World food prices at four-year low

A gauge of dairy prices dropped 6.5 per cent from August, with all products in the index falling, particularly skimmed milk power, the FAO said. Vasily Fedosenko / Reuters

World food prices fell to their lowest levels in four years last month as prices of all major food groups except meat dropped, led by a sharp decline in dairy prices, the UN’s food agency said on Thursday.

The Food and Agriculture Organization’s (FAO) price index, which measures monthly price changes for a basket of cereals, oilseeds, dairy, meat and sugar, averaged 191.5 points in September, down 5.2 points or 2.6 per cent from August.

The figure was 12.2 points or 6.0 per cent below September 2013.

It was the sixth consecutive slip in the index, which FAO said was the longest period of continuous falls since the late 1990s.

Affecting all international commodity prices is “the US dollar’s broad appreciation,” the FAO said.

A gauge of dairy prices dropped 6.5 per cent from August, with all products in the index falling, particularly skimmed milk power, the FAO said.

The Russian ban on dairy imports from countries that have imposed sanctions on Moscow over the conflict in Ukraine continues to weigh on dairy prices, the FAO said.

European Union dairy farms are moving away from cheese production and raising butter and skimmed milk output, which is in turn stimulating powdered milk production “as manufactures seek to adjust products to ensure the best returns”, the FAO said.

“The continued decline in prices reflects abundant export availability, above all in Oceania,” the agency said.

Bucking the trend, meat prices gained marginally to 207.8 points in September, 0.3 of a point higher than its revised value for August. At historic highs, meat prices may have “reached a peak”, the FAO said.

Strong output forecasts for cereal and wheat, and expected high levels of cereal stocks at the end of the year are putting pressure on prices.

The FAO raised its forecast for global cereal production for 2014 to 2.523 billion tonnes, 65 million tonnes higher than its May forecast.

The agency also raised its world wheat output forecast to 718.5 million tonnes, a new record, versus 716.5 million tonnes previously, and predicted world cereals stocks at the end of the 2015 season would be 627.5 million tonnes, versus 616.0 million tonnes in its previous forecast.

An index of vegetable oil prices declined 2.8 per cent to 162 points in September amid an outlook for ample palm-oil production in South East Asia and better-than-expected soybean yields in the US.

“The main driver behind the slide remains palm oil, whose prices dipped to five-year lows as abundant production coincided with weak import demand,” the FAO wrote.

Sugar prices declined 6.6 per cent to about 228 points as world production is expected to exceed consumption.

Follow The National's Business section on Twitter