Cereals drive world food prices; butter price at new high

By Gill Hyslop

- Last updated on GMT

The bakery industry will need to know which side its bread is buttered on in order to overcome the rising costs of wheat and butter. Pic: ©iStock/arissanjaya
The bakery industry will need to know which side its bread is buttered on in order to overcome the rising costs of wheat and butter. Pic: ©iStock/arissanjaya

Related tags Milk Food and agriculture organization Fao

Globally, food was 10.2% more expensive in July 2017 than last year and the highest it has been since 2014, said the United Nation’s food agency.

World food prices rose for the third successive month - by 2.3% from June to July - mainly driven by higher values for cereals, sugar and dairy.

The Food Price Index, compiled by the UN’s Food and Agriculture Organization (FOA), hit 179.1 points last month, the highest since December 2014, and a gain of 2.2% month-on-month.

The index has now recovered 20% from a low reached early last year.

According to the FAO, the price hike was caused by a combination of supply constraints and currency movements that provided support to prices of most cereals, sugar and dairy.

Cereal: two-year high

The FAO Cereal Price Index was up 5.1% month-on-month, hitting a two-year high.

“Wheat values rose the most in July, as continued hot and dry weather conditions hampered spring wheat crops in North America … and fuelling quality concerns, particularly for higher protein wheat … while seasonal tightness pushed up rice prices,”​ FAO said in a press statement.

Conversely, corn values remained largely steady, as support provided by a more rapid pace of foreign purchases by China was outweighed by improved weather conditions in the US.

Butter shortage looms

Sugar prices rose by 5.2%, the first increase since the beginning of the year; and dairy values gained 3.6% to hit their highest in three years.

"Tighter export availabilities pushed butter prices to a new high in July, [further] widening the spread between butter quotations and other dairy products,"​ FAO said in a press statement.

The FAO reported that butter prices rose 14% last month because of higher demand for the fat and lower dairy exports from major producers.

Spot prices for butterfat in western Europe have reached $7,212.50 per ton.

The rising butter price is continuing to stir up panic in the baked goods industry​, particularly following statements from dairy industry leaders like Peder Tuborgh, CEO of Arla, who has warned the UK could be facing a butter shortage by Christmas.

According to the US Department of Agriculture, global consumption is expected to rise 3.1% to a record 9.7m tons, outstripping the 2.5% rise in production.

Europeans are also eating so much butter that stockpiles are nearly empty. In its monthly report, the USDA said one measure of reserves had plunged 99% from a year ago.

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