International food prices continued to decline in August, said the Food and Agriculture Organization of the United Nations (FAO). Abundant reserves, the decline in energy prices and concerns over a possible economic slowdown in China have contributed to the sharpest drop of FAO Food Price Index in seven years.
In August, the index decreased by 5.2% compared to July, which is the sharpest fall since December 2008, and averaged 155.7 points. Virtually all basic food commodities recorded a fall in prices.
FAO Food Price Index is a weighted average which tracks prices for five major groups of food products on the international markets: cereals, meat, dairy products, vegetable oils and sugar.
In August, the index of grain prices fell 7% compared with July and by 15.1% compared to August of the last year and amounted to 154.9 points. The decline is due to falling prices for wheat and corn after a moderate growth over the past two months.
The price index for vegetable oils fell in August 8.6% compared with July levels and amounted to 134.9, the lowest level since March 2009. The fall was due to a decline in international prices of palm oil, mainly as a result of lower import demand, particularly from China and India, amid the expected growth in production volume.
A substantial fall in prices for milk powder, cheese and butter was the reason for the price index decline of dairy products by 9.1% to 135.5 points. Moreover, the decisive factor was the decline in import demand from China, the Middle East and North Africa.
The sharp 10 % drop in the price index of sugar is the result of the continuing depreciation of the Brazilian real against the US dollar and increasing confidence in the fact that India, being the second largest producer of sugar, will be pure exporter in the season of 2015-2016.
In contrast to the overall downward trend, the price of meat in August was virtually unchanged compared with the previous month. However, compared with the record high values of the index prices in August 2014, the decrease was by 18%.
Meanwhile, FAO's latest forecast for world cereal production in 2015 amounted 2.540 billion tons, up 13.8 million tons compared with the July forecast, but still 21 million tons (0.8%) below the record level of 2014.