Blog: Sugar, oil and cereals push up FAO commodity price index

Michelle Russell | 16 March 2012

Increases in sugar prices, coupled with higher prices of oils and cereals pushed the Food Price Index up for the month of February.

The Food and Agriculture Organisation (FAO)'s sugar price increase, along with higher prices of oils and cereals, pushed the Food Price Index up 1% in February, averaging 215 points.

Sugar prices rose by 2.4% last month as the market reacted to fears of a delayed harvest in Brazil.

The sugar index reached 342 points for the month, albeit 18% lower than in February last year, the FAO said last week. The price rise was driven by unfavourable weather conditions in Brazil, prompting the possibility of a delayed harvest that could lead to short-term tightness in the market, it said.

Large production harvests in India, the EU, Thailand and the Russian Federation managed to contain the increase, but failed to stop the Food Price Index edging up.

Dairy prices fell 2%, but oil and cereal prices both experienced 2% price increases due to poor monthly production growth in palm oil, and high international wheat prices, respectively.

The increases may come as little surprise to those in the industry, given that figures released by BRC-Nielsen in the UK last week showed the annual rate of food inflation in the country was 4.2% in February, compared to 3.7% a month earlier.

The ambient categories were the prime drivers of food price rises, the group said, where inflation is said to be 6.7% year-on-year to February versus 5.6% in the year to January.

Industry watchers had expected inflation to ease this year, and suppliers in particular will be keen to see prices fall back after a year in which commodity cost pressure has led to the need to increase prices. And in a climate of weak consumer confidence, any further price increases will inevitably hit food sales.


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