Manufacturers are facing further cost pressures following the news that global food commodity prices rebounded sharply in August after two consecutive months of decline.
Data from the Food and Agriculture Organization (FAO) shows there were strong gains for sugar, vegetable oils and some cereals amid production issues in some markets.
The overall FAO Food Price Index averaged 127.4 points in August, up 3.1% from July and 32.9% from the same month in 2020.
The sugar price index rose 9.6% from July, pushed up by concerns over frost damage to crops in Brazil, the world’s largest sugar exporter. The increase was mitigated by good production prospects in India and the EU as well as by a decline in crude oil prices and a weakening of the Brazilian real.
Meanwhile, the vegetable oil price increased by 6.7% last month, with international palm oil prices reverting to historic highs due to protracted concerns over below-potential production and resulting inventory drawdowns in Malaysia. Quotations for rapeseed oil and sunflower oil also rose.
The cereal price index was 3.4% higher in August than July. World wheat prices jumped by 8.8% due to reduced harvest expectations in several major exporting countries. Maize prices, by contrast, declined 0.9% as improved production prospects in Argentina, the EU, and Ukraine moderated the lowered production forecasts in Brazil and the US. International rice prices remained on a downward trajectory.
Meat edged up slightly in August, as strong purchases from China supported ovine and bovine meat prices and solid import demand from East Asia and the Middle East boosted poultry prices. Pig meat prices, by contrast, fell due to China’s continued decline in purchases and weak internal demand in Europe.
The dairy price index was down marginally from July, as international quotations for milk powders declined amid a weak global import demand and seasonally rising export availabilities in Oceania, more than offsetting rising butter and cheese prices.
NAM Implications:
- Add all the other cost drivers…
- …and explore the implications in using the ingredient cost rises reported above.
- And if any colleagues still need convincing, see ‘Pound-in-pocket inflation’
