Dairy, palm and sugar prices drive global food price index in January

A sharp rebound in the prices of dairy, palm and soya oils drove global food prices in January, a statement released from the Food and Agricultural Organisation (FAO) of the United Nations said on Thursday.

While prices of soybean oil jumped by 8.3 per cent in January 2019 to 30 cents per pound (lb), prices of crude palm oil (CPO) in the benchmark Bursa Malaysia shot up 6.3 per cent to ringgit 2299 in January 2019. SMP prices in the benchmark the Netherland spot market surged by 12.7 per cent to $195 a quintal in January 2019 from $173 a tonnes towards the end of last year.

With this, global food price index compiled by FAO started the year 2019 in a buoyant note and jumped by 1.8 per cent on sequential basis to 164.8 points in January. The index, however, is 2.2 per cent below its January 2018 level. But, the Food Price Index in January 2019 is still 3.7 points (2.2 per cent) below the corresponding month last year. The FAO price index remained largely stable in the last three previous months.

After seven months of sustained fall, the dairy products prices jumped by 12.2 points or 7.2 per cent averaged 182.1 points in January from its respective level in December 2018. All dairy products represented in the index registered higher prices in January, with Skim Milk Powder (SMP) quotations rising by as much as 16.5 per cent month-on-month. SMP price increase in the world market could offer an opportunity for Indian producers to start export now.

“The sharp increase resulted from limited export supplies from Europe, due to strong internal demand, and expectations of a seasonal tightening of export availability from Oceania in the coming months. Notwithstanding this price rise, the Index is only slightly above its level in the corresponding month last year,” FAO said in a note.

The FAO Cereal Price Index averaged 168.1 points in January, up marginally from December and almost 11.5 points (7.3 per cent) above its January 2018 level. Except for rice, the prices of other major cereals remained generally firm, supported by the decline in global production in 2018, tightening export supplies and robust world demand. 

January, however, was a particularly quiet month for wheat and maize markets, in part due to the absence of several key reports in the United States because of the US Government shutdown. Nonetheless, grain prices were up during the month, with maize values rising the most, in reaction to adverse weather conditions in South America. International rice prices also increased, primarily owing to upbeat demand for Japonica supplies and a firmer Thai Baht.

Meanwhile, the FAO Vegetable Oil Price Index averaged 131.2 points in January, rising 5.4 points (or 4.3 per cent) from the previous month and marking the second consecutive increase after a protracted fall. The rise mainly reflects additional gains in palm oil values, underpinned by a seasonal decline of production in the major producing countries and a firm global import demand. International soyoil prices also rose, largely reflecting robust demand for South American supplies.

The FAO Sugar Price Index averaged 181.9 points in January 2019, up 2.4 points (1.3 per cent) from December 2018. International sugar prices were largely influenced by movements in the Brazilian currency (Real), which gained strength against the US dollar. A stronger Real supports sugar prices because it limits the supply of Brazilian sugar to the world market, as domestic producers process sugarcane into ethanol for local sale. Firmer crude oil prices lent further support to international sugar price quotations.

FAO lifted the world's 2018 cereal production estimate to 2611 million tonnes, reflecting upward revisions of maize, wheat and rice.