The FAO Cereal Price Index averaged 147.4 points in January, up fractionally (0.1 percent) from December and 6.7 points (4.8 percent) above its level one year ago. Among the major cereals, world prices of rice and maize rose, while those of barley and wheat fell in January. International rice prices increased by 6.2 percent month-on-month, influenced by tighter availabilities, a strong local demand in some Asian exporting countries and exchange rate movements. World maize prices also increased, albeit marginally (0.5 percent), mostly influenced by a strong demand for exports from Brazil and concerns over dry conditions in Argentina, offsetting a downward trend in US export prices amidst slow sales. Among other coarse grains, world prices of sorghum increased slightly (0.9 percent), mainly influenced by the strength in maize markets and lower production in the United States of America, the top global exporter, while the decline in barley prices (1.0 percent) reflected spillover from the global wheat market. Meanwhile, international wheat prices fell for a third consecutive month in January, by 2.5 percent, as global supplies increased with larger than previously estimated production in Australia and the Russian Federation.
The FAO Vegetable Oil Price Index averaged 140.4 points in January, down 4.2 points (2.9 percent) month-on-month and standing nearly 25 percent below its level a year ago. The decrease reflected lower world prices of palm, soy, sunflowerseed and rapeseed oils. In January, international palm oil prices dropped for the second consecutive month, largely weighed by subdued global import demand, as major importers replenished their stocks during the past few months. World soyoil quotations also fell moderately, linked to sluggish import demand due to uncompetitive prices compared with those of other vegetable oils, as well as improved weather conditions in Argentina lately, raising production prospects. In the case of sunflower and rapeseed oils, international prices fell on ample global export supplies.
The Price of Food
The FAO Dairy Price Index averaged 136.2 points in January, down 2.0 points (1.4 percent) from December, hitting its lowest level in 12 months. The decline in January reflected lower international prices of butter and milk powders. World butter prices fell for the seventh consecutive month, underpinned by subdued import demand for long-term supplies at prevailing prices, stemming from market expectations for prices to fall further and increased supplies from Oceania. Meanwhile, international whole milk powder prices declined on lighter demand from leading importers and increased supplies from New Zealand, despite seasonally declining milk output. Skim milk powder prices also fell, mainly due to a sluggish global demand. By contrast, world cheese prices increased slightly, driven by a recovery in food services and retail sales in Western Europe, following the new-year holidays, and currency movements.
The FAO Meat Price Index* averaged 113.6 points in January, down marginally (0.1 points and 0.1 percent) from December, continuing the decline for the seventh consecutive month, but it still stood 1.5 points (1.3 percent) above its year-earlier level. Lower world prices of poultry, bovine and pig meats underpinned the decline in the index in January. World poultry meat prices fell further as global export availabilities from leading suppliers continued to exceed import demand, despite widespread avian influenza outbreaks. Meanwhile, pig meat prices fell slightly due to ample supplies of slaughter-ready pigs, especially in Brazil and the United States of America, and lower-than-expected imports by China ahead of the Spring Festival. Likewise, international bovine meat prices declined, with increased supplies of slaughter-ready cattle, mainly in Oceania. By contrast, ovine meat prices rose on higher import demand, notwithstanding increased slaughter volumes in Australia.
The FAO Sugar Price Index averaged 115.8 points in January, down 1.3 points (1.1 percent) from December, marking the first decline after sharp increases registered in the previous two months. The January decline in international sugar price quotations was mainly triggered by the good harvest progress in Thailand and favourable weather conditions benefiting sugarcane crop development in key growing areas of Brazil. Concerns over lower crop yields in India, which could affect export availabilities, contained more substantial sugar price declines. Also, the hike in gasoline prices in Brazil, which supported demand for ethanol, and the strengthening of the Brazilian real against the United States dollar contributed to limiting the downward pressure on world sugar prices.
* Unlike for other commodity groups, most prices utilized in the calculation of the FAO Meat Price Index are not available when the FAO Food Price Index is computed and published; therefore, the value of the Meat Price Index for the most recent months is derived from a mixture of projected and observed prices. This can, at times, require significant revisions in the final value of the FAO Meat Price Index which could in turn influence the value of the FAO Food Price Index.
