Eoin Kelly, Market Analyst, Bord Bia – Irish Food Board
Global commodity prices for food as measured by the FAO Food Price Index increased in June 2017 averaging at 175.2 points, up 2.5 points (1.4 %) from May and 11 points (7%) above its level a year earlier. This was the second successive month of increase in the value of the overall index with increases in dairy and cereal prices the principal commodities behind the upward trajectory. Looking at other commodities meat quotations firmed, while those of sugar and vegetable oils saw a decrease.
The FAO Dairy Price Index averaged 209 points in June, up almost 16 points or 8.3% from May. Compared to June in 2016 this is over 50% higher and dairy commodity prices for the year to date are on average 43% higher compared to the first half of 2016. However the current index is still 24% below its peak reached in February 2014. Prices of all dairy products that constitute the index rose, but butter price increased the most 14% compared to May to reach an all-time high. Limited export availabilities of dairy products in all major producing countries caused the prices of butter, cheese and whole milk powder to rise significantly. However it must be remembered that supplies of skim milk powder remain relatively strong due to the release of intervention product from the EU which has resulted in lowering the latest global dairy Trade (GDT) index.
In terms of global meat prices, the FAO Meat Price Index averaged 175.2 points in June, up 3.2 points or almost 2% compared to the previous month of May and marking the sixth consecutive month of moderate price increases. Limited export supplies in Oceania, coupled with strong demand, underpinned bovine and ovine meat prices in June, while solid import demand has supported pig meat prices. By contrast, poultry quotations continued to be affected by concerns over the spread of Avian Influenza in Europe, Asia and Africa. Global meat prices were on average almost 10% higher in June 2017 compared to year earlier levels and are running 11% higher for the year to date compared to 2016 prices.
The FAO Vegetable Oil Price Index averaged 162.1 points in June, down 6.5 points or 3.9% compared to May, when prices experienced a short-lived rebound. The decrease in the index mainly reflects falling palm and soy oil values. International palm oil quotations dropped by a full 7% marking a 10-month low, primarily because of good production prospects in Southeast Asia. Soy oil values dropped as bumper South American harvests bolstered global availabilities, while forecasts point to a near-record global output in 2017/18. Rapeseed and sunflower oil values also decreased, contributing to the overall fall in the index.
Focusing on cereals, the FAO Cereal Price Index averaged 154.3 points in June representing a one-year high. Wheat quotations increased the most, due mainly to a surge in high-protein wheat values on the back of deteriorating crop conditions in the United States, while strong import demand exerted upward pressure on international rice prices. In contrast, record harvests in South America have maintained downward pressure on maize prices.
The largest decrease was seen for sugar prices and the FAO Sugar Price Index averaged 197.3 points in June, down nearly 31 points or 13.4 % compared to May marking a 16 month low. International sugar prices have fallen steadily since February reflecting large export availabilities, in particular robust Brazilian supplies. Weak import demand has placed further downward pressure on quotations, especially as purchases by the world’s leading importer, China, have decreased following the imposition of high import tariffs.
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