World food prices rise for first time in seven months, led by cooking oil and dairy

The Food and Agriculture Organisation's price index for March declined 7.7% on an annual basis

Sugar cane farmers in Cuba. Sugar was the only commodity to post a year-on-year price increase in March. AP Photo

Global food prices in March recorded their first monthly increase in seven months, driven by higher costs of vegetable oils and dairy products, the Food and Agriculture Organisation (FAO) said.

The prices, however, posted a year-on-year decline during the month, the UN agency said in a report released on Friday.

The FAO's price index, which tracks the monthly change in the international prices of a basket of commodities, averaged 118.3 points last month, a 7.7 per cent decrease from the year-ago period.

However, it rose 1.1 per cent from February, marking its first increase since August, the Rome-based FAO said.

The main monthly index was primarily driven by vegetable oils as prices climbed 8 per cent to 130.6 points from February to hit a one-year high as quotations for palm, soy, sunflower and rapeseed oils rose, the FAO said. Still, it was a nearly 1 per cent decline from a year earlier.

"International palm oil prices increased due to seasonally lower outputs in leading producing countries and firm domestic demand in South-East Asia, while those for soy oil recovered from multi-year lows, boosted by robust demand from the biofuel sector, particularly in Brazil and the US," the agency said.

Vegetable oil quotations were also driven by higher crude oil prices.

Dairy prices, meanwhile, dropped 8.2 per cent annually to 124.2 points, but rose for the sixth straight month, driven by higher cheese and butter prices.

The increase reflected steady import demand from Asia, higher internal sales in Western Europe leading to the spring holidays and seasonally falling production in Oceania, according to the report.

"Notwithstanding softer Asian demand, international butter prices increased further in March, mainly due to solid seasonal demand and somewhat tighter European stocks," it said.

Meat prices rose 1.7 per cent to 113 points in March, a second consecutive monthly increase but a 1.5 per cent decline from the same period a year ago.

International poultry prices rose, underpinned by "continued steady import demand from leading importing countries, despite ample supplies mostly sustained by reduced avian influenza outbreaks in major producing countries", the FAO said.

The resistant nature of avian influenza viruses means they can be carried on farm equipment and spread easily from farm to farm, according to the World Organisation for Animal Health.

Prices of bovine meat – those related to cows – maintained a steady uptick in March, mainly due to higher purchases by leading importing countries, while prices for ovine meat – related to sheep – dropped for a second straight month, on a surge in supplies exceeding seasonal levels, especially from Australia, the FAO said.

Cereal prices declined 2.6 per cent from February for a third consecutive drop and posted the biggest annual decline of 20 per cent, driven by sustained export competition among the EU, the Russian Federation and the US.

"Amid ample supplies, cancelled wheat purchases by China [from both Australia and the US] placed downward pressure on markets, while favourable crop prospects for the 2024 harvest in the Russian Federation and the US also contributed to the softer price tone," the FAO said.

By contrast, maize inched up on a monthly basis, as higher buying interest, especially from China, amid logistical difficulties in Ukraine and elsewhere, supported the crop's prices.

Sugar was the only commodity to post a year-on-year increase, rising 4.8 per cent to 133.1 in March, but sequentially down about 5.5 per cent after climbing for two months.

Last month's decline was underpinned by the upward revision to the 2023-2024 sugar production forecast in India and the improved pace of harvest in Thailand.

Large exports from Brazil also weighed on world sugar prices. Brazilian crops, negatively affected by prolonged dry weather, "continued to exacerbate seasonal trends and limited the price decline", the FAO said. Brazil, Thailand and India are the world's biggest sugar producers.

In addition, higher international crude oil prices helped contain the decrease in sugar prices, the FAO said.