|Nominal and real prices since 1961|
The UN's Food and Agricultural Organisation (FAO) reported Thursday that for the whole of 2014, the Global Food Price Index averaged down 3.7% from 2013, marking the third straight annual decline. However, the sub-index for meat rose to a record high.
The FAO's monthly Food Price Index declined in December after three months of stability. Continued large supplies and record stocks combined with a stronger US dollar and falling oil prices contributed to the decline.
The December Food Price Index averaged 188.6 points, a drop of 1.7% from November, led down by sugar and palm oil.
This year-on-year drop came despite FAO's sub-index for meat rising to an all-time high annual average of 199 points, up 8.1% from 2013. Cereals, by contrast, dropped 12.5% from the previous year, buoyed by forecasts of record production and ample inventories.
FAO's Food Price Index is a trade-weighted index that tracks prices of five major food commodity groups on international markets. It aggregates price sub-indices of cereals, meat, dairy products, vegetable oils and sugar.
Four of those indices fell in 2014 and are at, or close to, their lowest levels in five years.
The agency said last month that world cereal production in 2014 was forecast at a new record of 2,532m tonnes (including rice in milled terms), 10m tonnes higher than last month’s forecast and 7m tonnes (0.3%) above last year’s peak.
The US had experience a severe drought in 2013 and production more than recovered in 2014.
The FAO Cereal Price Index averaged 183.9 points in December, up 0.4% from November as wheat prices rose on the back of worries that Russia may restrict exports. However, the increase was capped by the stronger US dollar. Moreover, rice prices fell markedly amid abundant export supplies.
The FAO Vegetable Oil Price Index average declined by 2.4% to a five-year low of 161 points in December, due mainly to depressed demand for palm oil as a biodiesel feedstock, itself linked to falling global oil prices.
The FAO Dairy Price Index declined by 2.3% to 174 points, its lowest level since late 2009, as slowing imports by China and Russia left abundant export supplies for international markets. Price declines were greatest for milk powders, butter and cheese.
The FAO Meat Price Index also declined in December, down 1.9% from the previous month, as a stronger U.S. dollar curbed price quotations for beef and mutton from Oceania and pork from Europe. However, at 204 points, this index is near its monthly all-time highs, and on a full-year basis rose 8.1% in 2014 from 2013, the only commodity group to post higher average prices over the year.
The FAO Sugar Price Index dropped 4.8% to 219 points in December, largely because of ample supplies in major producing countries such as Brazil. Falling crude oil prices, which reduce demand for sugar crops to be converted into ethanol, also weighed on international sugar quotations in December.
Lower crude oil prices spelled bearish price trends for commodities that can be used for biofuels, notably sugar but also palm oil, which has the largest weight inside the vegetable oils index, said Abdolreza Abbassian, FAO senior economist . "Ample supplies aside, the drop in oil prices obviously makes ethanol production less attractive," he said.