The FAO Food Price Index fell for the third consecutive month in June 2012, dipping 1.8 percent from May to its lowest level since September 2010. The four-point drop in June brought the index to 201 points from a revised level of 205 points in May 2012.

The index now stands at 15.4 percent below its peak in February 2011. The average prices of all commodity groups in the Index were below May levels, with the largest drop registered for oils and fats.

Continued economic uncertainties and generally adequate food supply prospects kept the index down although growing concerns over dry weather sent prices of some crops higher toward the end of the month.

Food commodity prices have started rising again recently, mostly because of adverse weather and this may result in a rebound of the Food Price Index in July.

FAO also lowered its forecast for 2012 world cereal production by more than 23 million tonnes from May, which is likely to result in a smaller build-up of global stocks by the end of seasons in 2013.

FAO’s new forecast for world cereal production in 2012 stands at 2 396 million tonnes, still a record level and 2 percent up from the previous high registered last year.

Supply and demand situation adequate

According to FAO’s latest assessment, the overall supply and demand situation in 2012/13 remains adequate thanks to abundant supplies of rice, a leading food staple, and sufficient exportable supplies of wheat and coarse grains.

But grain prices were very volatile in June due to continuing dryness and above-average temperatures in most of the major maize growing regions of the United States. Adverse weather is diminishing prospects of an improvement in the maize supply situation and FAO is monitoring the development closely.

High-level event on volatility and speculation

The issue of swinging food prices will be discussed by a high-level event on “Food Price Volatility and Price Speculation” to be held at FAO on Friday, 6 July. Speakers will include Leonel Fernández, President of the Dominican Republic who will give a keynote address, and FAO Director-General José Graziano da Silva.

“FAO has been actively involved in studying food price volatility and identifying appropriate policy responses,” said Graziano da Silva. “Our analytical work is helping to deepen the understanding of the nature, causes and impacts of volatility and of what governments and other stakeholders can do about it.”

The FAO Food Price Index is a measure of the monthly change in average international prices of a basket of 55 food commodities

» The FAO Cereal Price Index averaged 221 points in June, unchanged from May and down 45 points (16.8 percent) from its peak of 265 points in April 2011. Grain prices were very volatile in June, with weather as the main driver. After a generally subdued situation during the first half of the month, markets moved up in the second half amid deteriorating crop prospects, most notably for maize in the United States. The increase in maize prices underpinned wheat values, which were already experiencing some increases on downward adjustments to production forecasts in the Russian Federation. Rice prices remained largely steady, with large differences persisting across origins.

» The FAO Oils/Fats Price Index averaged 221 points in June, down for the second consecutive month. After falling by 6.8 percent in May, the index fell by another 5.6 percent in June notwithstanding prospects for further supply and demand tightness for oilcrops in 2012/13. The recent easing in international oils/fats prices was caused primarily by larger than expected oilcrop plantings in northern hemisphere countries, as well as a sizeable decline in crude oil prices, which has weakened demand for vegetable oils from the energy sector.

» The FAO Meat Price Index averaged 174 points in June, down 1.3 percent from May. Prices of all the meat categories fell, because of a faltering global import demand and a weakening of currencies in some major exporting countries. Despite their recent weakness, meat prices in the first six months still averaged 1 percent higher in 2012 than in 2011, sustained by lingering high bovine meat quotations.

» The FAO Dairy Price Index averaged 173 points in June, down 1.5 percent from the revised May value and the fifth consecutive monthly decline. The June index slide was mainly on account of butter and whole milk powder, whose prices registered large drops, while those of skim milk powder and casein firmed somewhat. Since the beginning of the year, dairy prices have shed 16.1 percent of their value.

» The FAO Sugar Price Index averaged 290 points in June, down 5 points (1.6 percent) from May and as much as 68 points (19.0 percent) below their level in June 2011. Sugar prices declined for the fourth month in a row, reflecting larger availabilities in India, the EU and Thailand, new supplies from Brazil reaching the market, and declining crude oil prices. However, prices regained some strength towards the end of June on the back of unfavourable harvesting conditions in Brazil, the world’s largest sugar exporter.

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