Global food prices surge in July amid grain deal expiration, rice export measures

Global food commodity prices rose in July, influenced by the termination of the Black Sea Grain Initiative and new trade restrictions on rice, the United Nation's Food and Agriculture Organization said in its monthly food price index report Aug. 4.

The FAO Food Price Index, which tracks monthly changes in the international prices of globally traded food commodities, averaged 123.9 points in July, up 1.3 % from June but 11.8% below July 2022.

According to the report, the primary reason behind this surge in food prices was driven by a sharp jump in the FAO vegetable oil price index, which rose 12.1% from June after seven straight months of declines.

Also, the global rice price index rose by 2.8% on the month and 19.7% on the year to reach its highest nominal level since September 2011 following India's July 20 prohibition of non-parboiled exports. This fostered expectations of greater sales in other origins, amplifying prices that were already rising on seasonally tighter supplies and Asian purchases.

The strengthening rice price "raises substantial food security concerns for a large swathe of the world population, especially those that are most poor and who dedicate a larger share of their incomes to purchase food," said the report.

Vegetable oil index soars

The FAO Vegetable Oil Price Index rose for the first time in seven months in July to 129.8 points, up 12.1% from June.

International sunflower oil prices rebounded by more than 15% from June, primarily from the termination of the Black Sea Grain Initiative. Palm oil prices also rose markedly, reflecting prospects of subdued production growth in leading producing countries, FAO said.

Prices of soybean oil, the second most traded vegetable oil after palm oil, also rose in July on continuing concerns over the production outlook of soybeans in the US.

Cereal prices remain subdued

The global cereal price index dipped 0.5% from June to 125.9 points, driven by a 4.8% drop in international coarse grain quotations from increased seasonal supplies of maize from ongoing harvests in Argentina and Brazil and potentially higher-than-anticipated production in the US.

International wheat prices rose by 1.6%, however, their first monthly increase in nine months, on uncertainty over exports from Ukraine as well as continued dry conditions in North America, the report said.

This was mainly driven by uncertainty over Ukraine's exports following the Russian Federation's decision to terminate the implementation of the Black Sea Grain Initiative and the subsequent damage to Ukraine's port infrastructure on both the Black Sea and the Danube River. Also, continued dry conditions in Canada and the US also added to price pressure.

Among other coarse grains, world prices of sorghum fell in tandem with those of maize, while world barley prices were nearly stable, influenced by the spillover effects from wheat markets.

The FAO Sugar Price Index in July was 146.3 points, down 3.9% from June, marking the second monthly decline as progress in Brazil's sugarcane harvest and improved rains across most growing areas in India weighed on world quotations, as did subdued demand from Indonesia and China, the world's largest sugar importers.

But persistent concerns over the potential impact of the El Niño phenomenon on 2023/24 sugarcane crops, particularly in Thailand, along with higher international crude oil prices, reined in the decline in world sugar prices.

The FAO Dairy Price Index dipped by 0.4 % in July to stand 20.6% below its July 2022 value at 116.3 points. World cheese prices recovered slightly after steep recent declines as hot weather affected seasonally declining milk supplies in Europe.

The FAO Meat Price Index dipped 0.3% from June to 117.8 points. Quotations for bovine, ovine, and poultry meat declined on solid supply availabilities and, in some cases, lower demand from leading importers. Pig meat prices rose, however, reflecting high seasonal demand coupled with ongoing tight supplies from Western Europe and the US.