World Food Prices Reach Record High in February -FAO

International maize price rises by 5.1%, wheat hits 2.1%

The Food and Agriculture Organisation (FAO) has disclosed that the benchmark gauge for world food prices went up in February, reaching an all-time high.

The organisation in its just-released Food Price Index noted that vegetable oils and dairy products prices had the highest increase.

The FAO Price Index, which tracks monthly changes in the international prices of commonly-traded food commodities, averaged 140.7 points in February, a figure up by 3.9 per cent from January, 20.7 per cent above its level a year earlier, and 3.1 points higher than reached in February 2011.

According to the report, the vegetable oils price index led the increase, rising 8.5 per cent from the previous month to reach a new record high, mostly driven by increased quotations for palm, soy and sunflower oils.

The report revealed that the sharp increase was principally driven by sustained global import demand, which coincided with a few supply-side factors, including reduced export availabilities of palm oil from Indonesia, the world’s leading exporter, lower soybean production prospects in South America, and concerns about lower sunflower oil exports due to disruptions in the Black Sea region.

Also, the FAO dairy price index averaged 6.4 per cent higher in February than January, caused by lower-than-expected milk supplies in Western Europe and Oceania, as well as persistent import demand, especially from North Asia and the Middle East.

Similarly, the cereal price index increased 3.0 per cent from the previous month, led by rising quotations for coarse grains, with international maize prices up 5.1 per cent, due to a combination of continued concerns over crop conditions in South America, uncertainty about maize exports from Ukraine, and rising wheat export prices.

Furthermore, the world wheat prices increased by 2.1 per cent, largely reflecting uncertainty about global supply flows from Black Sea ports and the international rice prices increased by 1.1 per cent.

However, the sugar price index declined 1.9 per cent despite favourable production prospects in major exporting countries such as India and Thailand, as well as improved growing conditions in Brazil.

Reacting to the report, FAO economist Upali Galketi Aratchilage, said, “Concerns overcrop conditions and adequate export availabilities explain only a part of the current global food price increases.

“A much bigger push for food price inflation comes from outside food production, particularly the energy, fertiliser and feed sectors.

“All these factors tend to squeeze profit margins of food producers, discouraging them from investing and expanding production,” he added.