FAO: Sliding Dairy Prices Offset Rises in Palm Oil, Sugar

The UN’s Food and Agriculture Organization (FAO) Food Price Index inched upward as sliding dairy prices nearly offset sharp rises in sugar and palm oil prices. The Food Price Index averaged 151 points in March 2016, up 1 percent from February, but almost 12 percent below its March 2015 level.

The Cereal Price Index averaged 147.6 points in March, down marginally from February, but 13.1 percent less than in March 2015. Wheat prices averaged slightly lower, as a result of strong competition and a generally favorable supply outlook in the new season. Maize quotations remained under downward pressure, largely influenced by favorable production prospects in South America, weak import demand and larger than anticipated outlook for plantings in the United States. Rice prices were stable.

The Vegetable Oil Price Index rose to 159.8 in March, up 6.3 percent from February, hitting a 15-month high. The upturn was driven by palm oil, the component of the index with the highest weight. International palm oil prices surged for the second consecutive month on concerns about stagnating global production in 2016, following prolonged dry weather in Malaysia and Indonesia. By contrast, the average March prices of other oils remained either unchanged (soy oil) or fell (sunflower and rapeseed oil).

The Dairy Price Index averaged 130.3 points in March, down 8.2 percent from February—plummeting to a level last seen in June 2009. While prices for all dairy commodities fell, butter and cheese were the most affected, reflecting a build-up of stocks in the major exporting countries. In the case of milk powders, the declines have been contained by continued sales of SMP to intervention stocks in the European Union, so providing an indicative base price for international transactions.

The Sugar Price Index averaged 219 points in March, up 17.1 percent from February and reaching its highest level since November 2014. Last month’s sharp increase mainly reflects the expectation of an even larger production deficit during the current crop year than earlier anticipated, following the recent heavy rainfall in Brazil, the world’s largest sugar producer. Reports of higher use of raw sugar for the production of ethanol in Brazil also boosted prices

The Meat Price Index averaged 146.4 points in March, practically identical to its February revised value. Prices were stable across the board. The removal of excess supplies through the aid to private storage scheme at the beginning of the year has helped to keep pig meat export prices steady in the European Union and, by extension, in the international market overall.  Sheep meat prices also stabilized, reflecting the end of the seasonal peak in supplies from Oceania. Poultry and bovine meat prices remained essentially unaltered compared to the previous month, as international supply and demand remained well-balanced.