Global food prices fall for second consecutive month – FAO Food Price Index

GLOBAL – Global food commodity prices fell in July for the second consecutive month mainly driven by higher-than-expected crop yields, declines in the quotations for most food products, and a slow pace of sales caused by high freight costs and logistical hurdles. 

According to the recently released FAO report, the Food Price Index averaged 123.0 points in July 2021, 1.2 percent lower than the previous month although still 31 percent higher than its level in the same period of 2020.  

The declines in July follow a similar trend observed in June, which marked the first drop in the Index following twelve consecutive monthly increases. 

Better-than-earlier projected maize yields in Argentina and improved production prospects in the US more than offset concerns about crop conditions in Brazil leading to a 6.0 percent month-on-month drop in international maize prices. 

International rice prices also hit two-year lows, impacted by currency movements and a slow pace of sales caused by high freight costs and logistical hurdles. 

However, wheat quotations edged 1.8 percent higher in July – reaching their highest level since mid-2014 – in part due to concerns over dry weather and crop conditions in North America. 

This significant drop in maize and rice prices led to the The FAO Cereal Price Index dropping by 3.0 percent points in July.  

The FAO Dairy Price Index declined 2.8 percent from June, impacted by slower market activity in the Northern Hemisphere due to ongoing summer holidays, with skim milk powder registering the largest drop, followed by butter, whole milk powder and cheese. 

“The FAO Vegetable Oil Price Index reached a five-month low, declining 1.4 percent from June, as lower prices for soy, rape and sunflower seed oils more than offset rising palm oil values,” details the organization. 

“A lower biodiesel blending mandate in Argentina pressured soyoil prices lower, while those for rape and sunflower oils were influenced by prospective record supplies for the 2021/22 season.” 

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In contrast, the FAO Sugar Price Index increased by 1.7 percent in July, its fourth monthly increase with FAO attributing the rise to firmer crude oil prices as well as uncertainties over the impact of recent frosts on yields in Brazil, the world’s largest sugar exporter. 

The organization however noted that good production prospects in India prevented a larger jump. 

The FAO Meat Price Index rose marginally from June, with quotations for poultry meat rising the most due to increased imports by East Asia and limited production expansions in some regions 

Bovine meat prices also strengthened, buoyed by high imports from China and lower supplies from major producing regions. Meanwhile, pig meat prices fell, following a decline in imports by China. 

The FAO’s has also released its July forecast for global cereal production in 2021 where it has marginally lowered production since the previous report in June to 2 817 million tonnes. 

The modest month-on-month cutback principally concerns coarse grains, with global production now pegged at 1 513 million tonnes, 3 million tonnes below last month’s expectation.   

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