Bakers prefer butter, helping prices soar
Consumers around the world are willing to pay more for products containing dairy and this is driving demand for butter and cream, says Fonterra.
Based on the prices of a basket of internationally-traded food commodities, the FAO Food Price Index averaged 203.9 points in July 2014, down 2.1% from a revised value in June and 3.5 points 1.7% below the July 2013 level.
"The lingering decline of food prices since March reflects much better expectations over supplies in the current and forthcoming seasons, especially for cereals and oils, a situation that is expected to facilitate rebuilding of world stocks," says FAO senior economist Concepción Calpe.
In contrast, meat prices rose for the fifth consecutive month in July, and those for sugar remained firm. The fall in quotations for grains, oilseeds, as well as dairy products pushed down the FAO Food Price Index to its lowest level since January 2014.
"Livestock product markets have their own dynamics: in the case of meat, beef in particular, many exporting countries are in a herd rebuilding phase, which is limiting availability for exports and sustaining prices," Calpe says. "As for dairy products, supplies available for trade appear to be abundant, which, along with a faltering import demand, has weighted on July's quotations," she added.
The FAO Cereal Price Index averaged 185.4 points in July, 5.5% from June and as much as 16.6% below the level one year ago.
In particular the fall in international prices for maize (down 9.2% from June) and wheat (down 5.8%) reflected excellent production prospects as well as expected abundant exportable supplies in the 2014/15 marketing season.
The FAO Dairy Price Index averaged 226.1 points in July, down 4.4% over June and 7.2% less than the same period last year. Reduced import demand - including a decline in purchases of butter by Islamic countries during Ramadan - contributed to the downward trend in dairy prices.
A continued strong demand for meat in Asia and particularly China, helped to edge up the FAO Meat Price Index which averaged 204.8 points in July, 3.7 points (1.8%) higher than its revised value in June and 14.1% above the same period last year. Average prices for poultry and ovine meat also rose, while those for pig meat fell back somewhat from the all-time high registered in June.
