After moving mainly lower throughout 2023, world food commodity prices are on the march higher again.
The Food and Agriculture Organization of the United Nations (FAO) on Friday reported its food price index averaged 120.4 points in May, up almost 1% from the revised April figure and the third straight monthly increase.
The index – which tracks monthly changes in the international prices of a set of globally traded food commodities- was mainly buoyed in May by a 6.3% increase in the price for cereals, including wheat. Wheat prices have moved higher amid woes in various parts of the world, including the Black Sea region, where drought and freezes have battered crops in parts of Ukraine and Russia, the world’s No. 1 exporter. Heavy, persistent rain is also denting yield prospects in parts of Europe, including largest producer, France.
World corn export prices also increased in May, pushed higher by production concerns in both Argentina, due to corn stunt disease, and Brazil, where poor weather has hurt the crop. Spillover from higher wheat prices has also lifted corn, as has limited selling activity in Ukraine.
Higher world dairy prices (+1.8%) further contributed to the overall increase in the FAO’s food price index in May. Dairy prices were underpinned by increased demand from the retail and food services sectors ahead of the summer holidays, as well as market expectations that milk production in Western Europe may fall below historical levels, the FAO said.
On the other hand, the FAO said global sugar prices were down 7.5% in May compared to April, mainly driven by pressure from the good start of the new harvest season in Brazil. World vegetable oil prices also weakened in May, slipping 2.4% from April, as declines in palm oil more than offset higher prices for soybean oil amid increasing demand from the biofuel sector.
Global meat prices were little changed in May (-0.2%) as international poultry and beef prices fell while pork and sheep and lamb increased.
But while food commodity prices are ticking higher again, the headline FAO food price index remains down 3.4% from a year ago and almost 25% below its March 2022 peak following the Russian invasion of Ukraine, as shown below.
