World food prices rose in July: FAO reports increase after months of declines

The global economy has seen a generalized rise in inflation in recent years. However, consumers witnessed an easing in food prices in recent months. This trend appears to have ended in July.

According to the FAO (Food and Agriculture Organization of the United Nations) food price index, food prices rebounded this month with a considerable increase.

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Figures behind the increase in food prices in July

According to studies conducted by FAO, in July 2023 the food price index closed at an average of 123.9 points. When compared to the index for the month of June, an increase of 1.3% is evidenced, that is, a total of 1.5 points.

The organization states that the increase in the weighted is due to a notable change in the price index of vegetable oils which, despite being counterbalanced by the decrease in the price index of sugar, the total percentage suffered an indisputable increase.

Food prices: wheat and rice prices increased

For the month of July, the FAO cereal price index closed at an average of 125.9 points. This figure represents a slight decrease of 0.7 points (0.5%) compared to June and a notable drop of 21.3 points (14.5%) compared to the same month last year.

This slight decrease is mainly due to the drop in international prices of coarse grains, including barley, oats, quinoa and corn, which experienced a negative variation of 4.8% in July compared to the previous month.

On the other hand, corn prices continued their downward trend, as a result of the seasonal increase in supplies from the Argentine and Brazilian harvests.

In addition, the sector was strongly influenced by an increase in production in the United States, particularly in the planting process, thanks to the recent good weather conditions.

In the case of other coarse grains, world prices declined along with the drop in corn prices. The price of barley, however, did not have a major impact, as it remained stable.

At the same time, international wheat prices rose by 1.6%. This was the first month-on-month increase in nine months. The cause of this increase lies in the uncertainty that the Ukrainian war continues to cause for the country’s exports.

In addition, the figure was affected by persistent drought conditions in Canada and the United States, both recognized leaders in world wheat production.

Regarding the increase in food prices, FAO stated that the index increased by 2.8% for all types of rice. This increase is the highest since September 2011.

It is further believed that this particular increase owes its origin to the growing seasonal shortage of agricultural supplies experienced by several regions in the world.

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Vegetable oil prices also increased

In the month of July, the FAO vegetable oil price index averaged 129.8 points, showing an increase of 14 points (12.1%) compared to June.

This is the first increase after seven consecutive months in which the trend was downward. The increase is mainly associated with higher world prices for sunflower, palm, soybean and canola oils.

International sunflower oil prices increased by more than 15% over the previous month. This increase was due to the uncertainty surrounding exports from the Black Sea region following tensions between Russia and Ukraine.

On the other hand, world prices for palm, soybean and canola oil also rose due to the production outlook in North American countries.

In addition, the rise in world crude oil prices and uncertainty regarding supply exports in the Black Sea region caused a notable increase in the sector’s prices.

Food prices index: dairy products

Regarding prices in dairy products, FAO reported a decrease for the seventh consecutive month in July. The average was 116.3 points, translating into a decrease of 0.4% with respect to June’s record.

Compared to the same month’s record for the previous year, the weighted average was 20.6% lower, mainly due to the drop in skimmed milk powder and butter prices, following the decrease in activity in European markets.

At the same time, after five months of steep declines, world cheese prices rose slightly on account of seasonal supply shortages caused mainly by high temperatures in European countries.

Food Prices Index: Meat

This group declined slightly in July, averaging 117.8 points, down 0.3% from the previous month. The group remains 5.1% below the level recorded in the same month last year.

The fall in beef and veal prices is due to the increase in exportable availabilities in Oceania and the decrease in import demand in Asian markets.

With respect to poultry protein, the price decreased as a result of an increase in export supply, which in turn was the cause behind the drop in the price of sheep meat, whose importers’ demand continues to decrease.

In the case of pork prices, there was an increase for the sixth consecutive month caused by the shortage of supplies in the United States and Western Europe.

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Sugar price falls

For the month of July, FAO reported the second consecutive decrease in the Sugar group. This food group closed at an average of 146.3 points, down 3.9% from the previous month. However, the weighted average is still above the level of the same month in the previous year, with an increase of 29.6%.

With respect to the decline in food prices of the sugar group, the cause would be the profitable sugar cane harvest in Brazil and optimal weather conditions in other exporting regions.

Despite the FAO report, the organization has stated that at the time of publication, prices for the final calculation are not available, which could require significant revisions in the final index.

In Colombia, how are food prices doing?

For Colombian consumers, inflation, which in June stood at 12.1% (-0.2% with respect to the previous month), has been reflected in the prices of foodstuffs in the family basket.

According to Cecilia López Montaño, former Minister of Agriculture in Colombia, this increase in food prices is due to the high percentage of imports compared to the consumption of products manufactured in Colombia.

According to DANE, in 2022, 15% of food consumption in the country -equal to 15.9 million tons- was imported food, a figure that has a direct impact on 65% of inflation.

Although 85% of the products consumed in Colombia are produced by peasant producers, the country continues to face challenges in reducing food prices in a global context of economic uncertainty, in which much of the production is guaranteed with fertilizers from other countries.

What is the FAO food prices index?

The FAO food price index is a mechanism for measuring month-to-month changes in food prices for a specific selection of food commodities.

This measurement is made by averaging the price indices of five commodity groups, which are weighted according to the average export shares of each during the period 2014-2016.

For its studies, FAO takes into account the following groups: cereals, vegetable oils, dairy, meat and sugar. You can consult in this link the information on the FAO food price index.

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