Cereal, dairy continue to drive FAO price index higher in March

March’s Food Price Index averaged 172.8 points, 1.1% higher than in February and 0.7% above its value a year earlier. Declines in price quotations for sugar and most vegetable oils were more than offset by increases for maize, wheat and most dairy products.

The Cereal Price Index averaged 165.6 points in March, 2.7% higher than in February and as much as 12.1% above its value in March 2017. The Index has been climbing continuously in recent months, reflecting firmer international prices of nearly all major cereals.  In recent weeks, weather concerns, particularly prolonged dryness in the United States and cold wet conditions in parts of Europe, lifted wheat price quotations. The increase in maize prices proved even more pronounced, supported by deteriorating crop prospects, especially in Argentina, as well as continued robust world demand.

The Vegetable Oil Price Index averaged 156.8 points in March, falling marginally from February’s multi-month low. Modest price drops for soy, rape and sunflower oils were largely offset by higher prices of palm oil. Despite expectations of seasonal production gains, palm oil prices firmed in March on the back of robust international demand and consequent inventory drawdowns in Malaysia and Indonesia. The EU’s prospective resumption of imports of palm oil-based biodiesel from Indonesia and renewed strength in mineral oil prices also lent support to palm oil values.

The Dairy Price Index averaged 197.4 points in March, up 3.3% from February and slightly above its level in the corresponding period last year. International price quotations for butter, Whole Milk Powder (WMP) and cheese rose, while those of SMP declined, reversing the gains recorded in the two preceding months. Lower than anticipated milk production in New Zealand and continued strong global import demand led to higher butter, cheese and WMP prices, while continued pressure from global stocks and higher production pushed down SMP prices.

The Sugar Price Index averaged nearly 186 points in March, down 3.4% from February and as much as 27.5% below its level the same month last year. Sugar prices continued to fall because large export availabilities. A weaker Brazilian Real and relaxed export rules from India, allowing millers to sell overseas until end of the current season, were factors boosting sugar shipments from both countries and resulting in more subdued international price quotations.

The Meat Price Index averaged 169.8 points in March, almost unchanged from February. At this level, the index is 3% above the corresponding month last year but still almost 20% below the peak reached in August 2014. Price quotations for ovine meat increased, pig meat gained slightly, poultry meat remained stable, while those for bovine meat eased. Strong import demand, especially by China, strengthened ovine meat prices. Somewhat tight supplies in Europe underpinned a small increase in pig meat prices, while subdued demand and expectations for supplies from New Zealand to increase in the coming months weighed on bovine meat values.