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330377

Global food prices moderate after hitting all-time high

The FAO Food Price Index, a barometer of prices for food commodities, rocketed to a record high immediately after Russia invaded Ukraine and disrupted food supply chains. Now it is down for the third month in a row, with large global harvests at hand, but Ukraine is a new entrant on the list of nations needing food aid, said the UN agency.

Grain, sugar and vegetable oil prices fell during June, combining to lower the index to a reading of 154.2 points, down 5.5 points from the peak in March. After the relatively mild decline, the index was still 23-percent higher than a year ago.

“The factors that drove global prices high in the first place are still in play,” said FAO chief economist Maximo Torero Cullen, “especially a strong global demand, adverse weather in some major countries, high production and transportation costs, and supply chain disruptions due to Covid-19, compounded by the uncertainties stemming from the ongoing war in Ukraine.”

Food price inflation has been a headache worldwide. It was 12.6 percent in the industrialized world during May, according to OECD data. The Labor Department will release the monthly Consumer Price Index on Wednesday. U.S. food prices rose 10.1 percent during the 12 months ending in May.

In a trio of reports on Friday, the Food and Agriculture Organization said global food prices improved slightly, the world grain harvest would be slightly larger than previously forecast, and 46 countries needed food aid. “This list now includes Ukraine and Sri Lanka,” said the FAO’s quarterly Crop Prospects and Food Situation report. The leaders of the Sri Lankan government resigned over weekend following months of economic turmoil.

“According to the April update of the Ukraine Flash Appeal 2022, about 24 million people are estimated to be in urgent need of humanitarian assistance and protection from the war, including up to 7.7 million internally displaced,” said the report. In Sri Lanka, “unprecedentedly high food prices are constraining economic access to food for large numbers of households” amid a downturn in domestic food production and lack of money to import food.

While grain, sugar and vegetable oil prices fell, the FAO Food Price Index said meat prices surged to an overall high. “World prices across all meat types increased, with those of poultry meat rising sharply, reaching an all-time high, underpinned by the continued tight global supply conditions impacted by war in Ukraine and avian influenza outbreaks in the northern hemisphere,” it said.

International wheat prices fell 5.7 percent during June, as the summer harvest began in the northern hemisphere. Corn prices also dropped, as the South American harvest ended and prospects brightened for the U.S. crop. “Concerns over demand prospects amidst signs of an economic slowdown added to the downward pressure,” said the FAO.

Vegetable oil prices plunged 7.6 percent, “driven by lower prices across palm, sunflower, soy and rapeseed oils,” said the FAO. Global demand for the oils has softened in the face of high prices.

In its Cereal Supply and Demand Brief, the FAO forecast a global grain harvest of 2.792 billion tonnes, slightly larger than its June estimate and 0.6 percent smaller than last year. Almost all of the 7.7 million-tonne increase from last month was attributed to increases in feed grain output. Grain exports would be the smallest in three years, with “war-related losses of corn and barley exports from Ukraine” playing a large part.

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