Food & Beverage Perspectives
Prices for Major Food Commodities Dropped 19% in 2015

Prices for Major Food Commodities Dropped 19% in 2015

For the fourth year in a row, abundant supplies and slow economic growth drove prices for major food commodities down for the fourth consecutive year ending 2015 19.1 percent below the previous year. The UN’s Food and Agriculture Organization (FAO) Food Price Index averaged 164.1 points over 2015 and ended the year even lower, at 154.1 points in December.

For the fourth year in a row, abundant supplies and slow economic growth drove prices for major food commodities down for the fourth consecutive year ending 2015 19.1 percent below the previous year. The UN’s Food and Agriculture Organization (FAO) Food Price Index averaged 164.1 points over 2015 and ended the year even lower, at 154.1 points in December.

The downward trend is good news for food and beverage manufacturers around the globe as falling prices for meat, dairy and cereals more than offset gains by sugar and vegetable oils.

“Abundant supplies in the face of a timid world demand and an appreciating dollar are the main reason for the general weakness that dominated food prices in 2015," said FAO senior economist Abdolreza Abbassian.

The Cereal Price Index averaged 151.6 points in December, down almost 2 points (1.3 percent) from November. Expectation of larger supplies entering world markets following the removal of export taxes in Argentina weighed on wheat quotations. Maize prices also fell in December amid intensifying export competition and sluggish international demand. Rice quotations were more stable, as a revival of purchases sustained the prices of the lower quality Indica and of aromatic rice. Compared to 2014, the cereal price index fell 15.4 percent, in 2015.

The Vegetable Oil Price Index averaged 141.1 points in December, up 2.9 points (2.1 percent) from November. The increase was driven by soybean oil whose prices leaped to 6-months highs, reflecting persisting uncertainties regarding Brazil’s soybean crop amid prospects of firming soy oil demand worldwide. International palm oil prices remained stable, as concerns about possible production declines in Southeast Asia were counterbalanced by weak global import demand. For 2015 as a whole, the vegetable oil index averaged 147 points, down 19 percent from 2014 and representing a 9-year low.

The Dairy Price Index averaged 149.5 points in December, down 1.6 points (1 percent) from November. The decline stemmed from a fall in prices for milk powders, as those for butter rose and those for cheese were unchanged. Weak demand for WMP has led manufactures to focus on producing other dairy commodities. Butter was the product most in demand, particularly in the Middle East, North America and North Africa, which boosted its price more than 3 percent in December. In the European Union, the possibility of sales of SMP to intervention stocks at a guaranteed price also increased the attractiveness of butter/SMP production over that of WMP.   The dairy index averaged 160.3 points in 2015, down 28.5 percent compared to 2014, marking its lowest annual average since 2009.

The Sugar Price Index averaged 207.8 points in December, up 1.3 points (0.6 percent) from November. International sugar prices continued to be influenced by concerns over harvesting delays in the South-Central producing regions in Brazil, caused by excessive precipitation. Prospects of reduced sugar harvests in other main producing countries, in particular India, Thailand and South Africa, also provided support. Overall, the sugar price index in 2015 averaged 21 percent lower than in 2014.

The Meat Price Index averaged 152.1 points in December, down 3.5 points (2.2 percent) from its November revised value. Quotations fell for the four categories of meat, with ovine, bovine and pig meat most affected. Reduced import demand in the United States for bovine meat intensified competition in other markets. For pig meat, a surge in output in the European Union caused both domestic and export prices to fall. Overall, the meat price index in 2015 was 15.1 percent compared to 2014, and its lowest annual average since 2010.

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