Food & Beverage Perspectives
January Food Price Index Drops to Nearly 7-Year Low

January Food Price Index Drops to Nearly 7-Year Low

<p>The UN&#8217;s Food and Agriculture Organization (FAO) Food Price Index fell in January, slipping 1.9 percent below its level in the last month of 2015, as prices of all the commodities tracked by the index fell, with sugar and dairy products registering the steepest declines. The main factors underlying the lingering decline in basic food commodity prices are the generally ample agricultural supply conditions, a slowing global economy, and the strengthening of the U.S. dollar.</p>

The UN’s Food and Agriculture Organization (FAO) Food Price Index fell in January, slipping 1.9 percent below its level in the last month of 2015, as prices of all the commodities tracked by the index fell, with sugar and dairy products registering the steepest declines. The main factors underlying the lingering decline in basic food commodity prices are the generally ample agricultural supply conditions, a slowing global economy, and the strengthening of the U.S. dollar.

FAO also raised its forecast for worldwide cereal stocks in 2016, as a result of lowering its projected consumption and raising 2015 production prospects. In January the Food Price Index averaged 150.4 points, down 16 percent from a year earlier and registering its lowest level since April 2009.

The Cereal Price Index averaged 149.1 points in January, down 1.7 percent from December. Ample global supplies, increased competition for export markets and a strong U.S. dollar continued to weigh on international wheat and maize prices, with the U.S. maize quotations falling to multi-year lows. Rice prices declined only marginally.

The Vegetable Oil price index averaged 139.1 points in January, down 1.7 percent from December. The slide was mainly caused by a marked drop in soyoil prices, reflecting expectations of ample global soybean supplies, notwithstanding lower than earlier anticipated production in the United States and Brazil. International palm oil prices were stable, as subdued global import demand was counter balanced by prospects of production slowdowns in the coming months.

The Dairy Price Index averaged 145.1 points in January, down 3 percent from December. Large winter milk production in the European Union, better than anticipated availability in Oceania and torpid import demand have caused international prices of all the dairy commodities covered by the Index to dip, with Whole Milk Powder (WMP) being the most affected.

The Sugar Price Index averaged 199.4 points in January, down 4.1 percent from December, marking the first decline after four months of steady rises. The decrease was prompted by better than expected crop conditions in Brazil, the world´s leading sugar producer and exporter. Prospects for reduced sugar outputs in India, Thailand, South Africa and China were not sufficient to reverse the price fall.

The Meat Price Index averaged 148.3 points in January, down 1.1 percent from its December revised value. Quotations fell for most categories, with the exception of pigmeat, which was stable, mainly due to the opening of European Union aid to private storage in January. Sheepmeat prices were sharply lower, reflecting the beginning of the peak production period in Oceania, while a lackluster demand weighed on the prices of poultry and bovine meat.

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