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Global food prices rise on strong demand and poor weather

By Caroline Scott-Thomas+

10-Mar-2014

Global food prices are at their highest levels in months – but it is too early to say whether it will be an ongoing upward trend, the Food and Agriculture Organisation (FAO) has said.

The FAO’s Food Price Index, which assesses the prices of a basket of internationally traded food commodities, was up 2.6% in February compared to January, although it was still 2.1% below last February’s level.

The biggest increases since January were sugar, which was up 6.2%, oils (up 4.9%), cereals (up 3.6%) and dairy (up 2.9%. Meat prices slipped marginally.

"This month's increase follows a long period of declining food prices in general. But it's too early to say if this is a true reversal of the trend," said FAO senior economist Concepción Calpe. "The weather is probably a major force driving up prices for certain commodities like sugar or wheat, but brisk demand is also an important factor underpinning maize, dairy and oil prices.”

Price increases in February cannot be entirely attributed to events in Ukraine, the FAO said, although it noted that wheat and corn prices there had spiked in recent weeks as a result of unrest.

Sugar prices increased in late February after three months of declines, it said, on the back of worries about crop damage from dry weather in Brazil and a potential drop in output from India.

Meanwhile, the FAO said it was too early to forecast global cereal output for the year, with most coarse grains yet to be planted. However, it estimated cereal stock-to-use ratio of about 24% in 2014, its highest level since 2002/03.

“The expected increase in global cereal production in 2013 has already resulted in more affordable prices, which in turn are boosting utilization and trade in 2013/14, and helping to replenish world stocks,” it said.

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