Food Prices Slide 6th Month to 4-Year Low as Grains Fall

October 9th, 2014


Category: Dairy, Grains, Oilseeds, Sugar

dairycheese-450x299(Bloomberg) – World food prices fell for a sixth month in September, the longest slide since 2009, as the cost of dairy, grains, cooking oils and sugar declined amid prospects for rising production.

An index (BCOM) of 55 food items dropped 2.6 percent month-on-month to 191.5 points, the lowest since August 2010, the United Nation’s Rome-based Food & Agriculture Organization said in an online report today.

Soybeans and corn are trading near the lowest in four years in Chicago amid an outlook for record U.S. harvests. In the past two years, all agricultural products on the Bloomberg Commodity Index other than cattle, hogs and coffee have declined, with the slide led by corn, wheat and soybeans.

“Sugar and dairy weakened the most, followed by cereals and oils,” the FAO wrote. “Among the underlying factors, the U.S. dollar’s broad appreciation continued to weigh on all international commodity prices.”

The food-price index declined 6 percent year on year, falling from the year-earlier period for a 15th month. That’s the longest such slide since a slump of more than three years that ended in June 2000.

Even as prices slide, 36 countries are still estimated to be in need of external food aid due to conflict, crop failures or local high food prices, the agency said. Twenty-six of the countries are in Africa.

The FAO’s grain price index fell 2.5 percent to 177.9 points, with “good production” and large quantities available for export weighing on prices for wheat and corn, according to the UN agency.

Wheat Production

The FAO raised its forecast for global wheat production in 2014-15 by 2 million metric tons from a month ago to a record 718.5 million tons. The outlook for coarse grains such as corn was raised by 12.8 million tons to 1.308 billion tons, little changed from a year ago.

“This year’s abundant supplies have already resulted in sharp declines in international prices of all cereals,” the FAO said. “Lower prices are not expected to stimulate trade, as the major cereal importing countries are holding large supplies, which may depress import demand.”

World stocks of grain are predicted to rise 8.3 percent to 627.5 million tons at the end of the 2014-15 season, the highest level in 15 years. That would increase stocks-to-use ratios to 25.2 percent from 23.5 percent, the highest since 2001-02, according to the agency.

A gauge of dairy prices dropped 6.5 percent from August, with all products in the index falling, particularly skimmed milk power, the FAO said.

Export Availability

“The continued decline in prices reflects abundant export availability, above all in Oceania,” the agency said. In the European Union, output of butter and skimmed milk powder rose as producers switched from production of cheese for Russia, according to the report.

An index of vegetable oil prices declined 2.8 percent to 162 points in September amid an outlook for ample palm-oil production in Southeast Asia and better-than-expected soybean yields in the U.S.

“The main driver behind the slide remains palm oil, whose prices dipped to five-year lows as abundant production coincided with weak import demand,” the FAO wrote.

Sugar prices declined 6.6 percent to about 228 points as world production is expected to exceed consumption.

A gauge of meat costs rose to 207.8 points, the highest on record dating to 1990, on rising beef export prices in Australia. Prices for pig meat are falling as production recovers from disease, the FAO wrote.

Meat “prices are currently at historic highs and the lack of an increase this month may indicate that, overall, they have reached a peak,” the FAO wrote.

In Western Africa, the outbreak of Ebola in Guinea, Liberia and Sierra Leone has disrupted food trade, farming and livelihoods, “seriously” affecting food security for a large number of people, the FAO wrote in a separate report.

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