Dairy and sugar drive world food prices up – FAO

Major food commodity prices rose in October on September by 3.9% with dairy helping to drive the rise.

The Food and Agricultural Organisation (FAO) Food Price Index averaged nearly 162 points in October and while it is up on September, it’s down 16% on a year earlier.

The dairy price index rose 9.4% from September on concerns that milk output in New Zealand would decline, according to the FAO.

The meat price index was stable while the cereal price index rose by 1.7%. The FAO states that this was pushed up in part by growing concerns over dry weather conditions affecting wheat crops in Ukraine and southern parts of the Russian Federation.

The rise in the sugar price index played a big role in the overall rise of food commodity prices. It surged 17.2% on September, FAO figures show.

It attributes the rise to fears that excessive rains in the main growing regions in Brazil would impact the sugarcane harvest and also reports of drought in India and Thailand.

According to the FAO, intensifying concerns that El Nino may hamper next year’s palm oil supply in Indonesia, coupled with slow progress in soybean plantings in Brazil, due also to unfavourable weather, spurred a 6.2% increase in the FAO vegetable oil price index.

The FAO’s latest Cereal Supply and Demand Brief slightly trimmed its October 2015 forecast for global cereal production and now projects production at 2.53 billion tonnes, 1.1% below last year’s record output.

It attributes half of the forecast cut reflected dimmer expectations about maize crops in India and Ukraine, mostly due to adverse weather.

At the same time, the FAO forecast for global wheat production has been raised, largely reflecting a bigger harvest in the European Union than earlier anticipated.

World cereal stocks are expected to remain at a comfortable level, with global wheat inventories rising further, reaching their highest level in 15 years, according to the FAO.

The FAO food price index is a trade-weighted index that tracks prices on international markets of five major food commodity groups: cereals, meat, dairy products, vegetable oils and sugar.

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