February 10, 2016

Ample agricultural supplies, a slowing global economy and a strong US dollar all have contributed to the fall in the prices of key commodities including meat and dairy products in January, FAO said.

The Food and Agriculture Organisation said the Food Price Index averaged 150.4 points during the first month of the year, down 16% from a year earlier and registering its lowest level since April 2009. The Index tracks international market prices for three other key commodity groups: major cereals, vegetable oils and sugar.

"The main factors underlying the lingering decline in basic food commodity prices are the generally ample agricultural supply conditions, a slowing global economy and the strengthening of the US dollar", FAO said.

It said the Meat Price Index moved 1.1% lower than its revised December value, with prices of all meat categories falling, except pigmeat, which was sustained by the opening of private storage aid in the EU.

The Dairy Price Index dropped 3% on the back of large supplies, in both the EU and New Zealand, and sluggish world import demand, while the Cereal Price Index declined 1.7% to 149.1 points amid ample global supplies and increased competition for export markets, especially for wheat and corn, as well as a strong US dollar, FAO said.

According to FAO's Cereal Supply and Demand Brief, also released on Feb. 4, weather patterns associated with El Niño are sending mixed signals about the early prospects for cereal crops in 2016, especially in the Southern Hemisphere.

It added the 2016 crop prospects have been "severely weakened" in Southern Africa, and a 25% cut in wheat production in South Africa "now appears likely".

It noted that conditions for the crop are generally favourable in the Russian Federation and the EU, but that winter plantings declined in the US and Ukraine. The area for wheat is also expected to be cut in India, following a poor monsoon and below-average rains since October.

As for the 2015 season, FAO modestly raised its forecast for world cereal production to 2.531 billion tonnes, up slightly from that released in December. Wheat output in Canada and Russia and corn output in China, Canada and Paraguay drove the upward revision, it explained.