In December, the Food and Agriculture Organization’s (FAO) price index, averaged 118.5 points, marking a 1.5% decrease from November and a 10.1% decline compared to December 2022. Over the course of 2023, excluding sugar, all other prices were down by 13.7%. The largest drop was seen in vegetable oils, with a 32.7% decrease over the year. However, cereal and dairy prices saw a slight rise in December.
A Deep Dive into the Global Food Price Index
The globally tracked Food and Agriculture Organization’s (FAO) price index registered an average of 118.5 points in the last month of the previous year, decreasing 1.5% from its November reading and substantially lower by 10.1% in comparison to December 2022.
Looking at the total performance in 2023, a decrease of 13.7% was noted from levels a year earlier. Only sugar prices bucked the trend with an overall increase, yet exhibited a decline of 16.6% in December compared to November.
The Dynamics of Sugar Prices
The FAO hints at the more aggressive production pace in Brazil and a diminished use of sugarcane for ethanol production in India as major influences behind the fall in sugar prices. The statement released by the UN agency outlined these factors.
Trends in Cereal, Meat, and Dairy Prices
Cereal prices, tracked by the FAO’s cereal price index, exhibited a 1.5% rise in December. Main contributing factors include inflated prices for wheat, maize, rice, and barley, combined with constrained shipments from key export nations. Despite this, cereal prices for the entire year were down 15.4% from 2022 averages as the market remained well-stocked, with rice being the only exception.
Conversely, the organization’s meat price index experienced a slight dip of 1.0% in December compared to November, ending the year 1.8% lower. The dairy price index fared similarly, increasing by 1.6% month-over-month in December but concluding the year with a decline of 16.1% compared to the previous year.
The Ripple Effect on Vegetable Oil Prices
Vegetable oils experienced the most significant price decline, with the index down 1.4% in December compared to the previous month. On a yearly basis, a hefty drop of 32.7% was registered.
As a key note, the time period of the price change mentioned in the seventh paragraph of this analysis refers to December, not November.
In a global economy interconnected by trade, changes in the prices of food commodities can ripple through the Forex market, possibly influencing currency pairs linked to major food exporting nations.