Global food prices moderate after hitting an all-time high

The FAO Food Price Index, a measure of food commodity prices, rose to a record high after Russia’s invasion of Ukraine disrupted food supply chains. The time has now fallen for the third month in a row, with large global crops on hand, the UN agency said, but Ukraine is a newcomer on the list of countries in need of food aid.

Prices of cereals, sugar and vegetable oils declined during the month of June, to unite with the decline of the index to a reading of 154.2 points, down 5.5 points from the peak of March. After a relatively moderate decline, the index remained 23 percent higher than it was a year ago.

“The factors that drove up global prices in the first place remain in place,” said FAO Chief Economist Maximo Torero Colin, notably strong global demand, bad weather in some key countries, rising production and transportation costs, and supply chain disruptions. due to Covid-19, which has been exacerbated by the uncertainty caused by the ongoing war in Ukraine.”

Food price inflation has been a nuisance around the world. It was 12.6 percent in the industrialized world during May, according to OECD data. The Labor Department will release its monthly consumer price index on Wednesday. Food prices in the United States rose 10.1 percent during the twelve months to May.

In three reports on Friday, the Food and Agriculture Organization said global food prices have improved slightly, the global cereal harvest will be slightly larger than previously expected, and 46 countries need food aid. “This list now includes Ukraine and Sri Lanka,” said the FAO’s Quarterly Crop Prospects and Food Situation Report. Sri Lankan government leaders resigned at the weekend after months of economic turmoil.

“According to the April update of the Ukraine Urgent Appeal 2022, it is estimated that approximately 24 million people are in dire need of humanitarian assistance and protection from war, including up to 7.7 million internally displaced people,” the report stated. In Sri Lanka, “unprecedented rise in food prices is limiting economic access to food for large numbers of families” amid declining domestic food production and a lack of funds to import food.

While prices of cereals, sugar and vegetable oils fell, the FAO Food Price Index said meat prices rose to an all-time high. “Global prices of all types of meat, with poultry meat prices rising sharply, have reached all-time highs, bolstered by persistently tight global supply conditions affected by the war in Ukraine and the outbreak of bird flu in the northern hemisphere,” the report said.

Global wheat prices fell 5.7 percent during the month of June, as the summer harvest began in the northern hemisphere. Corn prices have also fallen, as the South American harvest ends, and expectations for the US harvest have increased. “Concerns about the outlook for demand amid signs of an economic slowdown added to the downward pressure,” the Food and Agriculture Organization said.

The FAO said vegetable oil prices fell 7.6 percent, “driven by lower prices across palm, sunflower, soybean and rapeseed oils”. The global demand for oils has declined in the face of rising prices.

In its Cereal Supply and Demand Brief, the Food and Agriculture Organization projected a global cereal harvest of 2.792 billion tonnes, slightly larger than the June estimate and 0.6 percent lower than last year. Almost all of the increase of 7.7 million tons from last month is due to the increased production of feed grains. Grain exports will be the smallest in three years, with “war-related losses in corn and barley exports from Ukraine” playing a big role.

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