FAO food price indices

The FAO Food Price Index continued to increase since the start of the year and by March 2008 it averaged 220, as much as 80 points (57 percent) more than in March 2007. Prices of nearly all food commodities have risen since the beginning of the year supported by a persistent, tight supply and demand situation. In 2007, the index averaged 157, up 23 percent from 2006.

The FAO Cereal Index firmed since the start of 2008, averaging 283 in March 2008, up 45 points from January. Tight supplies continue to provide support to the prices of most cereals. In recent weeks, rice prices gained most but maize prices also made further gains. Wheat prices have come under some downward pressure during the first week of April in anticipation of larger crops in 2008. However, because of low stocks, wheat prices remain high and well above the previous year’s levels.

The FAO Dairy Index averaged 276 in March 2008, down 6 percent from its peak in November 2007. In terms of products, prices of milk proteins have fallen the most, as skim milk powder prices have fallen 27 percent since their peak in July 2007; butter prices have declined the least since their high in November 2007. Tight supplies from traditional exporters, strong import demand, and the exhaustion of public stocks caused an unprecedented eruption of dairy product export prices in late 2006 which has lasted through 2007.

The FAO Meat Index increased since the start of 2008 with the preliminary estimate for March 2008 at a high of 133, surpassing its previous peak in 2005. The recent gains mostly reflect the continued surge in feed prices. The extent of price increases varied significantly depending on feed conversion efficiencies, biological lags in production responses as well as the role played by contract prices. Since the beginning of the year lamb prices have increased the most as sheep producers are rebuilding flock numbers and reducing slaughter.

The FAO Sugar Index in the first three months of 2008 averaged 166, which is 29 points above the corresponding value in 2007. Since the beginning of 2008 sugar prices have gained some momentum, underpinned by strong fund investment in commodity futures, despite an expected global sugar surplus for the 2007/08 season. In 2007, the index averaged 129, a 32 percent drop over 2006. A recovery in sugar production in traditional importing countries led to weaker sugar prices in 2007.

The FAO Oils/Fats Index in the first quarter of 2008 averaged 269, which is 133 points (or 98 percent) above the corresponding value in 2007. Constant expansion in the demand for vegetable oils and fats - for food uses but also as biofuel feedstock - combined with a slowdown in production growth has resulted in a gradual tightening of global supplies, leading to a surge in prices. On an annual basis, the index averaged 174 in 2007 compared with an average of 117 in 2006.