Food Prices

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World food prices rose for a fourth straight month in November to remain at 10-year highs, led by strong demand for wheat and dairy products, according to Food and Agriculture Organization (FAO). The FAO’s Food Price Index, which measures the monthly change in the international price of cereal, dairy, meat, vegetable oils and sugar, jumped 1.6 points in November from the previous month to 134.4. That is the highest level in a decade and the fourth consecutive month the index has risen.
Prices of cereals and dairy saw the sharpest gains, followed by sugar, while prices of meat and vegetable oils fell slightly in November from the previous month. Inflation for essentials including food and energy has skyrocketed this year, thanks to supply-chain snarls and shortages as countries cast off COVID-19 restrictions. Soaring food prices are hitting low-income households especially hard because higher prices for essentials like bread, meat, milk and rice eat up a larger share of their incomes.
According to UN agency, the pain inflicted on consumers has placed central banks the world over in a tough position because higher interest rates help cool inflation, but they also risk denting fragile economic recoveries. The FAO Dairy Price Index led November’s aggregate rise, increasing by 3.4 percent from the previous month. Strong global import demand persisted for butter and milk powders as buyers sought to secure spot supplies in anticipating of tightening markets.
The FAO Cereal Price Index increased by 3.1 percent in November from the previous month and was 23.2 percent higher than its year-ago level. Maize export prices rose slightly and international rice prices remained broadly steady, while wheat prices hit their highest level since May 2011. The increase reflected strong demand amid tight supplies, especially of higher quality wheat, while prices were also supported by concerns about untimely rains in Australia and uncertainty rega rding potential changes to export measures in the Russian Federation.
The FAO Sugar Price Index was 1.4 percent higher in November than in October and nearly 40 percent above its level in November 2020. The increase was primarily driven by higher ethanol prices, though large shipments from India and a positive outlook for sugar exports by Thailand tempered the upward pressure on quotations. The FAO Vegetable Oil Price Index declined by 0.3 percent from a record high reached in October, reflecting lower values for soy and rapeseed oils as well as lower crude oil prices. International palm oil prices remained firm.
The FAO Meat Price Index decreased by 0.9 percent, its fourth consecutive monthly decline. Influenced by reduced purchases of pig meat by China led to lower international quotations, while ovine prices also fell steeply on increased exportable supplies from Australia. Bovine and poultry meat prices were largely stable. FAO’s new Cereal Supply and Demand Brief, also published Thursday, forecasts world cereal production at 2 791 million tonnes in 2021, a new record and 0.7 percent higher than the previous year. Compared to 2020, worldwide coarse grains and rice outputs are expected to increase, respectively, by 1.4 percent and 0.9 percent, while that for wheat to drop by 1.0 percent. World cereal utilization in 2021/22 is forecast to rise by 1.7 percent to 2 810 million tonnes, while world cereal stocks by the close of seasons in 2022 are predicted to decline by 0.9 percent form opening levels. The consequent stocks-to-use ratio of 28.6 percent “would still indicate a comfortable supply situation overall,” according to FAO. FAO forecasts global trade in cereals in 2021/22 to increase by 0.7 percent to 480 million tonnes, with an anticipated 2.2-percent expansion in world wheat trade more than offsetting a likely contraction in coarse grains trade.