World food prices fell in January to a 19-month low, as costs for everything from sugar to grains slid amid ample global supplies, the United Nations’ Food & Agriculture Organization said.
An index of 55 food items dropped to 203.4 points last month from 206.2 in December, the Rome-based FAO wrote in an online report today. The index is down 4.5 percent from a year earlier and is at the lowest level since June 2012, as costs of grain, sugar, vegetable oils and meat fell, with only dairy prices rising.
Corn was the worst performer in the S&P GSCI gauge of 24 commodities last year, sliding 40 percent on an outlook for a record global crop. Sugar tumbled 16 percent in New York in 2013 and extended the slide this year by 1.8 percent amid a global surplus in supply. In a separate report, the FAO said today that world grain production will be larger than previously expected at a record 2.502 billion metric tons.
“Whether or not the market has reached the low is hard to tell, but supplies are pretty good,” Abdolreza Abbassian, a senior economist at the FAO, said by phone today. “Unless we get some strange weather developing in the U.S. or Latin America, one shouldn’t expect a big change from the recent trend. There is some room still for downward adjustment, although livestock prices are firm and dairy is still rising.”
The FAO’s grain-price index fell to 188.4 points from 191.5 points the prior month, according to the report. Its gauge of sugar prices slid 5.6 percent while vegetable oil costs dropped 3.8 percent and meat prices fell 0.9 percent.
A gauge of dairy costs climbed 1.4 percent from the previous month to 267.7 points, the highest since November 2007, the FAO said. World prices rose in tandem with futures on the Chicago Mercantile Exchange, which surged 19 percent last month to a record amid rising global demand and drought in California, the top U.S. producing state.
The gain in prices in January follows a 29 percent increase in the FAO’s dairy index in 2013. Widespread drought reduced output last year in New Zealand, the world’s top dairy exporter. The U.S. Department of Agriculture projects that global inventories of everything from cheese to milk powder will decrease this year as demand outpaces production. Chinese imports of whole milk powder, often used in infant formula, have surged 14-fold since 2008, USDA data show.
“Many countries, especially in Asia, are becoming increasingly affluent and able to purchase higher value dairy and livestock products, and yet supply hasn’t come to terms with this rising demand,” Abbassian said. “Demand is extremely strong and growing.”