Price indices for vegetable oils, dairy and sugar drove the January decline, the UN food agency said, issuing two new reports on food production expectations.

The FAO food price indexfell 17.9 per cent below its all-time peak, reached in March 2022 following Russia’s full-scale invasion of Ukraine.

The downward pricing trend was helped in part by a pivotal agreement signed in July to unblock Ukraine grain exports amid the ongoing war.

Tracking monthly changes in the global prices of commonly traded food commodities, the latest index averaged 131.2 points in January, falling 0.8 per cent since December. FAO reported small price decreases on its latest meat and sugar indices.

“Strong harvest progress in Thailand and favourable weather conditions in Brazil outweighed the impact on sugar prices due to concerns over lower crop yields in India, higher gasoline prices in Brazil, which support demand for ethanol, as well as the Brazilian real’s appreciation against the United States dollar,” the report stated.

At the same time, vegetable oil prices fell 2.9 per cent, stemming from subdued global import demand for palm and soy oils and ample export availabilities of sunflower seed and rapeseed oils. Cereal prices remained essentially unchanged since December.

Wheat production soars

International wheat prices fell for the third consecutive month. The 2.5 per cent decrease relates to Australia and Russia outpacing production expectations. Meanwhile, slightly higher global maize prices were rooted in a strong demand for exports from Brazil and concerns over dry conditions in Argentina.

Holiday cheese boost

Cheese became slightly more expensive despite dairy prices averaging 1.4 per cent lower than in December, which came after lighter demand from leading importers and increased supplies from New Zealand. Currency movements drove the price increase alongside a recovery in food services and retail sales in Western Europe following the New Year holiday.

Global rice prices climbed 6.2 per cent from December, triggered by tighter availabilities. Other factors included strong local demand in some Asian exporting countries and exchange rate movements.

New cereal predictions

In its latest Cereal Supply and Demand Brief, FAO expects international trade in cereals in the 2022/23 period to decline by 1.7 per cent from the previous year’s record level, to 474 million tons.

Early indications point to likely area expansions for winter wheat cropping in the northern hemisphere. However, higher costs may affect the amount of fertilizer than can be applied to crops, with adverse implications for yields.

Low domestic prices could result in a small cutback in wheat plantings in Russia, the world’s largest exporter, while severe war-induced impacts in Ukraine are estimated to reduce winter wheat area plantings by 40 per cent.

Record planting is forecast for India, spurred by high market and support prices, and relatively high planting is projected in Pakistan as standing water from the 2022 floods is causing less hindrance than initially anticipated.

In the southern hemisphere countries, most of the 2023 coarse grain crops have been sown. Brazil may post record maize plantings, while those in Argentina could decrease due to low soil moisture levels and weather conditions augur well for maize yield prospects in South Africa, the report stated.