Global price of agricultural commodities fell to a seven-year low in August due to ample supplies, a slump in energy prices and concerns over slowdown in China.
Measured by the Food and Agricultural Organization (FAO) of the United Nations, the food price index averaged 155.7 points in August, down 5.2 per cent from July, the steepest monthly drop since December 2008, with almost all major food commodities registering marked dips. The trade-weighted FAO Food Price Index tracks international market prices for five major food commodity groups — cereals, meat, dairy products, vegetable oils and sugar.
Triggered by a bumper output in 2015, the global cereal price index averaged 154.9 points in August, down seven per cent from July and 15.1 per cent from last year, driven by falling wheat and maize prices that reversed two months of modest increases. Continued improvements in production prospects for 2015-16 were largely behind the slide.
FAO estimates global cereal production in 2015 at 2,540 million tonnes, about 13.8 mt more than expected in July but 21 mt (0.8 per cent) below the 2014 record. The upward revision resulted from more buoyant production prospects for coarse grains, wheat and rice across the world.
“Unfavourable weather in the winter harvesting season lowered yield in India. Consequently, India’s overall cereal output is estimated to be lower by 1.8 per cent at 234.1 mt in 2015, a second year of decline, from 243.2 mt and 238.4 mt in 2013 and 2014, respectively. India’s 2015 wheat crop is estimated to decline by five per cent (five mt) from the 2014 record due to crop damage caused by heavy rain, strong winds and hail,” an FAO study said.
Despite concern about planting delays, India’s rice output is expected to be 103.5 mt, about 0.9 per cent more than the disappointing figure of last year. But, our overall export of foodgrain is estimated to be lower, with growing domestic requirement. FAO estimates India’s rice ship- ment to be lower by 20 per cent in 2015.
Also, a substantial drop in price for milk powders, cheese and butter pushed the August dairy price index down 9.1 per cent to 135.5 points. Much of the weakness was attributed to softening import demand from China, West Asia and North Africa. A sharp fall in the sugar price index, down 10 per cent from July to an average of 163.2 points in August, was largely the result of continued depreciation of the Brazilian real against the dollar and firmer expectation that India would become a net exporter. in the current 2015-16 season.
Falling energy prices helped reduce transportation cost in the past year. The benchmark Brent crude oil price fell by 50 per cent to a low of $40 a barrel on August 24 and rebounded thereafter to trade at $49.