The FAO food price index rose more than one percent in March compared to the previous month, driven mainly by an 11 percent increase in dairy products. Dairy products make up 17 percent of the products the UN uses to create its Price Index, according to FAO data.
The FAO dairy price index rose by 22 points in March to 225, one of the biggest changes currently recorded. The increase is due to hot and dry weather in Oceania, which has led to a sharp drop in milk production and a consequent reduction in milk processing in the region.
Dairy prices used in the FAO index are based on exports from New Zealand, the world’s largest exporter of dairy products, with about a third of world trade. Export prices of dairy products also increased in other large exporting countries, such as the European Union and the USA, but not at the same level.
“This exceptional increase partly reflects uncertainty in the market as buyers look for alternative sources of supply,” the food price report said. “Furthermore, milk production in Europe is not yet fully up to speed after a particularly cold winter, which delayed the growth of pastures for livestock feeding.”
The organization simultaneously analyzed world supply and demand for grains and slightly revised upward its estimate of production in 2012, which rose by nearly 3 million tons, and is 2 percent below the 2011 record.
“Global cereal production in 2013 could recover strongly unless adverse weather conditions prevail in major production regions,” FAO said in its latest cereal supply and demand report. The outlook for cereal crops is generally positive, with wheat already well advanced, and rice and coarse grain plantings expected to increase in the coming months due to attractive prices. Global wheat production in 2013 is also expected to increase by 4 percent to 690 million tons, which is the second largest output from the 700 million tons produced in 2011.