Food Prices Rise, Led by Vegetable Oils on Concerns Over Ukraine Grain Deal, UN Says

Food prices rose on month in July, when concerns over fighting in Ukraine and the prospect of food exports stalling pushed wheat and sunflower-oil prices higher, the Food and Agriculture Organization of the United Nations said Friday.

The UN FAO's food price index, which tracks global prices for a basket of staple foods, averaged 123.9 points in July, up 1.3% from June and driven by higher quotations for vegetable oils globally. The figure, however, was 11.8% lower than in the same month last year.

The UN food body said much of the price rise was due to the war in Ukraine, and in particular the dissolving of the Black Sea Grain Initiative. The deal had allowed nearly 32.9 million metric tons of grains and oilseeds to flow out of Ukraine despite the fighting, but was brought to a halt last month after Russia refused to sign an extension to the deal.

Since then, key ports have been hit by the fighting, including Danube river ports which had been seen as key to moving food out of Ukraine even if the Black Sea remained off limits for exports. Reports on Friday also emerged of Ukrainian drone attacks close to the Russian port of Novorossiysk, a key hub for grain exports.

Vegetable oil prices rose 12.1% in July, marking the first increase in prices after seven months of decline, the FAO said. Sunflower oil prices rose 15% during the month, with Ukraine a key exporter of sunflower oils and seeds. Other oils such as palm oil also rose, as vegetable oil prices generally move in tandem with one another.

Elsewhere, cereal prices fell 0.5% from June, led by falling prices for coarse grains and corn. The FAO said strong harvests in Brazil and Argentina and better than expected output in the U.S. helped to lower prices.

That said, wheat prices had their first increase in nine months, rising 1.6%. "[This was] mainly driven by the uncertainty over Ukraine's exports following the decision taken by the Russian Federation to terminate the implementation of the Black Sea Grain Initiative and the subsequent damage to Ukraine's port infrastructure on both the Black Sea and the Danube River," the FAO said.

Elsewhere, dairy prices fell 0.4% to 116.3 points, led by lower prices for skimmed milk powder and butter. Meat prices were also down 0.3% on cheaper beef prices, though higher prices for pork were seen in Europe and North America, on higher seasonal demand and tight supply.

Sugar prices slipped 3.9% in July, but were still relatively high at almost 30% higher than where they were a year ago. Strong harvests in Brazil were helping to temper prices, but "persistent concerns over the potential impact of the El Nino phenomenon on the 2023-24 sugarcane crops, particularly in Thailand, along with higher international crude oil prices, reined in the declines in world sugar prices," the FAO said.

Write to Yusuf Khan at [email protected]

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