Global Food Prices Drop for the First Time in a Year

Vegetable oils and dairy prices fall

FAO’s vegetable oil price index dropped by 9.8% in June, due to a decrease in palm oil prices. Following a surge in palm oil prices for a year, global quotations decreased in June, due to prospective seasonal increases in production by leading global producers along with a lack of fresh import demand. Meanwhile, reduced global import demand led to a decrease in soy and sunflower oil prices.

In June, the FAO Dairy Price Index averaged 119.9 points, a 1% decrease from May, following a year of consecutive increases. Butter experienced the largest price drop amongst dairy products, due to a steep decline in global import demand and a rise in supply, especially in the EU. Whole milk powder prices decreased due to limited purchases by China and weaker demand for spot supplies, while global export availability was sufficient to meet existing orders. Global prices for cheese and skim milk powder dropped slightly due to reduced global import demand and increased exports from major producing regions.

Increased production causes a dip in the prices of cereals

FAO’s cereal price index decreased by 2.6% month-on-month, and global maize prices fell by 5.0%, due to high yields in Argentina and improved crop conditions in the US. The June forecast for global cereal consumption in 2021/22 has also been reduced by 15 million tonnes, compared to 2.81 billion tonnes in May. According to the FAO, by the end of the season in 2021/22, global cereal supplies are set to increase above their opening levels, due to higher maize stocks in China. According to the FAO, global rice prices dipped in June, reaching 15-month lows due to high freight costs and container shortages limiting export sales. The reduction in rice prices was also aided by increased forecasts for global rice production. FAO's recent forecast for world trade in cereals in 2021/22 has increased to a record high of 472 million tonnes, due to large maize imports from China.

According to the FAO, worldwide cereal harvests are estimated to reach nearly 2.817 billion tonnes in 2021, which is set for an annual record. This estimate would mark a new record high, reaching 1.7%, or 47.8 million tonnes, more than in 2020. Global wheat production is set to reach 784.7 million tonnes in 2021, a 1.2% increase year on year. By the end of the 2021/22 season, global cereal supplies are set to be larger than their opening levels for the first time since 2017/18.

Sources:

• Reuters. “World food prices fall in June for first time in a year - FAO.”
  
• Relief Web. “Global food prices fall for the first time in 12 months.”
  
• FAO. “Global food prices fall for the first time in 12 months.”
  
• Republic World. “Global Food Prices Decline In June, After Rising For Over 12months Reports UN.”
  
• Panorama AM. “Global food prices fall for first time in 12 months – FAO.”
  
• FAO. “FAO Cereal Supply and Demand Brief.”
  
• FAO. “FAO Food Price Index.”