Propelled by stronger grain and dairy prices, the Food Price Index rose for the second month in a row and is at its highest level since last November, said the UN Food and Agriculture Organization. In a companion report, the FAO said early indications point to smaller wheat and feed grain crops worldwide after record grain production in 2017.
The higher prices for grain and dairy — “bread and butter,” as the FAO termed the combination in its report — were offset somewhat by lower prices for sugar and vegetable oils. Meat prices were mostly unchanged. The trade-weighted FAO Food Price Index tracks international prices for five major commodity groups. Strong demand for butter, cheese, and whole milk powder helped drive up dairy prices by 3.3 percent in March.
In its Cereal Supply and Demand Brief, the FAO raised its estimate of 2017 grain production by 1.3 percent, to 2.646 billion tonnes. “Prospects for wheat production in 2018 are more restrained, given less favorable weather conditions and lower prices,” it said, pegging the crop at 750 million tonnes, which would be down by 7 million tonnes from 2017. Bad weather in Argentina and a shift away from corn in Brazil were expected to reduce feed grain production in South America. Production is also forecast to fall in South Africa. The harvest is currently underway in the Southern Hemisphere, while spring planting is in its early stages in the Northern Hemisphere.