Sugar prices drive FAO food price index rise

08-Nov-2013 - Last updated on 08-Nov-2013 at 09:40 GMT

Sugar is up...but the overall commodities picture is stable, says the FAO

Sugar price increases have led to the first rise in the global food price index since April, but food commodity markets are becoming less volatile, according to the Food and Agriculture Organisation (FAO).

The food price index measures the change in price for a global basket of internationally traded food commodities, and it rose 1.3% in October. However, this was still 5.3% below its year-ago level.

The rise was mainly driven by sugar prices, the FAO said, which saw their third consecutive monthly rise last month, up 7.3% in October alone.

“The increase in October was mainly attributable to harvest delays due to unfavourable weather conditions in the centre-south region of Brazil, the world’s largest sugar producer and exporter,” the FAO said. “Also a fire that destroyed a major sugar warehouse at the Santos port in Brazil exacerbated the price surge.”

The organisation said that sugar prices were particularly volatile in October because of uncertainty about how much surplus would remain from the current season. The FAO said that global sugar consumption was on course to increase by about 2% this year.

Meanwhile, the price index for meat, dairy and cereals was just slightly higher, while the index for vegetable oils was up 2%.

"The prices for most basic food commodities have declined over the past few months,” saidDavid Hallam, director of FAO's Trade and Markets Division. “This relates to production increases and the expectation that in the current season, we will have more abundant supplies, more export availabilities and higher stocks.”

According to the FAO’s Food Outlook report, global cereal inventories have recovered, meaning less volatility in commodity markets in recent years.

Global cereal stocks are expected to increase by 13% to 2014, with the greatest gain in coarse grains, up 30%, with most of that gain in the United States. Wheat and rice stocks are also expected to rise, by 7% and 3% respectively.

During the food price crisis of 2007/08, global cereal stocks-to-use ratio bottomed out at 18.4%. The current expansion in world cereal stocks would mean a ratio of 23%, the FAO said.

Last month, FAO director-general José Graziano da Silva urged countries to take advantage of the current calm conditions on world markets to prepare for future food price volatility.