The food price index monitored by the Food and Agricultural Organisation of the United Nations (FAO) has rebounded in January after five subsequent months of moderation. This indicates that global food prices have steadily risen in January, which may have a negative repercussion on Indian consumers as well.
Data compiled by the FAO show that the Food Price Index (FPI) averaged 214 points in January 2012, nearly 2% (4 points) up from December. The rebound represented the first upturn in the FPI since July 2011 but the index remained 7% below its corresponding value last year. In January, prices of all the commodity groups that compose the Index registered gains, with oils increasing the most, followed closely by cereals, sugar, dairy and meat.
“There is no single narrative behind the food price rebound – different factors are at play in each of the commodity groups. But the increase, despite an expected record harvest and an improved stocks situation, and after six months of falling or stable prices, highlights the unpredictability prevailing in global food markets,” said Senior Grains Economist Abdolreza Abbassian.
The Cereal Price Index averaged 223 points in January, up 2.3% (5 points) from December. International prices of all major cereals with the exception of rice rose in January. Coarse grains (maize) registered the steepest gain with prices rising 6 percent in January, mostly driven by a tight global supply and demand balance and concerns over crop prospects in South America.
Wheat prices also gained, though less significantly than coarse grains, with the wheat index up 1.5 percent under the influence of rising maize prices, depleting export supplies in the Russian Federation and unfavourable weather in several important growing regions. By contrast, rice prices remained on a downward trend, with the rice index shedding 3% from December, driven by seasonal harvest pressure and stiff competition for market shares among exporters.
According to FAO’s latest forecast world cereal production in 2011 is expected to be more than sufficient to cover anticipated utilization in 2011-12. Production is expected to reach 2,327 million tonnes – up 4.6 million tonnes from the last estimate in December. That would be 3.6% more than in 2010 and a new record. Cereal utilization in 2011-12 was lowered slightly from December, to nearly 2,309 million tonnes, but still 1.8% higher than in 2010-11. That would put cereal ending stocks by the close of seasons in 2012 at 516 million tonnes, 5 million tonnes up on FAO’s last forecast.
The Oil-Fats Price Index rose to 234 points in January, up 3% (6 points), from December. The index remains high in historical terms although below the corresponding value recorded one year ago. Firming import demand for palm and soy oil, combined with a seasonal decline in palm oil production and the prospect of below average export availabilities of soy oil were the main driving forces behind the recovery in the index.
The Dairy Price Index averaged 207 points in January 2012, up 2.5% (5 points) from December, when prices initiated an upturn after five months of steady declines. A rebounding of butter and cheese prices are behind this month's strength, as prices of both skim and whole milk powder were steady or slightly down. Relatively low stocks of dairy products in the United States along with supply tightness in Oceania have sustained prices in the past two months.
The Sugar Price Index rose to 334 points in January, up 2.3% (7.4 points) from December, but still 20% (86 points) lower than in January last year. Last month's increase was largely driven by less than favourable weather conditions in Brazil, the world's largest producer and exporter of sugar, on fears that it might delay harvest and cut total production. On the other hand, large production harvests in India, the EU, Thailand and the Russian Federation contained the recent price increase.
