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July 8, 2022

Food commodity prices hover near all-time peak as meat, dairy reach new heights – FAO

Butter prices “rebounded” on uncertainty over European milk supplies.

By Simon Harvey

Global food commodity prices rose again in June from a year earlier, and while vegetable oils and cereals led the gains, meat and dairy prices reached new all time-highs.

However, on a month-on-month basis, prices for vegetable oils, cereals and sugar declined last month but meat and dairy prices increased, according to an index compiled by the UN’s Food and Agriculture Organization (FAO).

The headline FAO Food Price Index, which tracks a basket of five food commodities, rose to an average of 154.2 points in June, up 23.1% from the same month last year but down 2.3% from May. The gauge reached an all-time high of 159.7 in March in the wake of Russia’s invasion of Ukraine.

Ukraine is the world’s largest exporter of sunflower oil and a major supplier of wheat, along with a host of other key food commodities. Russia, meanwhile, is the largest wheat exporter head of the US and Canada. Ukraine is fifth.

Máximo Cullen, the FAO’s chief economist, said: “Although the FAO Food Price Index dropped in June for the third consecutive month, it remained close to the all-time high of March this year. The factors that drove global prices high in the first place are still at play, especially strong global demand, adverse weather in some major countries, high production and transportation costs, and supply chain disruptions due to Covid-19, compounded by the uncertainties stemming from the ongoing war in Ukraine.”

The sub-vegetable oils index rose 34% in June from a year earlier, while the gauge for cereals climbed 27.6%. Indexes for dairy and meat increased 24.9% and 12.7% respectively, while the measure for sugar rose 8.9%.

On a month-on-month basis, vegetable oils dropped 7.6%, while cereals and sugar declined 4.1% and 2.6%, respectively. However, the diary index climbed 4.1% and meat was up 1.7%.

The FAO said international prices for all dairy products rose in June, led by cheese “as the early summer heat wave further weighed on already low milk output in Europe”. It added: “International butter prices rebounded as market uncertainty over milk deliveries in the months ahead bolstered foreign purchases, as well as internal demand in Europe.”

Prices for poultry rose “sharply” in June to an all-time high, the FAO said, “underpinned by the continued tight global supply conditions impacted by the war in Ukraine and the Avian influenza outbreaks in the Northern Hemisphere”.

Lower prices of palm, sunflower, soy and rapeseed oils drove the month-on-month decline in the sub-vegetable oil index. Palm oil prices fell for a third straight month “as seasonally rising output of major producing countries coincided with prospects of increasing export supplies from Indonesia amid large domestic inventories”.

Indonesia, the world’s largest palm-oil producer, lifted its ban on exports in May following a three-week ban to protect domestic supplies.

The FAO said wheat prices dropped 5.7% in June from May, when they reach an unprecedented high, but were still up 48.5% from June last year.

“The decline in June was driven by seasonal availability from new harvests in the Northern Hemisphere, improved crop conditions in some major producers, including Canada, higher production prospects in the Russian Federation, and slower global import demand,” the FAO explained.

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