The FAO Food Price Index (FFPI), a measure of the monthly change in international prices of a basket of food commodities, increased rapidly in August, up 3.1% (3.9 points) following two consecutive months of decline. The FFPI averaged 127.4 points in August and was up 31.5 points (32.9%) on the same period last year, led by strong gains in the sugar, vegetable oil and cereal sub-indices.
Sugar and vegetable oils were both up over 10 points from July. Strong demand for both rapeseed and palm oil, together with tightening regional supplies, drove the price of both. Sugar increased for the fifth consecutive month, prompted by concerns over frost damage in Brazil, the world’s largest exporter. Both increases will put further margin pressure on food manufacturers, particularly SMEs, already experiencing margin erosion on the back of rising commodity, energy and freight prices.
The cereal price index was up 4.3 points (3.4%) from July and 21.2% above its August 2020 level. Wheat has led the cereal increase, 43.5% up on July 2020 on the back of reduced harvest expectations in major exporting countries, while barley is up 35.6% on last year following lower production forecasts in Canada and the US.
In contrast, the meat price index was up only marginally in August, but rose 22% on last year. While Irish beef farmers will be concerned about the impact on feed prices, ultimately, the dynamic should support stronger beef prices in the period ahead.