World food prices rose in September to the highest in six months as dairy and meat producers passed on higher feed costs to consumers, the United Nations' Food & Agriculture Organization said.
An index of 55 food items tracked by the FAO rose to 215.8 points from a restated 212.8 points in August, the Rome-based agency reported on its website today. Dairy costs jumped the most in more than two years.
Livestock breeders and dairy farmers are passing on the higher cost of feed, after grain prices jumped in June and July, according to Abdolreza Abbassian, an economist at the FAO in the Italian capital. Higher prices don't mean a food crisis is imminent, he said today by phone.
"Despite a very difficult market, the fundamentals that suggest a food crisis are just not there," Abbassian said. "Market sentiment is now accepting high prices more as a rule than as an exception."
The FAO dairy-price index jumped 6.9 percent to 187.7 points from 175.6 in August, the biggest advance since April 2010, the data showed. The index for meat prices rose 2.1 percent to 175, climbing for a second month.
The world cereal-price index rose to 262.6 points from 259.9 points the previous month to reach the highest level since April last year. The index for grain prices in July surged 17 percent, the biggest jump since February 2008.
"We expected this for both meat and dairy, you have a lag with this big increase in input cost from the grain sector," Abbassian said. "There will be a limit to how much it goes up. By how much you can raise prices without consumers cutting consumption remains an issue."
David Fuller's view This 10-year
chart of the S&P GSCI Agriculture Official Close Index shows that we
have a worldwide problem regarding food prices, although not yet to the extent
that we saw in 1Q 2011. That comparison will be of little comfort to the poor
who are most affected by increases in the cost of food. The situation is likely
to become worse before it improves significantly.
The longer-term problem regarding food supplies is discussed in another report below (Subscriber's Area only) and also in this assessment from the knowledgeable John Macintosh. Here is the opening:
Implications of the Corn Stocks
Friday's corn and wheat stocks reports have some considerable implications. They suggest amongst other things that last year's corn crop was overstated.
The corn stocks were 200 million bushels below expectations, and wheat stocks were 170 million bushels below expectations, as more wheat was fed, displacing corn.
By September 1st this year over 1 billion bushels of corn had been harvested, 700 million more than normal. A lot of this early Southern corn was fed on farm or transported and consumed elsewhere. Additionally, with by far the highest ratio ever of new crop corn on hand versus old crop on September 1st , an unusually high amount of co- mingling would have taken place. In my opinion at least 200 million bushels of new crop would have been consumed or co-mingled, leaving the true old crop carry in at 788 million bushels, and not 988. This basically means that the USDA overstated the corn supply by some 600 million bushels, or 15 million tons.
Prices for corn, wheat and soybeans are at the centre of the global food price problem, although there has been some respite recently. This is due to favourable weather conditions in Argentina and Brazil ahead of their main crop season for corn and soybeans which is just getting underway.
Fortunately, prices for rough rice have remained relatively stable. If they were to surge in the manner of corn and soybeans, the problems of food price inflation and shortage would worsen considerably, especially throughout Asia.