World Food Prices Extend Drop As Supply Uptick Offers Relief
Global food prices fell for a fifth month after demand for some products weakened and there was a seasonal uptick in supplies.
(Bloomberg) -- Global food prices fell for a fifth month after demand for some products weakened and there was a seasonal uptick in supplies.
Wheat harvests in the northern hemisphere are helping ease supply constraints, while more grain trickles out of ports in Ukraine. A United Nations index of world food costs dropped 1.9% in August from the previous month, data showed Friday. The index remained at the lowest level since January.
Falling prices may offer some relief to consumers as they grapple with a deepening cost-of-living crisis. Still, the declines are not as sharp as in July when food prices plunged the most since 2008, and remain higher than a year ago. Food inflation shows no signs of easing in many nations, with higher energy prices likely to boost processing costs. Harvests may shrink in the long term as farmers curb fertilizer use.
“Food prices are still really high,” Erin Collier, an economist at the UN’s Food and Agriculture Organization, said in an interview with Bloomberg TV. “Our point of concern is the fact that cereals, which have been a main driver of these price increases, remain very high.”
Costs fell across the board in August, with vegetable oils pushed slightly below their level from a year earlier. More palm oil supplies from Indonesia and seasonally rising outputs in southeast Asia helped push down the prices, while import demand for sunflower oil has been subdued, the FAO said in a statement.
WATCH: A United Nations index of world food costs dropped 1.9% in August as demand for some items declined along with a seasonal increase in supplies. Source: Bloomberg
Dairy stocks remained adequate and New Zealand boosted production in the new season. Major poultry importers reduced their purchases, while domestic demand for bovine meat in key exporters was weak.
Still, concerns over the impact of drought on corn harvests have partly offset declines in grain prices. And while more grain is leaving Ukraine, the volume is still far below the norm and lost farmland and weak local prices are threatening its next wheat harvest.
The FAO lowered its 2022 grain forecast by 1.4% as heat waves led to plummeting corn yields in the European Union.
A strong dollar will also make it more expensive to ship foodstuffs and that will especially be problematic for import-dependent low-income countries, according to the FAO’s Collier.
The UN index tracks export prices for raw goods and excludes retail mark-ups, so it may take a while before their impact is felt by consumers.
(Updates with breakdown of lower costs in fourth paragraph)
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