The United Nations food agency (FAO) has reported that world food prices rose in December to their highest since 2014, lifted by strong rallies in vegetable oils, sugar and dairy markets.
According to the report, the FAO Food Price Index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat and sugar, averaged 181.7 points in December 2019, up 4.4 points (2.5%) from November, marking the third month of consecutive increase.
The cereal price index climbed 1.4% or 2.2. points on a monthly basis, averaging 164.3 points in December. The rise was largely led by higher international prices of wheat, as import demand from China accelerated while logistical problems in France, due to continued protests and worries over growing conditions in several important regions, also provided support. Meanwhile, prices for rice changed little in December.
Vegetable oil prices increased by 9.4% or 14.1 points compared to the previous month, averaging 164.7 points in December and reaching a 25-month high. “The latest upturn was primarily driven by firming palm oil prices, while soy, sunflower and rapeseed oil values also increased. International palm oil prices rose for the fifth consecutive month on solid demand.”
Dairy prices moved up 3.3.% or 6.3 points averaging 198.9 points in December. Cheese price quotations surged the most, rising by almost 8% following three months of continuous decline, underpinned by strong global import demand amidst tighter export availabilities from the European Union and Oceania.
Meat prices averaged 191.6 points in December, almost unchanged from its revised November value.
Sugar prices increased by 4.8% month-on-month- the third consecutive monthly increase. The latest rally in international sugar price quotations was prompted by rising crude oil prices, a situation that encouraged Brazil’s sugar mills to use more sugarcane supplies to produce ethanol instead of sugar, which resulted in reduced sugar availability in the global market. However, continued weakness of the Brazilian Real against the United States Dollar, coupled with improved prospects for the sugar harvest in India, contained prices from rising even further.
Last month, Nomura analysts warned that a sustained increase in food prices is unlikely to cause a global economic recession, but it could cause a “humanitarian crisis on a global scale,”
“The countries most vulnerable to a surge in food prices account for a small portion of the world economy, but make up a much larger share of the world population,” Nomura’s analysts wrote in a note. “A sustained surge in food prices is unlikely to cause a global economic recession, but it could cause a humanitarian crisis on a global scale.”
However, for the year as a whole, the FAO Food Price index averaged 171.5 points, 1.8% higher than in 2018 but still below the peak of 230 points registered in 2011.