World food prices rising in response to drought damage in the US

The monthly Food Price Index for July from the Food and Agriculture Organiztion of the United Nations (UN FAO), which covers a total of 55 food commodities, rose for the first time in four months. The index jumped by 6.1 percent to 213.15 points following record rallies in key crops like corn, soybeans, wheat and sugar. The severe drought in the US and other parts of the world especially played havoc with the two sub indices sugar and cereals.

The cereals sub-index rose by 17.1 percent followed by sugar which rose 11.7 percent. Only meat and dairy prices fell during the month.

The UN FAO wrote:

Cereals: The severe deterioration of corn crop prospects in the United States, following drought conditions and excessive heat during critical stages of the crop development, pushed up maize prices by almost 23 percent in July. International wheat quotations also surged (by 19 percent), amid a worsening of production prospects in the Russian Federation and expectations of a firm demand for wheat from the livestock sector for the second consecutive season because of tight maize supplies. By contrast, international rice prices remained mostly unchanged in July, with the FAO overall Rice Price index stable at 238, barely one point more than in June.

Sugar: The upturn was triggered by untimely rains in Brazil, the world’s largest sugar exporter, which hampered sugarcane harvesting in July. Concerns over delayed monsoon in India and poor precipitation in Australia also contributed to the price increase.