Palm oil boosts world food prices: FAO

By Niamh Michail

- Last updated on GMT

© iStock/slpu9945
© iStock/slpu9945

Related tags Price index Fao food price Food and agriculture organization Cereal

World food prices rose slightly last month driven by higher vegetable oils prices, and palm oil in particular, according to the UN's Food and Agriculture Organisation (FAO).

The FAO Food Price Index is a monthly measure of the changes in international prices of a basket of food commodities. It covers commodities such as grain, meat, dairy and sugar.

Last month it averaged 178.4 points, marking a slight rise (0.8%) in prices from the previous month, and a 4.3% increase from September 2016.

The highest increase came from vegetable oils, which experienced a seven-month high. Palm prices were strengthened by a lower production output in Southeast Asia while demand remained high as inventories in importing countries were low.

Soybean oil prices also rose, fuelled by concerns over a slow start to the planting season in South America, although the FAO noted that any price increases were capped by larger-than-expected harvest estimates in the US. There was a continued firmness in rapeseed and sunflower oil values which contributed to the index increase.

Maize and wheat growers have had a worldwide record harvest this growing season, however, which caused the cereal price index to fall by 1%.

FAO analysts now forecast 750.1 million tonnes of wheat and 1,361 million tonnes of coarse grain will be harvested in 2017, as well as 500.7 million tonnes of rice. This is slightly down from the previous forecast but close to last year's record output.

World cereal stocks should therefore reach a new all-time high of 720.5 million tonnes by the close of seasons in 2018.

That would take the stocks-to-use ratio of cereals - an indicator of the likely price direction - to 27 percent, well above the historical low of 20% registered exactly a decade ago,"​ said the FAO. "The ratio is even higher - 34.6% - for wheat due to significant inventory build-ups in China and Russia.”

Dairy prices increased by 4.5 points, or 2.1%, on the previous month -  27.4% higher than the corresponding period last year, but still 18.6% below a peak reached in February 2014, the index authors note. This increase came from continued supply constraints in Australia, New Zealand and the European Union. Growth in the United States remained “timid​”, it said.

Butter and cheese continue to be most sought after products, especially in Asia, but there is “limited buying interest​” in whole and skimmed milk powder.

Meanwhile, the sugar price index was largely unchanged from the previous month.

“The rapid decline in sugar quotations since the beginning of this year reflects a continuing oversupply situation prevailing in world markets, in parallel with the slow-down in demand.”

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