World food prices hit 10-year high as cereal prices surge

Key Points

·         The cereal price index surged by 2.0% in September from the prior month as wheat prices rose by 4%.

·         World vegetable oil prices surged 1.7% due to increase in palm oil prices.

World food prices soared in September for the second month in a row, reaching 10-year high due to rise in prices of cereals and vegetable oils, said the United Nations food agency on Thursday.

The food price index of Food and Agriculture Organization (FAO) averaged 130.0 points in September—the highest since 2011. The food price index tracks international prices of the most globally traded food commodities.

In September, prices were up by 32.8% on a year-on-year basis. Prices of agricultural commodity rose sharply in the last year due to harvest challenges and Chinese demand.

Cereal prices

The cereal price index surged by 2.0% in September from the prior month as wheat prices rose by 4%.

"Among major cereals, wheat will be the focus in the coming weeks as demand need to be tested against fast rising prices,” FAO Senior Economist Abdolreza Abbassian said in a statement.

Oil prices

In September, world vegetable oil prices surged 1.7% and an increase of about 60% on year-on-year basis. FAO said palm oil prices increased due to import demand and labor shortages in Malaysia.

Palm oil futures have hit record high in early October as vegetable oils are being used in biodiesel due to gains in crude oil markets.

FAO said sugar prices rose 0.5% in September because of adverse crop weather in Brazil.

The agency has projected a record world crop of 2.800 billion tonnes in 2021 for cereal production. A month ago, FAO had projected 2.788 billion tonnes of production.

The production would not match consumption of cereal as the forecast of cereal use for 2021 is 2.811 billion tonnes—an increase of 2.7 million tonnes from the prior month.

(With inputs from Reuters)

Picture Credits: Reuters