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FAO Food Price Index fell sharply in July but the respite may not last


Farmers harvest a wheat field near Melitopol in Ukraine. Wheat, soybean, sugar and corn futures prices have fallen from their March highs back to levels seen in early 2022.

Olga Maltseva | Afp | beautiful pictures

Food prices fell significantly in July compared to the previous month, especially the cost of wheat and vegetable oil, according to the latest data from Food and Agriculture Organization of the United Nations.

But the FAO says that while a drop in food prices from very high levels is “welcome”, there are doubts about whether the good news will last.

“Many factors of uncertainty remain, including high fertilizer prices that may affect future production prospects and farmers’ livelihoods, a gloomy global economic outlook and currency volatility, all Both pose serious stresses to global food security,” FAO chief economist Maximo Torero said in a press release.

The FAO Food Price Index, which tracks monthly changes in global prices of a basket of food commodities, fell 8.6% in July from the previous month. In Junethis index only decreased by 2.3% compared to the previous month.

However, this index in July is still 13.1% higher than in July 2021.

The price in the short term could fall further, if nothing happens in the futures contract. Wheat, Soybean, Streetand Corn Futures have fallen from March highs back to prices seen in early 2022.

Wheat contracts, for example, closed at $775.75 a bushel on Friday, down from 12-year highs of $1,294 in March and around $758 in January.

Why did the price drop?

Skepticism about the Ukraine-Russia agreement

Global doubts about whether Russia will keep the end of the negotiations or not.

Russia fired a missile at Odesa just a few hours following the UN-brokered agreement at the end of July.

And freight and insurance companies may still think it’s too risky to ship grain out of a war zone, Vos said, adding that food prices are still volatile and any new shocks would be too much. could cause more price spikes.

“To make a difference, it won’t be enough to export a few shipments, but at least 30 or 40 monthly shipments to bring in the existing grains that are stored in Ukraine, as well as the ones that are stored in Ukraine,” Mr. Vos said. as the product of the coming harvest.

“To help stabilize the market, the deal will need to stay in place for the second half of the year as that’s around the time Ukraine does most of its exports.”

Carlos Mera, head of agri-commodity market research at Rabobank, said that even with the existing deal, even with the current deal, land could continue to be destroyed “as long as the war goes on.” The painting continues.” “European street signs” last week.

“This one time [grain] Mera said. Consumers may also see prices rise further as there is typically a 3 to 9 month delay before the movement of commodity prices is reflected on supermarket shelves.

Then there is pressure to export enough grain as quickly as possible from the war zone.

“It’s about time we got back to work. I don’t see us exporting two [to] “John Rich, executive chairman of the Ukrainian poultry giant Myronivsky Hliboproduct (MHP), tells CNBC every month”Capital connection“in Monday.

“Hungry people, at the end of the day get hungry very quickly after a week.”

In In a note published earlier this month, credit rating agency Fitch Ratings’ The possibility of a rise in fertilizer prices, which have fallen recently – but are still more than twice as high as in 2020 – could cause grain prices to rebound, analysts wrote.

Russia’s restriction on gas supplies has caused European natural gas prices to spike. Natural gas is the main ingredient in nitrogen-containing fertilizers. They added that weather patterns in La Nina could also disrupt grain harvests later this year.

And falling food prices isn’t all good news. Part of the reason why the staple is getting cheaper is because traders and investors are pricing in recession fears, the analysts said.

The global manufacturing purchasing managers index has fallen, while the US Federal Reserve appears to be trying to raise interest rates to curb inflation even if it triggers a recession, the Fitch team wrote. , the Fitch team wrote.

Food

The FAO Index shows that prices of cereals, followed by wheat, have fallen 11.5% from the previous month. The FAO said wheat prices fell 14.5%, partly in response to the Russia-Ukraine grain deal, and better harvests in the Northern Hemisphere.

Vegetable oil prices fell 19.2% month-on-month – a 10-month low – partly due to ample palm oil exports from Indonesia, falling crude prices and lack of demand for sunflower oil.

Sugar prices fell 3.8% to a five-month low as demand fell, the Brazilian real weakened against the greenback and increased supplies from Brazil and India.

Milk and meat prices fell 2.5% and 0.5%, respectively.



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