Global food prices rose in August to their highest level in over a year, as costs climbed for all commodities except cereals. While impressive harvests have seen the price of grains drop, a downturn in European milk production has led to soaring dairy prices.
The UN Food and Agriculture Organisation’s (FAO) monthly food price index climbed 1.9 percent in August, resuming gains after a slight drop in July. This latest rise puts food prices at their highest level since May last year, after the index previously hit a seven-year low in January 2016.
“We seem to have reached the bottom for food prices in general some months back, and I think what we are seeing goes some way to confirm that”, said FAO Senior Grains Economist Abdolreza Abbassian.
Plentiful harvests and advances in pest-resistant crops have seen food prices fall steadily for the past few years, but this pattern appears to have bottomed out. While the FAO does not expect prices to return to their 2011 record highs, a significant drop in price is equally as unlikely, with food prices predicted to remain broadly stable for at least the next decade.
The FAO has raised its world cereal production forecast for 2016 to 2.57 trillion tonnes
This year’s rise can largely be attributed to the dairy, sugar and palm oil markets. Falling milk production in the EU, coupled with a sluggish dairy industry in Oceania has led to a 14 percent jump in dairy prices from the same month last year. The price of sugar has reached its highest level since October 2012, with this latest surge largely due to a strengthening of the Brazilian real, which has been increasing against the dollar.
Vegetable oils also rose seven percent from the previous month, fuelled by a rising import demand in some major importing markets, such as China, India and the EU. A lower than anticipated palm oil output in Malaysia also contributed to this price increase.
Cereal was the only commodity that saw its price decline in August, following a spike in wheat, maize and rice production. Consequently, the FAO has raised its world cereal production forecast for 2016 to 2.57 trillion tonnes, up 22 million tonnes from July. The FAO predicts a record global wheat harvest this year, as well as optimistic harvest prospects for maize in the US.
These ample cereal supplies are certainly promising for global food security, particularly in developing countries. The FAO celebrated this favourable global cereal stock-to-use ratio, welcoming an “even more comfortable supply and demand situation than predicted in the start of the year”.