The Food and Agriculture Organization of the United Nations (FAO) released a report on June 7 stating that the world food price index rose for the third consecutive month in May, driven by increases in grain and dairy prices that overshadowed declines in sugar and vegetable oil prices.
The Food Price Index (FFPI) of the FAO is an indicator that measures monthly changes in international prices of a basket of food commodities. The report published by FAO on Friday (June 7) revealed that the FFPI in May was 120.4 points, an increase of 1.1 points (0.9%) from the revised level in April. This rise was attributed to a slightly higher increase in the indices of grain and dairy prices compared to the decline in sugar and vegetable oil prices, while the meat price index remained almost unchanged.
Despite the FFPI rising for the third consecutive month in May, it is still 3.4% lower than the corresponding value from a year earlier, and 24.9% lower than the peak of 160.2 points reached in March 2022.
The FAO’s cereal price index averaged 118.7 points in May, rising by 7.1 points (6.3%) from April, but still 10.6 points lower (8.2%) than in May 2023.
Global major cereal export prices increased, with wheat prices showing the largest jump. This was mainly due to growing concerns that some key producing areas in 2024 such as parts of Europe, North America, and the Black Sea region might face unfavorable harvests.
Furthermore, the deterioration of the Black Sea shipping infrastructure added to the upward pressure on prices. In May, corn export prices also saw an increase, reflecting concerns about crop damage in Argentina (due to armyworm infestation), unfavorable weather in Brazil, and limited sales activities from Ukrainian farmers amidst tight seasonal supplies and robust global demand. The spillover effects from the wheat market also affected corn prices. As for other coarse grains, global prices of barley and sorghum also saw a rise in May.
The dairy price index averaged 126.0 points in May, increasing by 2.3 points (1.8%) from April and 4.3 points (3.5%) higher than the same period last year. International prices of all dairy products represented by this index rose in May.
The vegetable oil price index averaged 127.8 points in May, a decrease of 3.1 points (2.4%) from the previous month, but it was 7.7% higher than the same period last year. The decline in the index was mainly driven by a drop in palm oil prices, offsetting the increases in soybean oil, rapeseed oil, and sunflower oil prices. Due to long-term subdued global import demand, the production of major palm oil-producing countries in Southeast Asia increased seasonally, leading to a second consecutive month of decline in international palm oil prices in May.
The FAO also noted that the sugar price index averaged 117.1 points in May, a decrease of 9.5 points (7.5%) from April. This marks the third consecutive month of decline, with the index falling by 40.1 points (25.5%) from May last year, reaching its lowest level since January 2023. The FAO explained that the kickoff of the new harvest season, increased exports from Brazil, and the declining international crude oil prices all contributed to the drop in sugar prices.
In another report on grain supply and demand, the FAO predicted the world grain production for 2024/2025 to be 2.846 billion tonnes, roughly on par with the production in 2023/2024, as increases in barley, rice, and sorghum production are expected to offset the declines in corn and wheat production.