THE FAO PRICE INDEX

 

The FAO Food Price Index in April averaged 218.2, down marginally from 218.4 in March and still 54 percent more than in April 2007. Prices of most food commodities started to show some declines after reaching their peaks in March; but rice prices kept rising also in April. With early prospects for most basic foods pointing to generally larger production in 2008, food prices, as measured in terms of average international prices of basic food commodities, seems to be declining further in May.

The FAO Cereal Index averaged 284 in April 2008, up 20 percent since January and 92 percent more than in April 2007. While wheat prices have demonstrated some signs of weakness in recent weeks, in the maize market, prices have received support from strong demand and concerns about this year’s crop in the United States. International rice prices have increased sharply in recent months mainly as a result of export restrictions by key rice exporters.

The FAO Dairy Index averaged 266 in April 2008, down 12 percent from its peak in November 2007. In terms of products, it is the prices of milk proteins which have fallen the most, as skim milk powder prices dropped 32 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 April 2008 at a high of 136, surpassing its previous peak in 2005. Nevertheless, meat and livestock markets have not yet experienced a price hike comparable to that for grains and dairy products, but sustained increases in production costs, notably feed, in major producing countries, which are affecting the profit margins of meat producers, suggests that meat retail prices could still rise further.

The FAO Sugar Index in the first four months of 2008 averaged 164, which is 20 percent above the corresponding value in 2007. After increasing through February, prices have come down considerably in March and April, in part due to expected global sugar surplus for the 2007/08 season. In 2007, the index averaged 129, a 32 percent drop over 2006, reflecting a recovery in sugar production in traditional importing countries.

The FAO Oils/Fats Index in the first quarter of 2008 reached 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. Following steady gains since early 2007, in April 2008, the oils/fats index (as well as the comparable index for oilseeds) fell slightly compared with the record level observed in the preceding month.