Global food prices kept in check by strong greenback and retreating oil prices

Meat prices were particularly affected by falling currency exchange rates relative to the dollar. Sarah Dea / The National

A stronger US dollar and weak oil prices helped to keep a lid on global food prices last month, data from the United Nations showed yesterday.

The Food and Agriculture Organization’s (FAO) price index, which measures monthly price changes for a basket of cereals, oilseeds, dairy products, meat and sugar, fell 1.9 per cent in January compared to its revised lower reading for December.

Cereals and oils fell the most last month, down 3.6 per cent and 2.9 per cent respectively.

Last month’s fall continues an almost uninterrupted decline since last April owing to ample global supplies of most main food groups, the UN food agency said yesterday.

The index has now dropped every month since April 2014, barring a short-lived respite in October, the FAO said.

“Supply keeps being revised up, and on the import demand side, there really isn’t much activity simply because many importing countries themselves have very good supply,” said the FAO senior economist Abdolreza Abbassian.

The lower oil price could also favour production, Mr Abbassian said, as farmers can still make a decent margin on their produce thanks to lower input costs.

Brent crude prices have halved since their summer peak.

“The lingering weakness in crude oil prices continued to weigh on vegetable oil quotations by eroding the competitiveness of vegetable oils as biodiesel feedstock,” the FAO said.

Currency fluctuations have affected trade patterns and food prices in countries that have experienced higher currency volatility, and price declines and stability have not been experienced in some importing countries, Mr Abbassian said.

Meat prices — down 1.6 per cent month on month — were particularly affected by falling currency exchange rates relative to the dollar, especially products from Brazil, Europe, Australia and New Zealand.

The dollar has gained about 15 per cent against a basket of currencies in the past six months, Bloomberg data show.

The FAO’s forecast for world cereal production in 2014 hit a new record high of 2.53 billion tonnes, marginally higher than it predicted in December.

The outlook for crops in 2015 is favourable, partly thanks to good weather conditions and more planting in North America and parts of the Middle East and North Africa, which outweighed decreases in Russia and parts of Far East Asia, the FAO said.

Cereals stocks at the end of the 2014-15 season are now forecast to be 622.7 million tonnes, marginally lower than previously forecast.

Sugar and dairy prices were flat month on month.

* with Reuters

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