LONDON: The United Nations Food and Agriculture Organization (FAO) revealed in its latest report that the world food price index climbed for the third consecutive month in May. Despite drops in sugar and vegetable oil prices, higher prices for cereals and dairy products were predominant factors.
The FAO’s index, tracking globally traded food commodities, averaged 120.4 points in May, marking a 0.9% increase from April. However, this reading remained 3.4% below the level observed a year earlier.
The surge in May’s index was primarily driven by a 6.3% rise in cereal prices, fueled by concerns over unfavorable crop conditions affecting key producing regions like North America, Europe, and the Black Sea area. Similarly, dairy prices saw a 1.8% increase, attributed to heightened demand ahead of summer holidays and worries about declining milk production in Western Europe.
Conversely, the sugar index witnessed a sharp 7.5% decline, as Brazil, the top producer, commenced a promising harvest season. Vegetable oil prices also dipped by 2.4%, mainly due to falling palm oil quotations amidst rising seasonal output.
In a separate report focusing on cereals supply and demand, the FAO projected world cereal production for 2024-25 to remain roughly consistent with the previous year’s record output, reaching 2.846 billion tonnes. While barley, rice, and sorghum output are expected to increase, maize and wheat are anticipated to decline.
However, the FAO cautioned about the adverse weather conditions in the Black Sea region, which might lead to a downgrade in world wheat production, a factor not yet reflected in the forecast.
World cereal utilization for 2024-25 is predicted to rise by 0.5% year-on-year, reaching a new record high of 2.851 billion tonnes. Additionally, world cereal stocks are forecasted to increase by 1.5% from their opening levels, reaching a record 897 million tonnes.
