FAO: Commodity prices drop sharply in July, export prices all decline

The Food and Agriculture Organization of the United Nations' (FAO) food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat and sugar averaged 168.8 points in July against an upwardly revised 175.3 in June. Global agricultural food commodity prices fell sharply in July, as all the significant traded items posted notable declines, led by dairy and sugar.

The FAO Food Price Index averaged 3.7 percent below their June level, the most significant monthly drop since December last year. The index had been steadily rising in 2018 until June.

The FAO Dairy Price Index led the slide, declining 6.6 percent, with butter and cheese quotations dropping faster than those for whole and skim milk powders.

The FAO Sugar Price Index fell 6 percent to a nearly three-year low, primarily driven by improved production prospects in India and Thailand, both important sugar-producing countries. Expectations of lower output in Brazil, the world's largest producer and exporter, limited the fall in international sugar prices.

The FAO Cereal Price Index declined 3.6 percent from June and is now below its year-ago level. Export quotations for wheat, maize and rice all declined, although wheat and maize values edged higher towards the end of July.

The FAO Vegetable Oil Price Index was 2.9 percent lower, its sixth consecutive monthly decline, and is now at its lowest level since January 2016. Part of the July slide was driven by spillover weakness from the soybean market, which is affected by the trade dispute between China and the United States of America. Rapeseed oil values trended upwards, however, buoyed by improved demand from biodiesel producers and negative crop prospects in the European Union.

“The decline in July was driven by weaker export quotations for wheat, maize and rice,” says the FAO.

“International wheat prices were generally weaker during the first half of the month, but concerns over production prospects in the EU and the Russian Federation started to push export values higher towards the end of the month.”