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Food prices fall after three stable months

ROME, January 9, 2015

The United Nations Food and Agricultural Organisation (UNFAO) Index declined in December, after three months of stability, declining for the third consecutive year, according to a report.

The 1.7 per cent fall was credited to continued large supplies and record stocks, combined with a strong US dollar and falling oil prices, said the Emirates News Agency (WAM) report.

The trade-weighted index, which tracks prices of cereals, meat, dairy products, vegetable oils, and sugar on international markets, averaged 202 points over 2014, down 3.7 per cent from 2013, it said.

It saw year-on-year declines in the prices of four of the products, with the numbers approaching their lowest level in five years.

Only meat has risen, and it reached an all-time high annual average of 199 points, up 8.1 per cent from 2013.

While posting strong annual figures, meat prices declined in December by 1.9 per cent from the previous month, as a stronger US dollar affected prices for beef and mutton from Oceania.

The December decline was not enough to stop the annual growth, and prices remain close to their all-time high, having risen 8.1 percent in 2014.

The sugar price index dropped by 4.8 per cent to 219 points in December, mainly due to abundant supplies in major producing countries coupled with falling crude oil prices, which reduce demand for sugar crops to be converted into ethanol.

"Ample supplies aside, the drop in oil prices obviously makes ethanol production less attractive," said FAO senior economist Abdolreza Abbassian.

Lower crude oil prices had negative effects on commodities that can be used for biofuels, notably sugar but also palm oil. The depressed demand for palm oil as a biodiesel feedstock also contributed to vegetable oil prices hitting a five-year low of 161 points in December.

Cereals saw price drops of 12.5 per cent over the course of the year, on the back of forecasts of record production and ample inventories. Wheat prices rose on the back of worries that Russia may restrict exports, though the strong dollar helped to cap the rise, while abundant export supplies pushed rice prices down markedly, said the report.

The decline in the dairy price index to its lowest level since 2009 was attributed to a slowing of dairy imports by China and Russia, which left ample export supplies for international markets. The greatest declines were seen in milk powders, butter and cheese, it added.

Tags: UN | FAO | index | decline | stability |

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