The FAO Food Price Index drops again in February, albeit only marginally

The FAO Food Price Index (FFPI) averaged 129.8 points in February 2023, marginally down (0.6 percent) from January, continuing the downward trend for the eleventh consecutive month. With the latest decline, the index has fallen 29.9 points (18.7 percent) from the peak it reached in March 2022.  The marginal decline of the FFPI in February reflected significant drops in the price indices of vegetable oils and dairy, together with fractionally lower cereals and meat indices, more than offsetting a steep rise in the sugar price index.

The FAO Cereal Price Index averaged 147.3 points in February, down fractionally (0.1 percent) from January and 2.0 points (1.4 percent) above its level one year ago. After falling for three consecutive months, international wheat prices rose marginally (0.3 percent) in February. The slightly firmer tone mostly reflected ongoing concerns over dry conditions in key production areas of Hard Red Winter wheat in the United States of America, and robust demand for supplies from Australia, while strong competition among exporters helped to cap price gains. World maize prices changed little, up just 0.1 percent month-on-month. Support stemmed from worsening conditions in Argentina, and planting delays for the second maize crop along with a strong export pace in Brazil, while low demand for supplies from the United States of America weighed on maize export prices. By contrast, among other coarse grains, world prices of sorghum were down fractionally (0.2 percent), while barley prices declined slightly (0.9 percent) in February, mostly attributed to higher seasonal availability in the southern hemisphere. On the other hand, international rice prices eased by 1.0 percent in February, as trading activities in most major Asian exporters slowed, while their national currencies depreciated against the United States dollar. This was especially the case in Thailand, where the baht weakened from the ten-month highs it reached in January, contributing to the reversal of most of the price increases registered in January.

The FAO Vegetable Oil Price Index averaged 135.9 points in February, down 4.5 points (3.2 percent) from January and marking the lowest level since the beginning of 2021. The continued weakness of the index was driven by lower world prices across palm, soy, sunflowerseed and rapeseed oils. International palm oil prices dropped for the third consecutive month in February, chiefly weighed by lingering sluggish global import demand, despite seasonally lower production from major growing regions in Southeast Asia. Meanwhile, world soyoil prices also continued to decline, underpinned by softened purchases from key importing countries and prospects of rising outputs from South America. As for sunflower and rapeseed oils, world quotations remained on a downward trajectory, depressed by their abundant global exportable availabilities.

The FAO Dairy Price Index averaged 131.3 points in February, down 3.6 points (2.7 percent) from January and standing 10.2 points (7.2 percent) below the corresponding month last year. In February, the decline in the index was driven by lower prices across all dairy products, with the steepest falls in butter and skim milk powder (SMP). The continued weakness in global import demand, especially for near-term deliveries underpinned the price declines, despite a noticeable increase in purchases in recent weeks by North Asia. In addition, increased exportable supplies, including inventories of butter, cheese and SMP, in Western Europe, where seasonal milk deliveries in recent months have tracked above their corresponding monthly averages, also weighed on global export prices.

The FAO Meat Price Index averaged 112.0 points in February, fractionally lower (0.1 points and 0.1 percent) from January and standing 1.9 points (1.7 percent) below its value a year ago. In February, international poultry meat prices fell for the eighth consecutive month, reflecting abundant global supplies compared to softer import demand, notwithstanding avian influenza outbreaks in several leading producer countries. By contrast, international pig meat prices increased, underpinned by market concerns over the low availability of slaughter-ready hogs amid rising internal demand in Europe. Meanwhile, bovine meat prices were stable, following continuous declines since June 2022, as improved import purchases, especially from North Asia, led global demand to balance relatively well with current supplies. International ovine meat prices also remained broadly unchanged, as global demand was adequate to absorb elevated supplies from Australia.

The FAO Sugar Price Index averaged 124.9 points in February, up 8.1 points (6.9 percent) from January, reaching the highest level since February 2017. The February rebound was mostly related to the downward revision to the 2022/23 sugar production forecast in India, which dampened export prospects for the current season. Concerns over lower export availabilities from India amid strong global import demand lent additional support to world sugar prices. However, the good harvest progress in Thailand and abundant precipitation in the key growing areas of Brazil prevented a larger monthly price increase. The decline in international crude oil price quotations and ethanol prices in Brazil also contributed to limit the upward pressure on world sugar prices.

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