Food prices up to their highest level in 16 months
The UN Food and Agricultural Organization (FAO) food price index has risen by almost 3% in September compared with August, its highest level in 16 months. The rise is largely due to higher sugar and dairy prices with the FAO sugar and dairy sub-indices rising by nearly 7% and 14% respectively month on month. According to the FAO, the current price surge in dairy stems from concern that falling milk production in the European Union and a muted opening to the dairy year in Oceania would result in tighter exportable surpluses.
Blame Brazil…and India…and Thailand… and China for high sugar prices
Sugar prices have been boosted by adverse weather conditions in Brazil’s Centre-South region which produces the bulk of the country’s sugar. Brazil is the largest sugar producer and exporter. Reports of lower production in India – on account of smaller plantings – and tight supplies in Thailand and China are also underpinning the market. India is the second largest producer and top consumer of sugar.
Louis Dreyfus bearish on food prices into 2017
The rise in dairy and sugar prices contrasts with soft prices in grain markets which are being undermined by record global output and large exportable surpluses. Louis Dreyfus expects grain prices to remain sluggish through to 2017 due to high productivity in the US and a continuous expansion in production by Black Sea grain farmers.
Charts are sourced from the UN Food and Agricultural Organization