World food prices hit two-year low in May, says UN agency

Drop in cost of vegetable oils, cereals and dairy products offsets increase in sugar and meat prices

A farmer holds grains of wheat in Greece. International prices of wheat, maize, barley and sorghum declined in May. Bloomberg

The UN food agency’s world price index declined in May to its lowest in two years as a drop in the prices of vegetable oils, cereals and dairy products offset increase in sugar and meat prices.

The Food and Agriculture Organisation’s food price index, which tracks the monthly change in the international prices of a basket of food commodities, averaged 124.3 points in May, down 2.6 per cent from April, the agency said on Friday.

The May score marked the lowest since April 2021, Reuters reported.

The index was also 22 per cent below a record peak reached in March 2022 following the start of Russia’s invasion of Ukraine, according to the FAO.

“The decline in May was underpinned by significant drops in the price indices for vegetable oils, cereals and dairy, which were partly counterbalanced by increases in the sugar and meat indices,” the organisation said.

Soaring food prices will weigh on the growth of Mena economies this year, as double-digit food inflation hits poorer households and intensifies food insecurity in the long term, a World Bank report said in April.

About one in five people living in developing countries in the Mena region is expected to face food insecurity this year and almost eight million children under the age of five will be hungry, said the report, which examined the impact of rising food prices on the region.

More than 141 million people in the Arab world are exposed to food insecurity as the Ukraine conflict chokes crop supplies, the International Monetary Fund said last year.

Average year-on-year food inflation in the Mena region between March 2022 and December 2022 stood at 29 per cent, above headline inflation of 19.4 per cent, and these sharp increases in food prices can have long lasting effects on future generations, the lender said.

The FAO’s cereal price index dropped by about 5 per cent in May from the previous month and was 25 per cent below its record high a year ago, amid pressure caused by ample supply prospects and the extension of the Black Sea Grain Initiative allowing shipments from Ukraine.

International prices of wheat, maize, barley and sorghum declined in May.

However, international rice prices continued to increase last month, partly due to tighter supplies in some exporting countries such as Vietnam and Pakistan, the FAO said.

The agency’s vegetable oil price index slid by about 9 per cent month on month. The continued decline in the index reflected lower world prices across palm, soya beans, rapeseed and sunflower oils.

Global dairy prices eased more than 3 per cent, led by a steep drop in international cheese prices, amid a seasonal upturn in Northern Hemisphere's milk output, the agency said.

Global meat prices increased 1 per cent from April, marking the fourth consecutive monthly increase.

Sugar prices recorded a 5.5 per cent increase from April in a fourth straight monthly gain, as concerns over the El Nino weather pattern and shipping delays added to global supply risks, the FAO said.

However, improving weather in Brazil and lower crude oil prices prevented larger monthly price gains, the agency said.