Sugar Surge Helps Boost Global Food Prices by Most in Four Yearsby
UN food-price index rose 4.2% in June to an 11-month high
Prices will probably head down again this month: Abbassian
Global food prices climbed the most in almost four years, boosted by a rally in sugar and gains in grains, dairy and meat.
The United Nations’ food-price index jumped 4.2 percent in June, the most since July 2012, the group’s Food & Agriculture Organization said on its website. The gauge, which monitors 73 different food prices, advanced for a fifth month in the longest run since 2011.
Food costs are now the highest in almost a year, partly after raw-sugar futures rallied 16 percent last month. Speculators have boosted bullish bets on the sweetener to a record amid forecasts for a second year of supply shortages. The food-price gains may not last this month, as improving U.S. weather sent corn into a bear market and grain stockpiles are set to climb to a record, the International Grains Council forecast.
"It’s more probable that we will see prices heading down than going up from the levels they are now," Abdolreza Abbassian, a senior economist at the FAO, said by phone from Rome. "The weather doesn’t seem to be as threatening as of today and the dollar doesn’t seem to get any weaker any time soon either, which will always have bearish consequences for commodity markets."
The UN food-price index climbed to 163.4 points in June, though still 1.6 points lower than a year earlier. The sugar index rose 15 percent last month and a gauge tracking grain prices advanced 2.9 percent on tightening supplies from Brazil. While wet weather slowed sugar-cane harvesting in the world’s largest producer, dryness in corn areas cut supplies from the second-biggest shipper.
As ships faced long lines to pick up sugar at Brazilian ports early last month, small and large speculators excluding index funds boosted bets on higher prices to a record in the week ended June 21, U.S. government data showed. Corn prices, which gained in the first half of June amid cuts to forecasts for Brazil’s crop, then slid as rains in the U.S. boosted prospects before the harvest.
"Sugar has been quite an impressive game and it’s an important crop, but I wonder if this trend will continue for long," Abbassian said. "Weather also seems to be better than what we were expecting a couple of weeks back in terms of the summer moisture, especially for U.S. crops."