Drop in FAO world Food Price Index accelerates in June
FAO’s aggregate Food Price Index (FPI) was down 2.3 percent in June, the third straight month of decline. The drop was well above the monthly declines in April and May, down just 0.8 percent and 0.3 percent, respectively (all index figures adjusted for inflation). Though the meat and dairy indexes were still up in June, the decline in the overall FPI followed price weakness for grains, vegetable oils, and sugar.
Year on year, the June FPI was still up 21 percent YOY (inflation-adjusted). The return of pandemic pressure on regional demand for food products, the potential for price pressure on demand growth, and the uncertainty over the global economic outlook as the Russia-Ukraine war continues could all weigh further on food prices in the coming months.
Though down strongly in June, the oils index still has the strongest gains in the last 12 months. Per FAO, major edible oil markets saw price weakness in June, including palm, sunflower, soybean, and rapeseed/canola. Potentially strong supply available out of Indonesia may be weighing on palm oil prices. June was the third straight month of declines for the oils index.
The cereals index has seen the second-highest growth YOY but was down in June on weaker prices for wheat, sorghum, barley, and corn. Despite concerns over challenging weather, supply and logistics, and input availability around the world, grain crop outlooks are still seen as favorable in North and South America.
Up just 7 percent YOY, sugar prices slipped moderately in June as the trade expects adequate supply worldwide. A weaker Brazilian real and cheaper ethanol should support production and exports of that country’s sugar: In the first half of June, the sugar share of cane crush as down just 2 points YOY at 44 percent. If that trend continues and weather in southeast Asia remains neutral to favorable for 2022/23 harvests, sugar prices could weaken further—especially given the currently mixed global economic outlook.
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