The UN Food and Agriculture Organization’s benchmark monthly price index was down for the sixth month in a row in September, a decline it said was driven by “sharp drops” across vegetable oils.
The Rome-headquartered agency said the index last month was 1% below August but 5.5% higher than a year ago.
A 6.6% month-on-month fall in vegetable oil prices drove the latest overall price drop, the FAO said, pointing to “lingering heavy inventories of palm oil, coinciding with seasonally rising production in south east Asia” along with “higher soy oil export availabilities in Argentina, and increased sunflower oil supplies from the Black Sea region”.
Dairy, meat and sugar were all down by between 0.5% and 0.7% month on month, the FAO reported.
However, grains and cereals climbed in September by 1.5%. Wheat was up 2.2% due to what the FAO described as “concerns regarding dry crop conditions in Argentina and the United States of America, a fast pace of exports from the European Union amid high internal demand and heightened uncertainty about the Black Sea Grain Initiative’s continuation beyond November”.
The initiative refers to the recent Russia-Turkey-Ukraine-UN deal to facilitate food exports from Black Sea ports, which before the Russia-Ukraine war were vital exit points for vast quantities of grains and oilseeds from Ukraine.
Wheat jumped again by around 6.5% Monday-Tuesday after Russian missiles struck cities across Ukraine, attacks which Dutch bank ING said ”call into question the future of the Black Sea grain export deal”.
Rice was up 2.2% month on month to reach its highest in a year-and-a-half – in part due to recent trade restrictions and levies imposed by India, by far the world’s biggest exporter.
The index is based on 95 price quotations and export averages across the world’s food commodity markets, using a weighted average of 2014-16 prices as a baseline.
It surged from 141.2 points in February to 159.7 in March. Slight drops in April and May were followed by a hefty fall from June’s 154.7 to July’s 140.6.
That earlier surge reflected a spike in food commodity prices in the wake of the February invasion by Russia, the world’s biggest wheat exporter and Europe’s biggest energy source, of Ukraine, a major grains grower and the world’s top supplier of sunflower oil.
Russia was set to retain its position as the biggest wheat exporter, with a record crop likely this year, according to AHDB, citing SovEcon, a consultancy that tracks Russia’s vast farming regions.
But with consumer price inflation continuing to rise across most nations, it remained unclear how quickly the slow fall in commodity prices would filter through to retail, with input costs such as fuel, heating and fertiliser set to remain high, particularly in Europe.
Other concerns centred on the strength of the US dollar, which has threatened to increase the real price paid for imports as other currencies, the pound and euro included, weaken in turn.
Germany, by far the continent’s biggest economy, relies heavily on Russia for energy supplies. China, another key fertiliser and component supplier, imposed a de facto exports ban in mid-2021, prompting temporary production cuts elsewhere, including in the UK.
The FAO update came after Norwegian fertiliser maker Yara last week called for “a strong European fertiliser industry” and said the continent should cut dependence on Russia for raw materials.
Yara’s statement was followed by a joint appeal by prime minister Liz Truss and Emmanuel Macron, France’s president, in which they called for ”decoupling from Russian hydro-carbons” and said they would proceed with a proposed Anglo-French nuclear power plant at Sizewell on the Suffolk coast.
