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Food commodity prices fall for fifth year in a row in 2016

Food Price Index remained stable in December amid sharp fall in sugar prices

12 January 2016, Rome -Prices of major food commodities declined for the fifth year in a row in 2016, averaging 161.6 points for the year as a whole, some 1.5 percent below their 2015 levels.

Bumper harvests and prospects for staple cereals offset upward pressure on FAO's Food Price Index from tropical commodities such as sugar and palm oil, where production was impacted by El Nino.

In December, the Index  averaged nearly 172 points, unchanged from November.

The FAO Food Price Index is a trade-weighted index tracking international market prices for five key food commodity groups: major cereals, vegetable oils, dairy, meat and sugar.

2016 was marked by a steady decline in cereal prices, which fell 9.6 percent from 2015 and were down 39 percent from their 2011 peak. At the same time, sugar and vegetable oil prices rose over the year by 34.2 percent and 11.4 percent, respectively.

"Economic uncertainties, including movements in exchange rates, are likely to influence food markets even more so this year," said FAO senior economist Abdolreza Abbassian.

Cereals steady in December as dairy and vegetable oils rise

FAO's Cereal Price Index, largely stable since September, increased 0.5 percent in the month of December, with rice and maize quotations firming up while larger-than-expected production estimates in Australia, Canada and the Russian Federation led to lower wheat prices.

FAO's Vegetable Oil Price Index rose 4.2 percent from November, capping a double-digit annual gain to reach its highest level since July 2014. Both palm oil and soy oil quotations rose, the former due to low global inventory levels and tight supplies, the latter on the prospect of rising use in the biodiesel sectors in North and South America.

The FAO Dairy Price Index also rose, by 3.3 percent, from November, due primarily to higher prices for butter, cheese and whole milk powder and restrained output in the European Union and Oceania.

The FAO Sugar Price Index, while up almost a third over the year, declined 8.6 percent in the last month of 2016. The sharp fall was mainly driven by an ongoing weakening of the Brazilian Real against the U.S. dollar, along with a reported 18 percent jump in expected production in the Centre South, Brazil's main sugarcane-growing region.

The FAO Meat Price Index declined 1.1 percent from its revised November level. Its average value in 2016 was 7 percent below that of 2015, due mainly to falls in the international prices of bovine and poultry meats.

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