World food costs record first fall in three months

By Bloomberg Time of article published May 9, 2014

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Whitney McFerron London

World food costs fell for the first time in three months in April as dairy, sugar and vegetable oil prices declined, the Food and Agriculture Organisation (FAO) said yesterday.

An index of 55 food items fell 1.6 percent to 209.3 points from March, the UN agency wrote in an online report. Prices were down 3.5 percent from a year earlier. An index of dairy costs slid 6.3 percent on increased production in New Zealand and improving prospects for output in the northern hemisphere, the FAO said.

“The dairy market seems to be tempering on prospects of better supplies coming in,” senior FAO economist Abdolreza Abbassian said. “Production is rising, which is the market’s response to the higher prices earlier in the year.”

Class III milk futures on the Chicago Mercantile Exchange are down 6.5 percent since reaching a record last month amid drought in California and increasing demand from China. Milk collection across New Zealand, the top dairy exporter, rose 6.3 percent in the 10 months through March, compared with the same period a year earlier, Fonterra Co-operative Group said.

The FAO index of vegetable oil prices dropped 2.8 percent last month to 199 points, spurred primarily by a drop in palm oil, the FAO reported. Palm oil futures fell to a three-month low yesterday in Kuala Lumpur amid rising inventories in Malaysia, the second-biggest producer.

World sugar prices declined 1.6 percent in April to 249.9 points on FAO’s index, amid ample supplies from countries including Thailand, India and Australia, it said. The FAO said its index of meat prices increased 0.4 percent during the month because of higher pork prices following a disease outbreak in herds in the US.

The FAO index of grain prices rose 0.5 percent last month to 206.9 points, the highest since July last year, the report said. Wheat prices have rallied 21 percent this year on the Chicago Board of Trade amid dry weather in the US and concern that unrest in Ukraine could disrupt shipments. Maize futures have climbed 22 percent this year in Chicago.

The FAO said the grain price increase was less pronounced than in previous months. – Bloomberg

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