No.2  April 2008  
   Crop Prospects and Food Situation

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Countries in crisis requiring external assistance

Food Emergencies Update

Global cereal supply and demand brief

FAO global cereal supply and demand indicators

FAO food price indices

Low-Income Food-Deficit Countries’ food situation overview

Regional reviews

Statistical appendix


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.

FAO Food Price Index
  Food Price Index 1 Meat 2 Dairy 3 Cereals 4 Oils and Fats 5 Sugar 6
2000 931001068772105
2001 951001178972111
2002 949686979188
2003 10210510510110591
2004 11411813011111792
2005 117121145106109127
2006 127115138124117190
2007 157121247172174129
2007 March 140121186151138134
April 142119213148150125
May 144119222150161121
June 151120252159170119
July 156120277160175131
August 162123287171181126
September 171124290195190125
October 175122297201202128
November 181126302203221130
December 187123295224226137
2008 January 197126281239250154
February 217130278282273173
March 220133276284285169
1 Food Price Index: Consists of the average of 6 commodity group price indices mentioned above weighted with the average export shares of each of the groups for 1998-2000: in total 55 commodity quotations considered by FAO Commodity Specialists as representing the international prices of the food commodities noted are included in the overall index.
2 Meat Price Index: Consists of 3 poultry meat product quotations (the average weighted by assumed fixed trade weights), 4 bovine meat product quotations (average weighted by assumed fixed trade weights), 3 pig meat product quotations (average weighted by assumed fixed trade weights), 1 ovine meat product quotation (average weighted by assumed fixed trade weights): the four meat group average prices are weighted by world average export trade shares for 1998-2000.
3 Dairy Price Index: Consists of butter, SMP, WMP, cheese, casein price quotations; the average is weighted by world average export trade shares for 1998-2000.
4 Cereals Price Index: This index is compiled using the grains and rice price indices weighted by their average trade share for 1998-2000. The grains Price Index consists of International Grains Council (IGC) wheat price index, itself average of 9 different wheat price quotations, and 1 maize export quotation; after expressing the maize price into its index form and converting the base of the IGC index to 1998-2000. The Rice Price Index consists of three components containing average prices of 16 rice quotations: the components are Indica, Japonica and Aromatic rice varieties and the weights for combining the three components are assumed (fixed) trade shares of the three varieties.
5 Oils and Fats Price Index: Consists of an average of 11 different oils (including animal and fish oils) weighted with average export trade shares of each oil product for 1998-2000.
6 Sugar Price Index: Index form of the International Sugar Agreement prices.

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