World food prices declined for a third month in June as the cost of grains and vegetable oils slumped amid expectations for rising supplies, the UN’s Food & Agriculture Organization said.
An index of 55 food items fell 1.8 percent to 206 points from a restated 209.8 points in May, the Rome-based United Nations agency wrote in an online report today. World food prices were 2.8 percent lower than a year earlier.
Corn futures dropped 8.7 percent last month in Chicago on an outlook for a record crop in the U.S., the biggest grower, while wheat fell 7.9 percent as harvests in Europe are seen higher. World grain stocks at the end of 2014-15 will climb to a 14-year high, the FAO forecast in a separate report today.
“Last month’s decline, which was the third in succession, was largely the result of a marked drop in cereal and vegetable-oil prices, following further improvements in global production prospects,” the FAO wrote.
The UN agency raised its outlook for 2014-15 harvests of wheat, rice and coarse grains such as corn and barley. Global grain output is forecast to be 2.5 billion metric tons, 18.3 million tons more than predicted last month, the FAO said.
Production will outpace demand for a second year, lifting grain-ending stocks to 604.1 million tons, the highest since 2001, from 573.9 million tons a year earlier, according to the UN agency.
An FAO index of grain prices fell 5.2 percent to 196.2 points from 207 in May, the biggest slide since August last year and down from 232.3 points in the year-earlier month. A vegetable-oil price index declined to 188.9 points from 195.3.
For grains, “the slide was mainly caused by a weakening of wheat and maize quotations,” or corn, the FAO wrote. “By contrast, rice prices were marginally up from May, mostly reflecting the suspension of large public stock sales in Thailand.”
Dairy prices fell for a fourth month from their February record amid rising production in New Zealand and Europe. Large supply of milk powder is weighing on the market, while “firm” import demand caused cheese prices to climb, the FAO said.
“The decline in June was substantially less than in the previous three months, suggesting that the downward price adjustment may be coming to an end,” the agency said.
The FAO raised its outlook for world wheat output in the 2014-15 season by 4.5 million tons to 707.2 million tons, down from 716.9 million tons estimated for 2013-14. The forecast for coarse grains was increased to 1.29 billion tons from last month’s estimate of 1.27 billion and down from 1.31 billion tons a year earlier.
The index of world sugar prices fell to 258 points from 259.3 points. The market is concerned about the effects of a possible El Nino weather event, and indications of below-average monsoon rains in India point to a possible output shortfall for the second-biggest sugar producer after Brazil, the FAO said.
The FAO’s index of meat prices rose for a fourth month, advancing to 194.2 points from 192.8, the highest level since at least 1990, the agency’s data show. The increase was mainly due to higher pork prices on the back of the U.S. outbreak of Porcine Epidemic Diarrhea virus, according to the FAO.