The global price index of the United Nations food agency experienced a significant decline in May, reaching its lowest point in two years. This decline was driven by plunging prices of vegetable oils, cereals, and dairy products, which outweighed the increases observed in sugar and meat prices.
On Friday, the Food and Agriculture Organization (FAO) disclosed that the price index, which monitors the most traded food commodities worldwide, averaged 124.3 points in May. This figure is a revision from the initial April reading of 127.2, indicating a drop from the previous month’s revised score of 127.7.
May’s reading marked the lowest point since April 2021, signifying a 22% decrease from the all-time peak reached in March 2022 following Russia’s invasion of Ukraine.
The FAO highlighted a decline of nearly 5% in its cereal price index in May compared to the previous month. This decline was influenced by favorable supply prospects and the extension of the Black Sea Grain Initiative, which allowed for shipments from Ukraine.
However, international rice prices continued to rise in May due to limited supplies in certain exporting countries. The FAO expressed concern about the escalating prices of this staple food.
The vegetable oil price index experienced a sharp decline of almost 9% month on month. This decline can be attributed to abundant oilseed supplies and weak demand for palm oil. Additionally, global dairy prices decreased by over 3% due to a seasonal upturn in milk output in the northern hemisphere.
In contrast, sugar prices showed a notable increase of 5.5% from April, marking the fourth consecutive monthly gain. Concerns regarding the El Nino weather pattern contributed to global supply risks, as stated by the FAO.
However, sugar markets have been restrained by improved weather conditions in Brazil and lower crude oil prices. Sugar futures experienced a decrease in May after reaching a 12-year high in late April.
In a separate report on cereals supply and demand, the FAO projected world cereal production for this year at 2.813 billion tonnes, representing a 1% increase from 2022. This increase is primarily driven by the expected rise in maize output.
Furthermore, global cereal stocks for the 2023/24 season are projected to rise by 1.7% compared to the previous year, reaching a record high of 873 million tonnes.
This increase reflects the anticipated growth in stocks of maize, rice, and barley. However, wheat stocks are expected to decline due to a decrease in production, while demand is projected to remain stable.
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