A jump in sugar prices has led world food prices higher for the first time in several months.

According to the UN Food and Agriculture Organisation (FAO), which published its Food Price Index on Thursday, food prices rose by 1 percent between February and March. FAO’s Index looks the prices of a range of staples around the world. The Index revealed soaring sugar prices and increases in palm oil prices offset the effects of plunging dairy prices.

Although the index rose in March, achieving its highest level in 2016 so far, prices remained 12.0 percent below their March 2015 level, after months of easing prices on the back of ample food supplies, a slowing world economy and strong US dollar.

Cereal prices fell slightly in March - marking the fifth straight month of decline - amid a favourable supply outlook in the new season. Prices were down 13.1% on March 2015 levels. However, sugar prices rose by 17% from month to month, reaching their highest level since November 2014. The use of sugar in ethanol production in Brazil, the world’s largest sugar producer, played a part in the rise.

Dairy prices continued their free-fall last month, down 8.2 percent to their lowest point since June 2009. Meat prices, on the other hand, remained broadly unchanged.

First harvest forecasts for 2016

The Rome-based UN Organisation’s cereal brief was also released on Thursday. In its first such forecast of the year, the Supply and Demand Brief estimates that world cereal production will reach 2,521 million tonnes in 2016, falling just slightly short of last year’s output. The current forecast would make 2016 the third largest production total on record, after 2014 and 2015.

Lower wheat production around the world is predicted to lead the slight shrinkage in production. FAO foresees 712.7 million tonnes of wheat being produced in 2016, some 20 million tonnes less than in 2015. Russia and Ukraine are set to lead the reduction in plantings, on the back of dry weather.

FAO forecasts a decline in international trade in cereals in 2016/17, due to large stockpiles and reduced demand in importing countries. Large inventory levels and relatively sluggish global demand mean that market conditions for staple food grains appear stable for at least another season, the agency's latest Cereal Supply and Demand Brief predicts.


Although cereal use is predicted to remain above production, FAO said the stock-to-use ratios is expected to remain well above the historical low seen in the 2007/08 season.