July 27, 2022

FAO price index continues to fall, but higher than 2021

FAO price index continues to fall, but higher than 2021

By: Sydney Sheffield

The Food and Agriculture Organization of the United Nations (FAO) has released the June 2022 FAO Food Price Index. While the Price Index fell from May 2022, it is still higher than the previous year. The Index tracks monthly changes in the international prices of a basket of commonly traded food commodities.

The FAO Food Price Index averaged 154.2 points in June 2022, down 2.3% from May. This is 23.1% higher than in June 2021. The June Index is just slightly below the 159.7 points reading in March, following Russia’s invasion of Ukraine. The drop in June reflected declines in the international prices of vegetable oils, cereals, and sugar, but dairy and meat prices have increased.

“The factors that drove global prices high in the first place are still in play,” said FAO chief economist Maximo Torero Cullen, “especially a strong global demand, adverse weather in some major countries, high production and transportation costs, and supply chain disruptions due to Covid-19, compounded by the uncertainties stemming from the ongoing war in Ukraine.”

The FAO Meat Price Index averaged 124.7 points in June, up 1.7% from May, setting a record high and exceeding its June 2021 value by 12.7%. World prices across all meat types increased. Poultry meat rose sharply, reaching an all-time high, due to the continued tight global supply conditions impacted by the war in Ukraine and the avian influenza outbreaks in the Northern Hemisphere.

The FAO Dairy Price Index averaged 149.8 points in June, up 4.1% from May and 24.9% above its June 2021 value. In June, international prices of all dairy products increased. Cheese prices rose the most, mainly underpinned by a surge in import demand for spot supplies amid market concerns over supply availabilities later in the year. World milk powder prices increased on strong import demand and persistent global supply tightness.

The FAO Cereal Price Index averaged 166.3 points in June, down 4.1% from May, but still 27.6% above its June 2021 value. International wheat prices fell by 5.7% in June but remained 48.5% above their values a year ago. The FAO Vegetable Oil Price Index averaged 211.8 points in June, down 7.6% month-on-month.

Sonal Varma, chief economist for India and Asia (ex-Japan) at the Japanese bank told CNBC, “food prices are not likely to fall substantially over time. The demand for some of these products is relatively inelastic.” She also added that a recession will not cause “a material decline in prices.”