Dip in Sugar Prices Helps Global Food Commodity Prices Ease in November

Global food commodity prices dipped slightly in November, averaging 171.3 points, down 0.4 percent from October, but still 10.4 percent higher than in November 2015, according to the UN’s Food Agriculture Organization (FAO) Food Price Index. The small decline marked a departure from an almost uninterrupted rising trend in the Index since the start of the year. November’s easing was driven by a sharp dip in sugar prices, which more than offset a strong rebound in the prices of vegetable oils.

The Cereal Price Index averaged 141.4 points in November, down 0.6 percent from October and 7.9 percent below the previous year’s level. The strengthening U.S. dollar and ample supplies contributed to the generally weak tone lingering in cereal markets.  Good harvest prospects in Argentina and Australia weighed on wheat quotations. International rice prices remained close to multi-year lows reached in October, amid relentless pressure applied by new-crop arrivals and sluggish demand.

The Vegetable Oil Price Index rose to 175.6 in November, up 4.5 percent from October and marking the highest level since August 2014. The strong rebound was primarily driven by palm oil, whose prices strengthened amid lower than anticipated production in Southeast Asia and prospects of continued global supply tightness. Soy oil quotations also appreciated, reflecting firm global import demand coupled with below-potential crushings in South America. Prospects of rising demand for vegetable oils from the biodiesel sector also lent support to prices.

The Dairy Price Index averaged 186.4 points in November, up 1.9 percent from October. Quotations rose for whole milk powder (WMP) in particular; butter also firmed. Sustained import demand by markets in the Middle East and North Africa, plus China, combined with limited availability from New Zealand, the main world supplier, led to WMP prices jumping by 9 percent. For butter, the market tightened due to rising domestic usage in the European Union and the United States and robust import demand elsewhere. Cheese and skimmed milk powder supply and demand were well-balanced, and prices remained steady.

The Sugar Price Index averaged 287.1 points in November, down nearly 8.9 percent from October and marking the first decline after six consecutive monthly increases. The fall in international sugar prices was largely imputable to a weakening of the Brazilian currency with respect to the U.S. dollar, which stimulated sugar exports from Brazil, the world’s largest sugar producer and exporter. Reports of a higher than expected harvest in the Center South, Brazil’s main producing region, also helped to pressure sugar prices downward.

The Meat Price Index averaged 161.5 points in November, essentially unchanged from its revised value for October.  Lower prices for ovine meat, pig meat and chicken meat were counter balanced by a rise in bovine meat quotations.  Adequate availability of pig meat within the European Union, ahead of the peak season for ovine meat production in Oceania and a continued downward drift in chicken meat prices contributed to quotations for these commodities falling back somewhat. Conversely, tighter domestic supplies of bovine meat in Australia caused export quotations from this source to increase.