Key Takeaways:
World food prices rose 0.6% in July, with the FAO index averaging 131.1 points, the highest since January 2023, the UN agency said Friday.
The FAO's chief economist warned this week that the world faces another bout of food inflation as wars in Iran and Ukraine, along with El Niño, create a mix of higher costs and lower crop yields, Reuters reported.
Cereal prices rose 3.4% from June, reversing the prior month's decline, with wheat up 5.8% on Black Sea export disruptions and heatwave crop damage. Sugar climbed 5.6% and vegetable oils 2.0%, while meat fell 2.8% from a record high and dairy slipped 0.7%.
The near-total closure of the Strait of Hormuz sent fertilizer prices sharply higher this year, raising concerns over a shock to the global food system, while expectations of a strong El Niño could disrupt harvests across key farming regions and further tighten supplies.
Global wheat prices rose 5.8% as concerns persisted over disruptions to Black Sea export flows and the likely impact of recent heatwaves on crop yields in several key producing countries. World maize prices increased 3.6%, supported by hot, dry weather in parts of the United States and spillover effects from firmer energy markets as geopolitical tensions rose. The FAO All Rice Price Index held broadly steady in July.
Sugar prices rose 5.6%, erasing June's decline, on concerns over the potential impact of persistent hot, dry weather on crop yields in the European Union and El Niño-related conditions on production prospects in key Asian producers. Expectations of stronger ethanol demand in Brazil, following a temporary increase in the mandatory ethanol blend in gasoline, also supported prices, though gains were partly offset by improving harvesting conditions in Brazil's Center-South growing regions.
The FAO Vegetable Oil Price Index rose 2.0% to its highest level since June 2022. Palm oil prices increased on firm demand from Indonesia's biodiesel sector and higher crude oil prices, while soy oil gained on persistently strong feedstock demand in the United States and stronger global import demand. Sunflower and rapeseed oil prices declined.
The FAO Meat Price Index weakened 2.8% from its record high in June, posting its first monthly decline this year. Poultry prices fell on ample Brazilian export supplies, while pig meat dipped as European Union supplies stayed abundant and global demand softened. Bovine meat eased on weaker Asian import demand, though ovine meat rose to a new record high on tight exportable supplies in Oceania.
Dairy prices declined 0.7%, with whole and skim milk powder and butter quotations dropping. Cheese prices rose for the first time in a year as tighter seasonal milk supplies in the European Union outweighed price declines in Oceania and competitive pressure from ample US export supplies.
The index reading was 18.2% below its March 2022 peak that followed Russia's full-scale invasion of Ukraine.
This article is for informational purposes only and does not constitute investment advice.
