The World Food Price Index, prepared by the U.N. Food and Agriculture Organization, fell for the third straight month in July, after just coming off a slight recovery earlier this year. Lower international prices for grains, soy and palm oil, as well as lower prices for sugar, meat and dairy drove the index down.
The Food Price Index, a measure of the monthly change in international prices of a basket of food commodities, consists of five indices: cereals, oils/fats, dairy, meat and sugar.
Cereals fell 3.7% from June and nearly 13% from July, 2012 price indices. A key player in the cereals index, corn, saw fairly large drops in price due to favorable weather in key growing areas. Wheat prices also fell, but strong exports limited the decline, FAO said.
Oils and fats were similarly down, falling 3.3% from June to the lowest level in three years. The slide reflects easing quotations for both soy and palm oil, FAO said, and ample oil availability in Argentina coupled with weak demand. A good soybean crop is shaping up in the U.S., also leading to a decline. Prices for rape and sunflower seed oil also fell, reflecting improved 2013-14 crop prospects.
Dairy prices also fell, but not as steeply as oils and cereals. Tightening global availability and slowing production in the U.S. and other exporters kept prices stable, only resulting in a 1.1% drop in the food price index.
Meat remained unchanged from June, even though prices for poultry and pork were lower. This was largely offset by higher beef prices and weakening international prices for meat due to reduced import demand. FAO says this could be a reflection of production growth in Asian countries and a build-up of domestically produced meat inventories.
Finally, the FAO sugar price was down 1.5% from June, due to an anticipated production surplus in major producing areas, such as Brazil. Declining ethanol prices in Brazil also provided incentives to convert sugarcane to sugar, not ethanol, putting downward pressure on sugar prices.
Click here to view a country-by-country FAO monthly analysis.