Food prices fall in December, index declines for 3rd successive year: UN

The Food and Agriculture Organization (FAO)'s Food Price Index declined in December after three months of stability, showing the third consecutive year of falling prices in all commodities, except for meat.

"Cereal, vegetable oil, dairy and sugar all dropped in 2014, due to continuing large supplies and record stocks combined with a stronger U.S. dollar and falling oil prices," UN spokesman Stephane Dujarric said at a daily news briefing here, quoting the latest FAO index.

The 1.7-percent fall in December, which comes after the index had appeared to bottom out last month, was credited to continued large supplies and record stocks, combined with a strong U.S. dollar and falling oil prices, according to a press release on the monthly survey.

The trade-weighted index, which tracks prices of cereals, meat, dairy products, vegetable oils, and sugar on international markets, averaged 202 points over 2014, down 3.7 percent from 2013.

It saw year-on-year declines in the prices of four of the products, with the numbers approaching their lowest level in five years. Only meat has risen, and it reached an all-time high annual average of 199 points, up 8.1 percent from 2013.

While posting strong annual figures, meat prices declined in December by 1.9 percent from the previous month, as a stronger U.S. dollar affected prices for beef and mutton from Oceania and pork from Europe. The December decline was not enough to stop the annual growth, and prices remain close to their all-time high, having risen 8.1 percent in 2014.

The sugar price index dropped by 4.8 per cent to 219 points in December, mainly due to abundant supplies in major producing countries coupled with falling crude oil prices, which reduce demand for sugar crops to be converted into ethanol.

"Ample supplies aside, the drop in oil prices obviously makes ethanol production less attractive," said FAO senior economist Abdolreza Abbassian.

Lower crude oil prices had negative effects on commodities that can be used for biofuels, notably sugar but also palm oil. Depressed demand for palm oil as a biodiesel feedstock also contributed to vegetable oil prices hitting a five-year low of 161 points in December.

Cereals saw price drops of 12.5 percent over the course of 2014, on the back of forecasts of record production and ample inventories. Wheat prices rose on the back of worries that Russia may restrict exports, though the strong dollar helped to cap the rise, while abundant export supplies pushed rice prices down markedly.

The decline in the dairy price index to its lowest level since 2009 was attributed to a slowing of dairy imports by China and Russia, which left ample export supplies for international markets. The greatest declines were seen in milk powders, butter and cheese.

"Dairy prices at the start of 2014 were at record levels," said Abbassian. "From those levels to what we ended the year with December prices fell 34 percent. This was probably the biggest single decline among all the commodities." Endite