Global food prices up for third month in a row on higher cereal and dairy product prices

Cereal prices for May rose by 6.3 per cent compared to the previous month, FAO says

A farmer carries rice seedlings in a paddy field in Sri Lanka. Cereal prices rose last month, according to the latest data from the FAO. Bloomberg

Global food prices rose for a third month in a row in May as prices of cereals and dairy products surged amid unfavourable crop conditions and higher demand.

The UN Food and Agriculture Organisation's price index, which tracks the most globally traded food commodities, averaged 120.4 points in May, up 0.9 per cent from its revised April level, the FAO said in a report on Friday. On an annual basis, however, the index fell by 3.4 per cent.

Cereal prices for May rose by 6.3 per cent compared to the previous month.

“Global export prices of all major cereals rose month-on-month, with wheat prices increasing the most,” the Rome-based organisation, said.

“The sharp monthly rise was largely due to growing concerns about unfavourable crop conditions for the 2024 harvests, possibly constraining yields in some main producing areas of several major exporting countries, including in parts of Europe, Northern America and the Black Sea region.”

The damage to the Black Sea shipping infrastructure amid the continuing war between Ukraine and Russia also added upwards pressure on cereal prices.

Russia and Ukraine are important producers of wheat and other cereals and use ports in the Black Sea to export cereals to different markets around the globe.

Maize export prices also increased in May on production concerns in both Argentina and Brazil as a result of unfavourable weather in the latter and damage to the crop from the spread of Spiroplasma disease in the former, according to FAO.

Dairy prices, meanwhile, rose 1.8 per cent in May from April, driven by increased demand from the retail and food services sectors ahead of the summer holidays and market expectations that milk production may fall below historical levels in Western Europe, the report said.

The meat price index and sugar price index during the month fell 0.2 per cent and 7.5 per cent respectively compared to April on the back of lower demand for poultry in some major producing countries in the case of the former and improved supply outlook in the case of later as production is expected to rise in Brazil, a major producer of sugar on conducive weather.

The vegetable oil price index also fell during the month, driven by lower palm oil prices, as outputs across major producing countries in Southeast Asia increased.

In a separate report on the supply and demand of cereals, the FAO forecast 2024/25 world cereal production at 2.846 billion metric tonnes, roughly on a par with 2023/24's record output, as output of barley, rice and sorghum are all predicted to increase, while wheat and maize production is projected to decline.

World cereal total utilisation in 2024/25 is expected to increase by 0.5 per cent year-on-year to a record high of 2.851 billion tonnes, while cereal stocks will increase by 1.5 per cent to a record 897 million tonnes, it said.