GLOBAL FOOD PRICES DROP SHARPLY IN MAY

New statistics released today by the United Nation’s Food and Agriculture Organization (FAO) reveals global food prices dropped sharply in May due to generally favorable supplies, growing global economic uncertainties and a strengthening of the U.S. dollar.

The FAO Food Price Index, measuring the monthly change in international prices of a basket of food commodities, fell by 4% in May to 204 points, down 9 points from April, the lowest level since September 2011 and about 14% below its peak in February 2011.

"Crop prices have come down sharply from their peak level but they remain still high and vulnerable due to risks related to weather conditions in the critical growing months ahead," said FAO's grain analyst Abdolreza Abbassian.

FAO at the same time raised the forecast for world cereal production by 48.5 million tons since May, mainly on the expectation of a bumper maize crop in the United States. FAO's latest forecast for world cereal production in 2012 stands at a record level of 2.419 million tones, 3.2% up from the 2011 record. The bulk of the increase is expected to originate mainly from maize in the United States amid an early start of the planting season and prevailing favorable growing conditions. As a result, the global coarse grain production is forecast at 1.248 million tons, an 85 million ton increase from the previous year.

The Cereal Price Index averaged 221 points in May, down 1% from April. Wheat prices fell most following improved weather conditions and influenced by maize prices, which plunged following the release of the USDA report projecting a record maize crop in the United States. By contrast, international rice prices rose slightly, mainly on increased purchases ahead of the Ramadan period.

The Oils/Fats Price Index averaged 244 points in May, down 6.8% from April. The drop, which was led by falling soy and palm oil quotations, reversed the upward trend witnessed since December 2011. The Dairy Price Index averaged 164 points in May, down 12% FROM April and the lowest level since October 2009. The recent slide in international dairy prices, uninterrupted since the beginning of the year, mirrors a rebuilding of supplies in major export markets.

The Meat Price Index averaged 179 points in May, barely 1 point below its April value.

The Sugar Price Index averaged 295 points in May, down 9% from April, and as much as 5.6% below their level in May 2011. Sugar prices declined for the third months in a row, reflecting larger availabilities in India, the EU and Thailand, and new supplies from Brazil entering the market. Markets were also pressured by declining oil prices and the strengthening of the U.S. dollar.