Global agri-commodities prices fell sharply to hit seven-year low in August due to ample supplies, a slump in energy prices and concerns over economic slowdown in China.
Measured by the Food and Agricultural Organisation (FAO) of the United Nations, the food price index averaged 155.7 points in August 2015, down 5.2% from July, the steepest monthly drop since December 2008, with virtually 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, global cereal price index averaged 154.9 points in August, down 7% from July and 15.1% from last year - a decline driven by falling wheat and maize prices that reversed two consecutive months of modest increases. Continued improvements in production prospects for 2015-16 were largely behind the cereal price slides.
FAO estimates global cereal production in 2015 at 2,540 million tonnes, 13.8 million tonnes more than expected in July, but still 21 million tonnes (0.8%) below the 2014 record. The upward revision resulted from more buoyant production prospects for coarse grains, wheat and rice across the world.
"Unfavourable weather condition in the winter harvesting season lowered yield in India. Consequently, India's overall cereal output is estimated to be lower by 1.8% at 234.1 million tonnes in 2015, the second year of consecutive decline, from 243.2 million tonnes and 2,38.4 million tonnes in 2013 and 2014 respectively. India's 2015 wheat crop is estimated to decline by 5% (5 million tonnes) from the 2014 record due to crop damage caused by heavy rains, strong winds and hail," a FAO study said.
Despite concerns about the possible incidence of planting delays, India's overall rice output is expected to remain higher at 103.5 million tonnes, 0.9% more than the disappointing figure of last year.
But, India's overall export of foodgrains is estimated to be lower due to a tightening of supplies and growing domestic requirements. FAO estimates India's rice shipment to be lower by 20% in 2015.
Meanwhile, the vegetable oil price index averaged 134.9 points in August, down 8.6% from July, and its lowest level since March 2009. The fall primarily reflected a six-and-a-half year low in international palm oil prices, mainly the result of slowing import demand, notably by India and China, amid expectations of rising production.
Also, a substantial drop in prices for milk powders, cheese and butter pushed the August dairy price index down by 9.1% to 135.5 points, with much of the weakness attributed to softening import demand from China, the Near East and North Africa.
A sharp fall in the sugar price index - down 10% from July to an average of 163.2 points in August - was largely the result of the continued depreciation of the Brazilian Real against the US Dollar and firmer expectations that India, the world's second largest sugar producer, will become a net exporter in the current 2015-16 season.