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FAO’s forecast of global cereal production this year was trimmed by 1.2 million tonnes, bringing the new total to 2.593 billion tonnes.  File Photo: Bloomberg
FAO’s forecast of global cereal production this year was trimmed by 1.2 million tonnes, bringing the new total to 2.593 billion tonnes. File Photo: Bloomberg

Record butter, wheat surge puts food prices near 2-year high: FAO

Food and Agriculture Organization (FAO) said the world food prices rose 1.4% in June over the previous month and 7% over June of last year

London: Record butter prices, gains in meat and wheat’s drought-fuelled rally have pushed global food costs to near the highest in two years.

Limited export availability in the dairy market has made products including butter and cheese more expensive, while hot and dry weather in the US and Europe in the past month sent wheat futures surging. That helped a gauge of food prices rise by 1.4% in June, the United Nations’ Food & Agriculture Organization said in a report on Thursday.

“This is a month for wheat prices, and meat is firming up," Abdolreza Abbassian, a senior economist at the FAO in Rome, said by phone. “A lot of the increases in the dairy market come from the butter situation."

The FAO’s food index has rebounded 17% since touching a seven-year low in early 2016. The latest increase comes after worries the weather impact on crops in North America and western Europe sent wheat futures to multiyear highs. The meat market has also been hit by limited export supplies from some nations, as well as strong demand, and there have also been concerns about bird flu affecting poultry, the FAO said.

The organization’s food-price index rose to 175.2 points last month, near a two-year high set in February.

In a separate report, the FAO cut its estimate for this year’s wheat harvest by 0.4% to 739.9 million metric tons. Still, grain stockpiles will probably finish the 2017-18 season at a record high after bumper grain harvests from Russia to Australia.

“The wheat story is the interesting one," Abbassian said. “On the one hand, you have these huge supplies, but on the other hand there is a potential for tightening of high-quality wheat which has pushed up prices." Bloomberg

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