GLOBAL— Marking the third consecutive monthly decline, The FAO Food Price Index fell 8.6 percent from June, particularly on the costs of wheat and vegetable oil.
The vegetable oil, sugar, dairy, meat and cereal price indices all fell month-on-month in July, with wheat slumping 14.5%, partly due to the reaction to the Russia-Ukraine grain deal, and better harvests in the Northern Hemisphere, the FAO said.
If Futures are anything to go by, prices in the short term may fall further. Wheat, soybean, sugar, and corn futures have fallen from their March highs back to prices seen at the start of 2022.
Analysts cited a mix of both demand and supply reasons for the slide in food prices: Ukraine and Russia’s closely watched agreement to resume exports of grain through the Black Sea after months of blockade; better-than-expected crop harvests; a global economic slowdown; and the strong U.S. dollar.
However, FAO Chief Economist Maximo Torero notes that while the decline in food commodity prices from very high levels is welcome, many uncertainties remain.
In a note published earlier this month, credit rating agency Fitch Ratings’ analysts wrote that a possible increase in fertilizer prices, which fell recently — but which are still double that of 2020 — could cause grain prices to jump again.
Russia’s restriction of gas supply has led European natural gas prices to spike, a key ingredient in nitrogen-based fertilizers. The analysts added that La Nina weather patterns could disrupt grain harvests later this year as well.
“Many uncertainties remain, including high fertilizer prices that can impact future production prospects and farmers’ livelihoods, a bleak global economic outlook, and currency movements, all of which pose serious strains for global food security,” FAO chief economist Maximo Torero said in a press release.
Additionally, there is growing global skepticism over whether Russia will keep its end of the bargain of the grain export deal. Food prices remain volatile and these or any other new shocks can cause more price surges.
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