The United Nations Food and Agriculture Organisation (FAO) food price index (FFPI) was up 1.5 points in January to 135.7, resuming the trend that started in the middle of 2020. The index has been on an upward trend since the middle of 2020 when it was as low as 92.

Cereals

The cereal index was just a fraction higher than December at 140.6, an increase of just 0.1% on December but 15.6 points or 12.5% higher than January 2021.

Wheat prices were 3.1% lower in January, with good harvests in Australia and Argentina. In contrast, maize prices were up 3.8% on December, driven by concerns about drought, particularly in Argentina and Brazil.

Dairy

It was a fifth month in a row of dairy price increases, with January at 132.1 points, up 3.1 on December - a 2.4% increase. This puts the dairy index 20.8 points or 18.7% higher than it was a year ago.

The biggest increases were for skim milk powder (SMP) and butter, with the increase driven by tightening of global supplies for trading, especially a reduction in milk being exported from western Europe.

Production is expected to remain below average in Oceania in the moths ahead, which, combined with COVID-19-related labour shortages, is putting further pressure on supply.

Meat

The meat price index covering all species was marginally higher in January at 112.8 points and, like the other categories, there is a significant increase on this time last year, with the index up 16.6 points or 17.3%.

The index reports beef prices reaching a new peak in January, driven by stronger global demand than supplies available.

Pigmeat prices increased slightly, as increasing input costs cooled global supply, but prices of sheep and poultry meat were lower and there were better global supplies than demand.

Comment

The sustained climb in the food index reflects the fact that global demand for agri-food products is keeping ahead of supply on a sustained basis for a year and a half.

The apparent lower supply identified by the FFPI in Oceania should mean continued strong dairy prices in the coming months.

Similarly, demand seems particularly strong globally for beef and cow numbers at their lowest in the US for seven years, beef prices are looking good as well.

The US futures index is projected to increase from 163 at present to 183 by the middle of the year and continue at that level through to this time next year.