UN Food Agency’s Global Price Index Hits Two-Year Low in August

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In August, the world price index of the United Nations food agency dropped to a new low for the past two years, reversing a slight recovery seen in the previous month. The Food and Agriculture Organization’s (FAO) index, which monitors the most globally traded food commodities, averaged 121.4 points in August, compared to a revised 124.0 for the previous month. The FAO stated on Friday that the July reading, initially reported as 123.9, had rebounded from a two-year low in June. This August figure was the lowest since March 2021, and also 24% below the all-time high reached in March 2022 following Russia’s invasion of Ukraine.

The decrease in the overall index was attributed to declines in dairy products, vegetable oils, meat, and cereals, despite an increase in FAO’s rice benchmark to a 15-year high due to Indian export restrictions, according to the agency. FAO’s cereal index slightly dropped by 0.7% from July as wheat prices fell during the northern hemisphere harvests. Meanwhile, maize (corn) experienced a seventh consecutive monthly decline, reaching a near three-year low due to a record Brazilian crop and the approaching U.S. harvest.

In contrast, the agency’s rice index surged by nearly 10% month-on-month as India’s decision in July to ban Indica white rice exports disrupted trade during a period of tight availabilities ahead of new-crop harvests, FAO stated. The sugar index of FAO rose by 1.3% month-on-month in August, placing it 34% above the level from the previous year, driven by concerns about the impact of the El Niño weather pattern on global production. Vegetable oil prices experienced a 3.1% decrease in August, while dairy prices fell by 4%, marking an eighth consecutive monthly decline, reflecting abundant supply in Oceania and reduced Chinese imports.

In a separate report on cereal supply and demand, the FAO predicted world cereal production for this year to be 2.815 billion tonnes, a slight drop from a prior estimate of 2.819 billion. Nonetheless, the latest forecast was an increase of 0.9% from 2022 and matched the record output from 2021, according to the FAO. The downward revision primarily resulted from a reduction in projected wheat output due to dry weather affecting Canada and the European Union, and heavy rainfall affecting Chinese crops, as reported by FAO.

Reuters

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