Food commodity prices eased for a sixth month in September, trimming gains on a rolling annual basis that have partly been driven by the war in Ukraine.

A “sharp” drop in vegetable oils prices offset a month-on-month increase in cereals prices, which were led higher by a 2.2% “rebound” in the cost of wheat, the Food and Agriculture Organization of the United Nations reported today (7 October).

The FAO Food Price Index tracking a basket of five commodities – veg oils, cereals, meat, dairy and sugar – edged down 1.1% in September from a month earlier to average 136.3. The gauge was still up 5.5% from last year.

While the annualised increase in prices compared to August’s 7.9% gain, the month-on-month September decline was less pronounced than the previous 1.9% drop and the 8.6% decrease in July.

Veg oil prices – down 6.6% on the month – reached the lowest index level since February last year. They fell 9.5% from September 2021.

In its commentary on food commodity prices, the FAO explained: “International quotations for palm, soy, sunflower and rapeseed oils were all lower. Lingering heavy inventories of palm oil, coinciding with seasonally rising production in south-east Asia, pushed palm oil prices down. Higher soy oil export availabilities in Argentina, increased sunflower oil supplies from the Black Sea region and lower crude oil prices also contributed to the drop in this sub-index.”

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Food commodity prices have been propped up since Vladimir Putin’s troops invaded Ukraine in February, with subsequent international sanctions crimping the supply of crude oil and gas, and leading to higher global energy prices.

While Ukraine is one of the world’s top exporters of wheat, barley, sunflower oil and fertiliser, a deal was brokered in July to allow outgoing shipments of some commodities. However, the terms were for 120 days, which would expire in November.

Wheat prices pushed up the cereals sub-index in the FAO food index by 1.5% in September from August, keeping the gauge 11.3% higher than a year earlier.

The FAO linked the wheat price increase to “concerns regarding dry crop conditions in Argentina and the United States of America, a fast pace of exports from the European Union amid high internal demand, and heightened uncertainty about the Black Sea Grain Initiative’s continuation beyond November”.

Meat prices fell 0.5% month-on-month but were up 7.7% from last year, with the FAO citing a decline in pig slaughtering in Europe as a component. The EU announced this week that pork production from the trading bloc would likely fall 5% in 2022 due to higher feed costs and African swine fever.

“World bovine meat prices fell on high export availabilities from Brazil and elevated cattle liquidation in some producing countries, while poultry meat prices inched down due to subdued import demand,” the FAO said. “By contrast, world pig meat prices rose due to a supply shortfall of ready-to-slaughter animals in the European Union.”

Dairy declined 0.6% in September from August, with prices rising 21% from the same month last year. The month-on-month drop was also a reflection of the weak euro against the US dollar, “along with market uncertainties and bleak global economic growth prospects”, the UN body noted.

Sugar edged down 0.7% and was 9.5% lower than last year, “mostly related to good production prospects in Brazil, along with lower ethanol prices and currency movement effects”, the FAO said.

For more on Just Food’s coverage of how the war is affecting the food industry, please visit our dedicated microsite.

Just Food’s parent GlobalData is providing an ongoing analysis of the war’s impact across business sectors.