Food Prices Rise: Dairy Products Up 6.2 Percent, Grains Up 2.5 Percent

Food prices increased in February on global markets, driven by higher grain and milk and dairy product prices, reported the United Nations Food and Agriculture Organization (FAO) on Thursday.

The FAO’s index of prices for a basket of basic food products rose by 1.1 percent in February compared to the previous month, reaching an average of 170.8 points. Compared to February of last year, it is up 2.7 percent.

The most significant price increases last month were for milk and dairy products, which rose by 6.2 percent compared to January, following a spike in the prices of butter, cheese, and whole and skimmed milk powder.

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Grain prices increased by 2.5 percent on a monthly basis, driven by adverse weather conditions that worsened the harvest forecasts for winter wheat in the U.S. and corn in Argentina. Meat prices stagnated in February as cheaper chicken counterbalanced higher beef prices.

The index reflecting changes in vegetable oil prices fell by 3.1 percent compared to January, sliding to the lowest level in 19 months due to an expected surplus in global production this year. Palm oil prices fell the most, reflecting an increase in stocks in Malaysia and Indonesia. Soybean oil prices were pressured by expectations of record soybean production in the U.S.

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Sugar prices fell by 3.4 percent in February, sliding to the lowest level in two years under the influence of higher production in Malaysia, Thailand, and India. Market participants are also preparing for a significant increase in production in the European Union due to a larger sugar beet harvest, increased planted areas, and the abolition of production quotas.

Forecast of Lower Wheat Production in 2018

In a separate report, FAO released its first forecast for wheat production this year, predicting it will reach 744 million tons. Although above average, if confirmed, this will mean that production will decrease for the second consecutive year due to lower expected yields in the EU and the Russian Federation.

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At the end of the 2017/2018 season, wheat stocks are expected to reach a record 272.2 million tons, an increase of 9.2 percent compared to the previous season. Stocks of grains used for human and animal consumption are also expected to reach a record level of 309.8 million tons, rising nearly eight percent compared to the beginning of the season.

Global grain trade in 2017/2018 is estimated at 405 million tons, with FAO predicting it will remain at the level of the previous season.