U.N. food price index falls; still third-highest ever

By Sara Wyant

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, Jan 22, 2014-The Food and Agriculture Organization (FAO) of the United Nations recently reported the second straight annual drop in its food price indexbut still the third highest level on record, as declines in sugar, cereal and vegetable oil offset sharp increases in meat and dairy prices.

 

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For 2013, the index averaged 209.9 points, down 1.6 percent from 2012 and below 2011's peak of 230.1.

 

“Last month, the FAO food price index remained elevated as strong demand for certain high-protein foods continued to drive up prices overall, countering falling prices of major food crops after last year's abundant harvests,” said FAO economist Abdolreza Abbassian.


Meanwhile, in the United States, the USDA's Economic Research Service (ERS) is predicting food, food-at-home, and food-away-from-home consumer price indexes to increase 2.5 percent to 3.5 percent this year over 2013 levels. “This forecast is based on an assumption of normal weather conditions; however, a resurgence of the drought in key agricultural areas or other severe weather events could potentially drive up food prices beyond the current forecasts,” ERS said.

 

ERS forecasts that food price inflationary pressures are expected to be moderate, given the outlook for commodity prices, animal inventories and export trends. Retailer margins, having contracted since the drought, may expand in 2014 given moderate input prices, which should contribute to inflation, ERS said.

 

Also, the Labor Department's Bureau of Labor Statistics' most recent Consumer Price Index (CPI) data show that food-at-home monthly prices remained steady in December. Overall, CPI data found that national prices for food-at-home increased by 0.4 percent over the past year.

 

The U.N. report focused on prices for five major food commodities: cereals, dairy products, meat, sugar and vegetable oils.

·       The FAO cereal price index averaged 219.2 points in 2013, down as much as 17 points, or 7.2 percent, from 2012. Large global supplies, following record harvests in 2013, continued to hold down international prices of wheat and maize.

·       The FAO sugar price index was 18 percent lower in 2013. The index saw a sharp slide of 15.8 points in December for the third consecutive monthly decline, with the sugar cane harvest in Brazil - the world's largest sugar producer and exporter - exceeding expectations.

·       The FAO dairy price index had its highest annual value in 2013 with an average of 243 points. Demand for milk powder, especially from China, remains strong, and processors in the Southern Hemisphere are focusing on this product rather than on butter and cheese, the report said.

·       The FAO meat price index remained historically high in 2013, as prices for bovine and pig meat moved higher, and on strong demand from China and Japan. Prices for poultry were stable, while those for sheep meat moved lower.

·       The FAO's vegetable oil price index dropped below 2013's average, with palm oil falling to a four-year low.

 

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