June 2008  
 Food Outlook
  Global Market Analysis

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Special features

Statistical appendix

Market indicators and food import bills




Food Outlook


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.

FAO Food Price Index
   Food Price Index 1Meat2Dairy3Cereals4Oils and Fats5Sugar6
2000  92.71001068772105
2001  94.51001178972111
2002  94.19686979188
2003  102.310510510110591
2004  114.411813011111792
2005  117.3121145106109127
2006  127.4115138124117190
2007  157.4121247172174129
2007April 141.7119213148150125
 May 144.4119222150161121
 June 151.2120252159170119
 July 155.8120277160175131
 August 161.6123287171181126
 September 171.4124290195190125
 October 175.3122297201202128
 November 180.6126302203221130
 December 187.3123295224226137
 2008January 196.3126281238250154
 February 215.8128278281273173
 March 218.4132276280285169
 April 218.2136266284276161
1 Food Price Index: Consists of the average of six 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 three poultry meat product quotations (the average weighted by assumed fixed trade weights), four bovine meat product quotations (average weighted by assumed fixed trade weights), three pig meat product quotations (average weighted by assumed fixed trade weights), one 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 nine different wheat price quotations, and one 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 Oil and Fat 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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