Food Prices Rose in March as Dairy Costs Jump on New Zealand

World food prices rose in March as dairy costs jumped on a drought in New Zealand that hurt milk output and as a late spring in Europe delayed a production rise, the United Nations’ Food & Agriculture Organization said.

An index of 55 food items tracked by the FAO advanced 0.8 percent to 212.4 points last month from a restated 210.7 points in February, with dairy prices gaining the most in more than three years, the Rome-based FAO wrote in an online report. The gauge, which rose to a record 237.9 points in February 2011, is 1.7 percent lower than a year earlier.

Milk collection in New Zealand, the world’s biggest dairy exporter, fell 16 percent last month, according to Fonterra Cooperative Group Ltd (FCG), as the country suffers its worst drought in at least 30 years.

“At the root of the price surge is prolonged hot, dry weather in Oceania which has led to milk production falling off steeply,” the FAO wrote. “Furthermore, the spring surge in milk production in Europe has been retarded due to unfavorable weather limiting pasture growth.”

The FAO’s gauge of world dairy prices jumped 11 percent to 225.3 points from 203 the previous month, the highest level since July 2011 and the biggest jump since November 2009.

The UN agency’s cereal price index slipped 0.5 percent to 244 points from 245.3 points, while the index for cooking oil declined 2.5 percent to 201.1 points.

An index of sugar prices advanced 1.1 percent to 262 points from 259.2 points. The index for meat prices declined 2 percent to 175.7 from 179.2, according to the report.

In a separate report, the FAO cut its outlook for 2012-13 wheat production from its March 7 estimate by 800,000 metric tons to 661 million tons, while the outlook for coarse grains, which include corn and barley, was increased by 2.6 million tons to 1.16 billion tons.

The outlook for the rice crop was lifted by 900,000 tons to 489.5 million tons.

To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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