According to the latest UN Food and Agriculture Organisation statistics, food prices continued to fall slightly across the world last month. The UN Food Price Index eased by one percent overall in June.

The index measures the cost of a range of staple foodstuffs around the world. Having spiked last summer, when concerns about the effects of drought in major cereal growing regions sparked grain rallies on global markets, food prices were slipping until earlier this year, when fresh rises were driven by soaring dairy costs.

FAO said on Thursday (4th July), "Last month's decline reflects a drop in sugar and, especially, dairy prices, with more contained slides affecting cereals and oils." Although dairy prices have begun to drop off again, following the record rises recorded in spring 2013, international meat prices are now increasing in their place; meat prices gained 2 percent in June, according to the FPI.

Dairy prices fell 4.3 percent between May and June, though FAO noted that "declining prices need to be seen in the context of the exceptionally high levels recorded in April and May." Calm is finally returning to the dairy market, after an abrupt fall in New Zealand's end of season output, as dairy supplies are now being sourced elsewhere including Europe and the United States, and as a result prices are falling. 

The 2 percent rise in meat prices, a reversal of trends seen in the preceding months, may also be short-lived. FAO said that, looking at long-term trends, the increases seen in June may not be sustainable. The Organisation said, "Despite the rise in the June index, there are signs that international prices for meat are beginning to lose strength in the face of reduced import demand – especially from Asian countries where… domestic production has increased and stocks have accumulated."

Sugar, Oils, Cereals

Sugar prices also dropped off between May and June. Showing decline for the third consecutive month, prices fell 3 percent due to the large surplus in production anticipated in major producing areas (notably in Brazil, the world's largest sugar producer and exporter). This is in spite of heavy rains slowing harvesting in the Centre South region, the main producing area in Brazil.

Cereal prices were down one percent from May, but remain markedly higher than in June last year, before rallies took off, largely in response to concern over the US drought. Expectation of bumper crops this year is the main reason for the decline in international cereal prices. Of all cereals, wheat prices fell furthest, FAO said, because of seasonal harvesting pressure from the northern hemisphere crops.

Fats and oils dropped marginally below May prices to their lowest level in six months. The decrease was driven by soy oil, mostly reflecting a rise in export availabilities in South America, where subdued consumption coincided with high soy oil production.