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Food & Beverage Perspectives

Poor Weather Drives Food Prices Up in October

Article-Poor Weather Drives Food Prices Up in October

Poor Weather Drives Up Food Prices in October

Global food commodities inched upward in October, mainly the result of rises in the sugar, vegetable oils and dairy quotations, while cereal prices experienced a more modest increase, according to the latest report from the UN’s Food and Agriculture Organization (FAO). While prices did increase, food on international markets was still 16-percent cheaper than in October 2014.

The Food Price Index averaged 162 points in October 2015, as much as 6 points more than in September and the sharpest increase since July 2012.  The Food Price Index is a trade-weighted index that tracks prices on international markets of five major food commodity groups: cereals, meat, dairy products, vegetable oils and sugar.

The Cereal Price Index averaged 157.4 points in October, up 1.7 percent from September, largely led by an upturn in wheat and maize prices. Wheat quotations were higher, mostly on concerns about dryness affecting winter wheat in some countries and deteriorating production prospects in Australia. Maize prices strengthened, largely reflecting a slowdown in farmers’ sales in the United States, the world’s biggest producer and exporter of maize. By contrast, rice prices fell, as a result of marked declines in the fragrant and Japonica rice segments.

The Vegetable Oil Price Index averaged 142.6 points in October, up 6.2 percent from September. The increase, which follows three months of decline, was primarily driven by higher palm oil prices, as concerns intensified about El Niño compromising next year’s production in Southeast Asia. In addition, international soy oil prices strengthened, mainly reflecting slow progress in soybean plantings in parts of Brazil due to unfavorable weather conditions. Limited global availabilities of rape and sunflower seed also lent support to the index.

The Dairy Price Index averaged 155.6 points in October, up 9.4 percent from September.  Concerns that milk output in New Zealand would fall during the current June/May dairy year caused Oceania prices to rise in both September and October, with export prices from the European Union following suit—although remaining below quotations in Oceania. Prices of whole milk powder surged by almost 21 percent over the month, with all the other dairy products also incurring marked increases.

The Sugar Price Index averaged 197.4 points in October, up 17.2 percent from September and the highest level since February 2015. The sharp month-on-month increase was largely weather-driven: in Brazil, the world´s leading sugar producer, delays caused by excessive precipitation in the South-Central producing regions, adversely affected sugarcane harvesting; and reports of crop damages caused by excessive dryness in India, Thailand, the Philippines, South Africa and Vietnam provided further support to international sugar prices.

The Meat Price Index averaged 168.8 points in October, essentially the same level as in September, prolonging an extended period of overall stability that has been evident since March 2015. Of the meats covered, only ovine meat registered a substantial change, rising by 8 percent due to constrained export availability in Oceania; prices of the other categories of meat were little changed.

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