Global food prices stable in November

Rise in veg oil and grains offset decline in dairy products

Global food prices remained stable for a third month in a row in November, with a surge in vegetable oil and grains offsetting a decline in dairy products.

Data compiled by the Food and Agricultural Organization (FAO) of the United Nations showed the Food Price Index averaged 192.6 points in November, a third month of stability. The Index now stands 13 points or 6.4 per cent, below its level in November 2013.

The stabilisation indicates a possible reversal in trend from a continuous fall until three months earlier. "The index appears to have bottomed out, with higher probabilities for a rise in its value in the coming months" said Abdolreza Abbassian, senior economist at FAO.

Cereal prices rose significantly for the first time since March as growing conditions for the just-sown wheat crop in the northern hemisphere appear less than ideal. However, rice prices weakened as newly-harvested supplies arrived to market. Thus, the Cereal Price Index averaged 183 points in November, up 2.6 per cent from October but down 5.8 per cent from a year earlier.

The forecast for world cereal production has been lowered marginally since October, to 2,522 million tonnes, now 3.7 mt below the record production in 2013. Global cereal utilisation, however, in 2014-15 is forecast at 2,459 mt, 1.7 per cent higher than in 2013-14. Most of the anticipated increase is expected to concern feed-use of cereals, foreseen to rise by 2.6 per cent to 874 mt. The predicted expansion is largely driven by this season’s ample supplies and lower prices.

This year’s abundant supplies have already resulted in sharp declines in international prices of all cereals,  excepting rice. However, the lower prices are not expected to stimulate trade, as the major cereal importing countries are holding large supplies. This might result in total cereal trade contracting five per cent to 337 mt in 2014-15, said FAO.

The Vegetable Oil Price Index also rose, increasing 0.7 per cent to 164.9 points, still almost 17 per cent below its level a year earlier, due to lower than anticipated global production of sunflower oil and some slowing of palm oil production in Malaysia and Indonesia. However, soy oil prices were weak, dampening the sub-index's rise.

International sugar prices, on a downward trend for most of 2013, recovered modestly in the first half of 2014, underpinned by drought in Brazil. Falling international prices are expected to stimulate global import demand and boost its trade in 2014-15, though imports by China and Russia are expected to contract. Exports are anticipated to remain unchanged in Brazil, the world’s largest producer and exporter, but to rise in Thailand.

By contrast, the index for dairy prices declined 3.4 per cent from October and 29 per cent from a year earlier, to average 178.1 points in November. This reflects increased export availability of dairy products, along with slower imports to large markets such as China and Russia.

Also, the sugar price index dropped 3.2 per cent from October to average 230 points in November, about eight per cent below their level a year earlier. The recent decline came as rain in Brazil's main sugar producing region alleviated concern about a prolonged drought there.