Global food prices drop further

FAO food price index drops again in March driven by sugar's sharp slide

The FAO Food Price Index continued to decline in March, dropping 1.5 percent from February and 18.7 percent (40 points) below its level a year earlier.

A sharp fall in the price index for sugar - which reached its lowest level since February 2009 - together with dipping prices for vegetable oils, cereals and meat, more than offset a rise in dairy prices and contributed to the lower index, which in March averaged 173.8 points.

The index has been on a downward path since April 2014.

The FAO Food Price Index is a trade-weighted index that tracks prices of five major food commodity groups on international markets. It aggregates price sub-indices of cereals, meat, dairy products, vegetable oils and sugar.

Abundant supplies and rising dollar pushes down international prices of most food commodities

The FAO Meat Price Index averaged 177 points in March, down 1 percent from its revised February value. Since reaching its peak last July, the meat index has fallen each month.

The reduction was caused primarily by lower prices for both pork and chicken, worldwide.  Beef prices, on the other hand, remained unchanged

In March, the FAO Dairy Price Index rose for the second consecutive month to average 184.9 points, up 1.7 percent from February. Limited export supplies in Oceania and Europe was the principal cause of the reversal of the falling world dairy price trend that prevailed between March 2014 and January 2015

The FAO Sugar Price Index averaged 187.9 points in March, down a sharp 9.2 percent from February. This was mainly due to improved crop prospects but also the continued weakening of the Brazilian currency against the US dollar, which is supportive to exports.

The FAO Cereal Price Index averaged 169.8 points in March, down 1.1 percent from February and as much as 18.7 percent below its level a year earlier. The downward trend in 2015 has been mainly due to large export supplies and mounting inventories, in particular for wheat and maize.

The FAO Vegetable Oil Price Index averaged 151.7 points in March, nearly 3.1 percent below the February level and reaching its lowest value since September 2009.

The FAO Meat Price Index averaged 177 points in March, down 1 percent from its revised February value, while the FAO Dairy Price Index rose in March for the second consecutive month to average 184.9 points, up 1.7 percent from February.

World cereal supplies boosted by record crops in 2014

Meanwhile, the cereal output estimate for 2014 was raised to 2 544 million tonnes mainly due to a larger than anticipated maize harvest in the European Union, according to FAO's latest Cereal Supply and Demand Brief. If confirmed, global cereal output in 2014 would outstrip the 2013 record by 1 percent.

Looking ahead to the 2015 season, global wheat production is expected to reach 722 million tonnes in 2015, around 1 percent below the current estimate for 2014, mainly due to reduced plantings in the EU. While China, India and Pakistan are all expected to harvest close to 2014's record levels, production is predicted to decline in the Russian Federation and Ukraine.

As for coarse grains, plantings are only about to start in the northern hemisphere. However, early indications in the southern hemisphere, where crops are more advanced, point to a decline in 2015 production from last year's high levels. In particular, South Africa's maize production is expected to decline sharply, by 33 percent, following severe precipitation shortfalls earlier this year.

FAO's forecast for world cereal utilization in 2014/15 has been raised by nearly 17 million tonnes since March, to 2 493 million tonnes. The increase largely reflects historical revisions in China and India. 

The forecast for world cereal stocks by the close of crop seasons ending in 2015 has also been revised up sharply since last month's report and now stands at 645 million tonnes. The increase mainly reflects upward revisions to wheat and maize stocks in China.

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