Global food commodity prices in the food and beverage industry continued to decline in June, reaching a two-year low before the expiration of the current Black Sea Grain deal. The FAO Food Price Index, compiled by the Food and Agriculture Organization of the United Nations, dropped 20.9% on a rolling 12-month basis to average 122.3, remaining at the lowest level since April 2021.
Tracking prices of cereals, vegetable oils, meat, dairy, and sugar, the index decreased by 1.4% from May. It had reached an all-time high of 159.7 in March 2022 due to Russia’s invasion of Ukraine and the impact of the Covid-19 pandemic on global supply chains.
The Black Sea Grain Initiative, a trade agreement between Russia and Ukraine, allows for the passage of grains out of three Ukrainian ports. Although the agreement has been extended several times, Russia has not made any commitment beyond the current expiry on 17 July. Russia has threatened to withdraw from the deal unless obstacles to its own food and fertilizer shipments are removed.
Cereal prices, as measured by a component gauge of the FAO Food Price Index, dropped 23.8% on an annualized basis to 126.6, the lowest level since July 2021. International wheat prices decreased by 1.3% due to ample supplies and a lower export tax in Russia, along with improved conditions in the US. International coarse grain quotations in June decreased by 3.4%, driven by increased maize supplies from ongoing harvests in Argentina and Brazil, as well as improved output prospects in key producing areas of the US.
Vegatable oils fell 45.3% year-on-year and declined 2.4% on a monthly basis, primarily due to a drop in palm and sunflower oil prices. However, soy and rapeseed oil prices rose influenced by weather conditions in major growing regions. On the other hand, lower international cheese prices led to a 22.2% annualized decline in the sub-dairy index. Meat prices dipped 6.3% over the 12 months, while poultry prices rose due to high import demand from East Asia amid ongoing supply challenges associated with avian influenza outbreaks. Sugar prices fell 3.2% from May, mainly triggered by the sugarcane harvest in Brazil and sluggish global import demand, particularly from China.
Despite the recent decrease, the component sugar index was up 30% from a year earlier, reaching 152.2 in June. In May, it had reached the highest level since October 2011 at 157.2.
