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December gains drive FAO Food Price Index to three-year high

Food prices, as reflected in the FAO Food Price Index, rose to a three-year high in 2020. While the Index closed the year 3.1 percent higher than 2019, however, it remained well below the peak seen in 2011.

In addition to this year-on-year increase, the December Food Price Index also showed a rise of 2.2 percent from November.  This marked the seventh straight monthly increase in food prices.

The Cereals Price Index rose for the sixth straight month in December, up by 1.1 percent from the previous month. Tightening supplies, potentially negative growing conditions in several regions, and the announcement of an export quota from Russia combined to drive up wheat prices. Maize prices also rose as a result of concerns over crop forecasts in South America, combined with spillover effects from spiking soybean prices. Decreased supplies and increased purchases drove up global rice prices.

Overall in 2020, the Cereal Price Index rose by 6.6 percent from the previous year, the highest annual average seen since 2014. Wheat and maize prices rose by 5.6 and 7.6 percent, respectively, due to reduced supplies and strong demand. Rice prices rose 8.6 percent from 2019; this six-year high was driven by falling production in several exporting countries, as well as temporary export restrictions enacted by some countries in the face of the COVID-19 pandemic.

The Vegetable Oil Index gained 4.7 percent in December to reach the highest level since 2012. Palm oil contributed most strongly to the increase, with tightening supplies and increased Indonesian export duties driving prices up for the seventh consecutive month. Soybean oil prices also reached a seven-year high due to reduced exports from Argentina. For 2020 overall, the Vegetable Oil Price Index rose 19.1 percent from 2019; this sharp increase marks the highest annual average in three years.

The Dairy and Meat Prices Indices also both rose month-on-month (3.2 percent and 1.7 percent, respectively) in December but declined from their 2019 levels, by 1 percent and 11.6 percent, respectively. In contrast, the Sugar Price Index fell slightly by 0.5 percent month-on-month but rose by 1.1 percent overall from its 2019 levels.