Global food prices fall for third consecutive month, says FAO

The FAO Food Price Index was down for a third consecutive month in June, as good supply and improved global production prospects for wheat, maize and palm oil lowered prices.

The Food and Agriculture Organisation of the United Nations (FAO) today confirmed that global food prices fell for the third month running on the back of the falling prices of cereal and vegetable oil and improved global supplies. However, the organisation warned that conflicts and adverse weather continue to threaten food security in many countries.

The Food Price Index, based on the prices of a basket of internationally-traded food commodities, averaged 206.0 points in June 2014, down 3.8 points (1.8%) from May and nearly 6 points (2.8%) below the June 2013 level.

The index had risen to a ten-month high of 213 points in March 2014, but fell in April, May and June, mainly as a result of lower cereal, vegetable oil and dairy prices. Sugar prices also declined in June from May, but remained up from last year, while in contrast, meat prices on average increased from May.

Supply and demand

The FAO Cereal Price Index averaged 196.2 points in June, down 10.9 points (5.2%) from a revised value in May and 36.1 points (15.6%) below last year. The slide was mainly caused by lower wheat and maize prices, both of which fell by close to 7% amid further improved crop prospects and diminishing concerns over possible disruption of shipments from Ukraine, said the FAO.

Vegetable oils averaged 188.9 points in June, down 6.4 points (3.3%) from May, in part reflecting a 9-month low in the price of palm oil - the most widely traded edible oil.

Meanwhile dairy prices averaged 236.5 points in June, down 2.5 points (1.%) over May, a less substantial decline than the previous three months. Meat prices, however, rose slightly - averaging 194.2 points in June, which is 1.4 points (0.7 %) more than in May. The fact that meat prices continue to rise while cereal and oil prices fall is reflection of constrained world supplies, said the FAO.

Cereal forecast

The latest forecast for world cereal production in 2014 now stands at 2 498 million tonnes - including rice in milled terms - , is 18 million tonnes up from the previous figure in June, although still 1 percent (23 million tonnes) below last year's record output, said the FAO, adding that the recent revision reflects improved production prospects for coarse grains and wheat crops - particularly in the United States, the EU and India.

Despite increased supplies and lower average prices, the latest FAO report also warned that many people in conflict and drought stricken areas require external assistance for food.