-year onwards, with butter and WMP recording the largest increases.

The FAO's Meat Price Index averaged 161.5 points in December, 1.8 points (1.1 percent) down from its revised value for November.

Quotations for ovine (lamb and mutton) and bovine meat in particular fell, while those for poultry and pig meat were only slightly down.

Despite modest growth during the course of the year, the average value of the Index in 2016 was 7 percent below that of 2015, with the largest falls recorded for bovine and poultry meats, said FAO.

The FAO's Sugar Price Index averaged 262.6 points in December, down 24.6 points (8.6 percent) from November.

"The sharp fall in international sugar prices in December was mainly driven by a continuous weakening of the Brazilian currency (Real) against the US Dollar, boosting sugar exports from Brazil, the world's largest sugar producer and exporter."

Reports of higher-than-expected sugar production in 2016/17 (up 18 percent from 2015/16) in the Centre South, Brazil's main producing region, also contributed to pushing down prices, said FAO.

Overall, however, the FAO Sugar Price Index averaged 255.9 points in 2016, 34.2 percent higher than in 2015, the first yearly rise since reaching a peak of 369 points in 2011.

The sharp increase in 2016 mostly reflected tighter supplies in Brazil, India and Thailand, said FAO. +