Food Costs Jump to 10-Month High as Weather Hurts Beef to WheatRudy Ruitenberg
World food prices rose to a 10-month high in March as crop damage from dry weather across the globe lifted the cost of everything from beef to wheat.
An index of 55 food items climbed 2.3 percent to 212.8 points from a restated 208 in February, the Rome-based United Nations’ Food & Agriculture Organization said on its website today. The gauge, at its highest since May, is still down 1 percent from a year earlier.
U.S. Gulf wheat export prices tracked by the International Grains Council jumped 12 percent last month, the biggest surge since July 2012, as crop conditions in Texas and Kansas deteriorated due to drought. Beef prices rose as dry weather affected production in Australia and the U.S., while sugar gained on drought in Brazil, the biggest producer.
“Last month’s increase was largely driven by unfavorable weather conditions affecting some crops and geopolitical tensions in the Black Sea region,” the FAO wrote.
Russian troops last month took control of the Crimea peninsula to the southeast of Ukraine’s main grain-export ports. About 25 percent of Kansas wheat was in poor to very poor condition as of March 30, from 21 percent a week earlier, the U.S. Department of Agriculture reported this week.
The FAO’s index of grain prices climbed 5.2 percent last month to 205.8 points, the biggest jump since July 2012. That’s still below where the indicator was in July, and 14 percent below the year-earlier level.
Coffee, hogs and corn are the best performers on the S&P GSCI gauge of 24 commodities this year, after sliding last year.
A gauge of sugar prices jumped 7.9 percent in March to 253.9 points, the most since July 2012. Drought in Brazil and reduced cane output in Thailand boosted the sweetener, as well as the likelihood of sugar crops being adversely affected by an El Nino weather event later this year, FAO said.
The cooking oils index advanced 3.5 percent to 204.8 points, the highest level since September 2012. Palm oil prices were lifted by limited inventories in Malaysia, an outlook for rising usage in Indonesia and the possibility of El Nino later this year, according to the FAO.
“The rise in the index mainly reflected a surge in palm oil, on continued concerns over the impact of protracted dry weather in Southeast Asia,” the FAO wrote.
Dairy costs tracked by the UN agency slipped 2.5 percent to 268.5 points on reduced buying by China and uncertainty over trade with Russia. The FAO meat price index advanced 1.5 percent to 185 points, on higher costs for beef and pork.
“The main driver was higher bovine prices, which were associated with dry weather conditions affecting production in both Australia and the U.S.,” the FAO said. “Pig meat also rose, in part on concern over the effect of porcine epidemic diarrhea virus on export supplies in the U.S.”
U.S. boxed pork carcass prices surged 57 percent in the first quarter, the most on record, according to the USDA. The country’s hog herd at the start of March was the lowest since 2007 as the piglet-killing virus was found in at least 27 states.
In a separate report, the FAO forecast world wheat production will drop 2 percent in 2014 to 702 million metric tons, 2 million tons less than predicted last month, on reduced planting in Canada, dry conditions in Australia and lower yields in Russia and Ukraine. U.S. output is forecast to climb 3.5 percent, despite dryness for winter crops, the FAO said.
The UN agency lifted its estimate for 2013 global production of wheat, coarse grains and milled rice by 6.2 million tons to a record 2.521 billion tons.