Cereal, sugar and dairy drive global food prices upwards

The value of meat remained steady month-on-month while vegetable oil prices fell slightly.

Compared to July last year, cereal prices rose by an average of 9.5%. Hot and dry weather in North America disrupted the spring growing conditions for wheat which meant poorer quality yields, particularly for higher protein wheat.

“Seasonal tightness also provided some support to rice quotations, although gains were capped by a slowdown in demand,”​ said an accompanying report by the FAO.

Maize values remained largely steady.

Vegetable oil prices dipped slightly by 1.1% from last month, settling at the lowest level since August 2016. This downward trend was driven by palm oil, the index’s key commodity.

Dairy prices averaged 3.6% higher than June and 52.2% higher than July last year. Despite these increases the index is still 21% below its 2014 peak.

International prices of butter, cheese and whole milk powder (WMP) increased, while skimmed milk powder (SMP) fell.

“While strong buying activity from Asian importers also underpinned cheese and WMP quotations, SMP prices were weighed down by slack demand and prospects of larger releases from the intervention stocks in the EU.”​

Meanwhile sugar prices were up 5.2% from June but this is still 26% below its value a year prior.

FAO analysts put the reason for this rebound in sugar quotas down to the strong appreciation of the Brazilian real currency as well as good weather conditions in Brazil, the biggest global supplier. Crops development in Thailand and India also progressed.

Created in 1996, the FAO price index measures developments in the global agricultural commodity markets. In 2008, when the prices of major commodities skyrocketed, the index became a marker of potential food insecurity in developing countries.