The FAO Food Price Index averaged almost 172 points in Dec 2016, unchanged from Nov 2016 with strong gains in vegetable oil and dairy prices, largely offsetting a fall in sugar and meat quotations.

For 2016 as a whole, the index averaged 161.6 points, down 1.5pc from 2015, representing the fifth consecutive annual decline. While prices of sugar and vegetable oils rose significantly in 2016, falling prices in cereal, meat and dairy markets kept the Index below its 2015 average.

Cereal Price Index

Averaged 142.1 points in Dec 2016, up just 0.5pc from Nov 2016 and broadly stable since Sept2016. International rice prices increased somewhat in Dec 2016, sustained by official measures put in place in Thailand to prop-up local prices and also strong demand for supplies from Pakistan.

While prices of sugar and vegetable oils rose significantly in 2016, falling prices in cereal, meat and dairy markets kept the Index below its 2015 average

While maize quotations also firmed in Dec 2016, mostly on weather concerns and brisk demand, wheat values weakened as a result of larger than expected production estimates in Australia, Canada and the Russian Federation as well as good crop prospects in Argentina. Overall, the Cereal Price Index averaged around 147 points in 2016, down 9.6pc from 2015 and as much as 39pc from its peak in 2011.

Vegetable Oil Price Index

Averaged 183 points in Dec 2016. Driven primarily by palm and soy oils, the index gained 7.4 points (or 4.2pc) from Nov 2016 and reached its highest level since July 2014.

For palm oil, low global inventory levels and protracted supply tightness continued to bolster prices, while soy oil quotations firmed on both, weather concerns in Argentina and the prospect of rising uptake by the biodiesel sector in the US, Brazil and Argentina.

For the year as a whole, the index averaged nearly 164 points, up 11.4pc from 2015 but well below the values recorded in the preceding five years.

Dairy Price Index

Averaged 192.6 points in Dec 2016, up 6.2 points (3.3pc) from Nov 2016. Moderate rises were recorded for butter, cheese and whole milk powder (WMP), while quotations for skimmed milk powder (SMP) remained stable.

Restrained milk production in the EU and Oceania and buoyant international and domestic demand continued to underpin the market. While the Index average for 2016 was 4pc lower than the previous year, international dairy prices staged a substantial recovery from mid-year onwards, with butter and WMP recording the largest increases.

Meat Price Index

Averaged 161.5 points in Dec 2016, 1.8 points (1.1pc) down from its revised value for Nov 2016. Quotations for ovine and bovine meat in particular fell, while those for poultry and pig meat were only slightly down.

Despite modest growth during the year, the average value of the Index in 2016 was 7pc below that of 2015, with the largest falls recorded for bovine and poultry meats.

Sugar Price Index

Averaged 262.6 points in Dec 2016, down 24.6 points (8.6pc) from Nov 2016.

The sharp fall in international sugar prices in Dec 2016 was mainly driven by a continuous weakening of the Brazilian currency (Real) against the dollar, boosting sugar exports from Brazil, the world’s largest sugar producer and exporter.

Reports of higher than expected sugar production in 2016-17 (up 18pc from 2015-16) in the Centre South — Brazil’s main producing region — also contributed to pushing down prices.

Overall, however, the FAO Sugar Price Index averaged 255.9 points in 2016, that is 34.2pc higher than in 2015, the first yearly rise since reaching a peak of 369 points in 2011. The sharp increase in 2016 mostly reflected tighter supplies in Brazil, India and Thailand.

• Unlike for other commodity groups, most prices utilised in the calculation of the FAO Meat Price Index are not available when the FAO Food Price Index is computed and published; therefore, the value of the Meat Price Index for the most recent months is derived from a mixture of projected and observed prices. This can, at times, require significant revisions in the final value of the FAO Meat Price Index which could in turn influence the value of the FAO Food Price Index.

Published in Dawn, Business & Finance weekly, January 16th, 2017