GLOBAL FOOD PRICES DOWN, DROUGHT MAY HIKE GRAIN PRICES

New statistics released by the United Nation’s Food and Agriculture Organization (FAO) reveals continued economic uncertainties and generally adequate food supply prospects kept the FAO Food Price Index down although growing concerns over dry weather sent prices of some crops higher toward the end of the month.

The FAO Food Price Index, measuring the monthly change in international prices of a basket of 55 food commodities, fell for the third consecutive month in June 2012, dropping 1.8% from May to its lowest level since September 2010. The four-point drop in June brought the index to 201 points from a revised level of 205 points in May 2012.

The index now stands at 15.4% below its peak in February 2011. The average prices of all commodity groups in were below May levels, with the largest drop registered for oils and fats.

The Cereal Price Index averaged 221 points in June, unchanged from May and down 16.8% from its peak of 265 points in April 2011. Grain prices were very volatile in June, with weather as the main driver. After a generally subdued situation during the first half of the month, markets moved up in the second half amid deteriorating crop prospects, most notably for maize in the United States. The increase in maize prices underpinned wheat values, which were already experiencing some increases on downward adjustments to production forecasts in the Russian Federation. Rice prices remained largely steady, with large differences persisting across origins.

The Dairy Price Index averaged 173 points in June, down 1.5% from the revised May value and the fifth consecutive monthly decline. The June index slide was mainly on account of butter and whole milk powder, whose prices registered large drops, while those of skim milk powder and casein firmed somewhat. Since the beginning of the year, dairy prices have shed 16.1% of their value.

The Oils/Fats Price Index averaged 221 points in June, down 5.6% from May and down for the second consecutive month notwithstanding prospects for further supply and demand tightness for oilcrops in 2012/13. The recent easing in international oils/fats prices was caused primarily by larger than expected oilcrop plantings in northern hemisphere countries, as well as a sizeable decline in crude oil prices, which has weakened demand for vegetable oils from the energy sector.

The Meat Price Index averaged 174 points in June, down 1.3% from May. Prices of all the meat categories fell, because of a faltering global import demand and a weakening of currencies in some major exporting countries. Despite their recent weakness, meat prices in the first six months still averaged 1% higher in 2012 than in 2011.

The Sugar Price Index averaged 290 points in June, down 1.6% from May, and as much as 19% below their level in June 2011. Sugar prices declined for the fourth month in a row, reflecting larger availabilities in India, the EU and Thailand, new supplies from Brazil entering the market, and declining oil prices. Prices regained some strength toward the end of June on the back of unfavorable harvesting conditions in Brazil, the world’s largest sugar exporter.