When lockdowns forced people to eat at home, producers catering to restaurants lost a key customer base, while grocery stores faced a massive increase in demand. Many food producers struggled in those early months to convert their operations to serve grocery consumers.
Food production costs also increased due to labor turnover, investments to protect products from contamination, and additional worker-training costs. Even the cost of transportation of food to processors and grocery stores increased as retailers placed rush orders to keep shelves stocked.
These cost increases are folded into the price consumers pay for groceries. And while some transportation costs have dropped, including gasoline, other increased costs throughout the food supply chain offset any potential relief.
With Ukraine unable to fulfill its role as a major wheat producer, the world is facing a shortage. Short supply means the price of wheat is much higher, making it more expensive to process key ingredients, such as flour and starch. In turn, food producers must increase the price they charge consumers to make up for their higher production costs.
Due to the war in Ukraine, Western countries have implemented bans on Russian imports, including oil and gas. Energy prices rose 23.8% from August 2021 to August 2022, per the latest CPI report. Higher energy prices further exacerbate the already-high food production and transportation costs that the pandemic triggered.
Soaring fertilizer costs also contribute to food price increases. Since early 2021, farmers have struggled to cope with rising fertilizer costs; prices in some areas increased by more than 300% before the war in Ukraine, according to the American Farm Bureau Federation. Higher prices on the production side has forced farmers to increase their crop prices .
Another report on the pace of inflation in the U.S. is due later this week and there's some hope that it's slowing. But most people have noticed higher prices at the grocery store on everything from dairy to meat to wheat products. The cost of groceries rose 13.5% in the past year, the largest increase in 43 years. Economics correspondent Paul Solman looks at what's driving prices up.
But you have probably noticed higher prices at the grocery store already on everything from dairy, to meat, to wheat products. The cost of groceries rose 13.5 percent in the past year. That's the largest increase in 43 years.
First, we have the supply chain disruptions from COVID that are still lingering. Those lead to rising energy prices, rising transportation costs, rising labor costs. On average, 16 cents out of every dollar spent on food can be tied back to the farm.
That region is what's called the breadbasket of Europe, a major supplier of wheat and sunflower oil, which goes into a lot of processed food products. So that set off rising commodity prices on the global market.
The bird flu outbreak this year, it's the second largest outbreak we have seen in modern history. It's affected over 40 million birds, many in commercial operations. And that sent the price of poultry and eggs surging.
Coffee in general, we're looking at about almost 20 percent more expensive than last year. A lot of this is tied to adverse weather around the globe, especially in coffee-producing regions like Brazil that saw frost and drought last year. And that's put upward pressure on prices.
We actually found that the cheaper varieties at the beginning of the pandemic have experienced nearly twice as much inflation as the most expensive varieties. And why is that happening? Well, as people are substituting into cheaper goods, they're increasing the relative demand. And that pushes prices up in this context of very limited supply overall.
We hope that prices start to moderate or at least the rate of increase starts to moderate. But because the rate of increase starts moderating doesn't mean that prices are going to come down. And that's important to keep in mind.
The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, decreased by 0.3 percent from November 2022 to December 2022 and was up 6.5 percent from December 2021. The CPI for all food increased 0.3 percent from November 2022 to December 2022, and food prices were 10.4 percent higher than in December 2021.
In 2022, food prices increased by 9.9 percent. Food-at-home prices increased by 11.4 percent, while food-away-from-home prices increased by 7.7 percent. All food price categories tracked by the U.S. Department of Agriculture (USDA), Economic Research Service (ERS) increased by more than 5 percent. Following an outbreak of Highly Pathogenic Avian Influenza (HPAI), egg prices had the largest price increase (32.2 percent) of any category tracked by ERS between 2021 and 2022. Beef and veal prices increased the least (5.3 percent) between 2021 and 2022 and generally declined from peak prices in November 2021. Eleven food-price categories increased by more than 10 percent, including fats and oils (18.5 percent), poultry (14.6 percent), other meats (14.2 percent), cereals and bakery products (13.0 percent), other foods (12.7 percent), dairy products (12.0 percent), processed fruits and vegetables (12.0 percent), nonalcoholic beverages (11.0 percent), and sugar and sweets (10.4 percent). All food categories grew faster than their historical average rate, and the 20-year average inflation rate increased for all food categories. 2ff7e9595c
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