Cereal and dairy lift world food prices while maize, barley and sorghum supplies forecast to rise

10 Jun 2024 --- World food prices spiked for a third consecutive month in May amid a surge in prices for cereals and dairy products, outweighing price drops for sugar and vegetable oils, says the Food and Agriculture Organization of the United Nations (FAO).

The FAO Food Price Index averaged 120.4 points in May, up 0.9% from its revised April level, while it remained down 3.4% from its level a year ago and 24.9% below its March 2022 peak.

Low harvest impacts costs
Rising global wheat export costs drove cereal prices upward by 6.3% from April, reflecting growing concerns about “unfavorable crop conditions” curbing yields for the 2024 harvests in parts of Northern America, Europe and the Black Sea region. 

Maize export prices also increased in May, pushed up by production concerns in Argentina due to the Spiroplasma disease (corn stunt disease) and Brazil due to adverse weather conditions. Meanwhile, spillover effects from the wheat markets and limited sales in Ukraine also pushed prices up.

The FAO All-Rice Price Index rose by 1.3% in May. 

The dairy segment also witnessed price hikes of 1.8% from April, influenced by rising retail and foodservices demand. The upcoming vacation period and market expectations that milk production in Western Europe may fall, contributed to the price surge. 

Prices of pig and ovine meat increased amid a decline of 0.2% in the FAO Meat Price Index in May.“Renewed import demand for spot supplies from some countries in the Near East and North Africa also lifted dairy prices,” underscores the FAO.

Oil, sugar and meat drops
The FAO Sugar Price Index dropped 7.5% from April owing to the positive start of the new harvest season in Brazil.

Lower international crude oil prices reduced the demand and exerted “downward pressure” on sugar prices, flags the organization.

Meanwhile, vegetable oil costs declined by 2.4% from April, due to the ongoing weak global demand for palm oil. This offset the higher prices of soy oil, driven by the increasing demand from the biofuel sector. Higher prices of rapeseed and sunflower oils were noted due to a slump in export availability in the Black Sea region. 

The FAO Meat Price Index decreased marginally, by 0.2%, as international prices of poultry and bovine meat plummeted while those of pig and ovine meat increased. 

Ongoing price fluctuations
The F&B sector has witnessed a whirlwind of changes recently due to climate change, unstable weather conditions and impact of wars.

Food commodity prices ended in 2023 about 10% below their year-earlier level, with the most notable decrease observed in international sugar quotations. 

This was followed by a drop in prices in January, led by declines in the prices of cereals and meat, which more than offset an increase in sugar prices. The Red Sea shipping crisis further increased food commodity and plastic prices and disrupted dairy trade.

The FAO predicts world wheat production to decline due to adverse weather conditions in the Black Sea region.In April, rising meat prices and a slight surge in vegetable oils and cereals counterbalanced decreases in sugar and dairy products. The FAO Food Price Index averaged 119.1 points, an increase of 0.3% from its revised March level while down 9.6% from its year-earlier level.

Future outlook
The FAO has predicted a world cereal production of 2846 million metric tons for the 2024/25 (July/June) season.

“Global maize and wheat outputs are forecast to decline, while those of barley, rice and sorghum are predicted to increase, according to the new Cereal Supply and Demand Brief,” notes the FAO.

However, it also warns that the recent “adverse weather conditions in the Black Sea region will likely result in a downgrade in world wheat production.”

Meanwhile, the FAO expects increased rice consumption to propel the world cereal total utilization by 0.5% to 2851 million metric tons.

World cereal stocks of maize, barley, sorghum and rice are expected to rise by 1.5% above their opening levels to 897 million metric tons, while those of wheat could decline. The global stocks-to-use ratio “will likely remain at 30.9%.”

“FAO predicts world trade in cereals to decline by 1.3% from the previous year to 481 million metric tons, led by lower trade prospects for maize. International rice trade is forecast to grow robustly,” concludes the FAO.

By Insha Naureen