In the wake of the developments in Ukraine, food prices fell for the fourth consecutive month in July, according to the Food and Agricultural Organization (FAO). As expected, the UN agency has published its latest Food Price Index, a barometer that tracks changes in prices of five food commodities: cereals, vegetable oils, dairy products, meat, and sugar.
In July, the index averaged 140.9 points, down 8.6 points from June. As a result of the UN-brokered agreement on Ukrainian grain exports, vegetable oils and cereals experienced double-digit percentage drops in price. “Especially from a food access perspective, the decline in food commodity prices from very high levels is welcome,” said FAO Chief Economist Maximo Torero.
FAO’s Vegetable Price Index decreased by 19.2 percent in July compared with June, marking a 10-month low. All oil types fell in international quotations, according to the agency, with palm oil prices dropping as a result of ample export availability from Indonesia. In addition, sunflower oil prices fell sharply due to subdued global import demand despite ongoing logistical uncertainty in the Black Sea region. As a result of lower crude oil prices, vegetable oil values also declined.
Additionally, the Cereal Price Index declined by 11.5% last month, while remaining 16.6% above July 2021. Wheat prices led the decline in all cereal prices in the index. Several factors contributed to the drop in wheat prices, including the Russia-Ukraine agreement on grain exports from key Black Sea ports, and seasonal availability from northern harvests.
There was also a 11.2 percent decline in coarse grain prices in July. Argentinian and Brazilian seasonal availability of maize, as well as the Black Sea Grain Initiative, contributed to the 10.7% decline in maize prices. Additionally, this year has seen the first decline in international rice prices.
With expectations of a continued global economic slowdown, a weakening of Brazil’s currency, the real, and lower ethanol prices, the Sugar Price Index fell by nearly four percent. There were also indications of increased exports and favourable production prospects in India that contributed to the downward trend. In Europe, hot and dry weather also caused concerns over sugar beet yields, preventing sharper declines.
The FAO also reported that the Dairy Price Index decreased 2.5 percent “amid lacklustre trading activity,” but still averaged 25.4 percent above last July. Despite declining prices for milk powders and butter, cheese prices remained stable, driven by tourism in European destinations.
Due to weakening import demand, meat prices also continued to decline. Despite tight supplies and strong import demand, poultry prices reached an all-time high due to Avian influenza outbreaks in the northern hemisphere. The FAO Meat Price Index also declined by 0.5 percent from June due to weaker import demand for bovine, ovine, and pig meats.