Global food price index falls for second straight month as grain, dairy prices drop

Global food prices fell for the second consecutive month in June, with grains, dairy products and sugar declining while rice, vegetable oils and meat moved higher.

The Ministry of Agriculture, Food and Rural Affairs said Friday that the Food and Agriculture Organization of the United Nations (FAO) global food price index came in at 130.3 in June, down 0.3 percent from the previous month's reading of 130.8.

The index had risen for three consecutive months from February through April before turning lower in May. It uses the 2014–2016 average price level as its baseline of 100.

The sharpest decline was in grains. A continued drop in grain prices could ease pressure on feed costs and food production expenses.

The grain price index fell 3.5 percent from the previous month to 110.2. Wheat dropped 4.4 percent as harvests in the Black Sea region got underway and supply expansion prospects offset crop concerns in the United States and Australia. Corn fell 6.2 percent, reflecting improved supply conditions in major South American exporting countries and weaker biofuel demand tied to lower international oil prices. Barley and sorghum also declined, by 3.4 percent and 7.7 percent, respectively.

Rice prices bucked the trend, rising 3.2 percent from the previous month as stronger import demand in Asia, weather uncertainty and higher production and transportation costs pushed prices up.

The dairy price index fell 1.5 percent to 117.4. Improved raw milk supplies in the EU and the United States pushed down prices for skim milk powder, butter and cheese, while weak import demand from China weighed on whole milk powder prices.

The sugar price index dropped 5.7 percent to 89.7, as lower ethanol prices in Brazil prompted higher sugar production and exports. However, crop concerns in major producing countries stemming from El Niño limited the extent of the decline.

Vegetable oil prices rose 3.8 percent to an index reading of 192.0. Palm oil prices climbed on expectations of reduced exportable supplies from Indonesia, while rapeseed oil gained as planting conditions deteriorated in Australia and Canada. Soybean oil edged lower, weighed down by higher South American production and falling international oil prices.

The meat price index rose 0.4 percent to 131.0. Poultry prices increased due to a temporary supply shortage in Brazil, and lamb prices also rose amid firm demand and limited export availability. Pork and beef prices fell, however, as EU supply expanded and Australian export prospects improved.

Meanwhile, domestic consumer prices for agricultural and livestock products rose 3.2 percent in June from the same month last year, matching the overall consumer price inflation rate for the period.