Aggregate Food Prices Helping To Bring Inflation Down

FAO global food prices were steady in November but were still down 10.7% y/y with each of the major categories down on the year, except sugar. Cereals and meat were lower on the month but sugar, dairy and oils were higher. The peak in food deflation occurred in June at -20.7% y/y. Some countries have faced pressures from higher prices of particular items, such as rice, but overall food prices have been putting downward pressure on the CPI in 2023.

• Cereal prices are down 19.4% y/y due to increased harvests for maize and wheat. Rice was stable due to offsetting price movements from different sources and types.
• Sugar prices rose 1.4% m/m to be up 41.1% y/y down from 46.6% in October but still very high. Dry conditions in Thailand and India, two major producers, has made markets nervous re adequate global supply. Shipping delays from Brazil also added to pressure but strong Brazilian output and lower oil prices should help reduce them going forward.
• The Reserve Bank of India governor Das cited sugar prices as an area the central bank was monitoring closely.
• Dairy prices rose for the second consecutive month but they remain down 16.9% y/y. Weakness in the sector has weighed on NZ’s export values. The outlook is improving with increasing demand from Northeast Asia and low stocks but supply in Australasia remains robust.
• Meat prices were down 2.4% y/y in November after -3.9%, as strong supply weighs on beef prices and soft Asian import demand on pork meat.
• Vegetable oils remain soft down 19.8% y/y but off the lows of -48.2% around mid-year.

Source: MNI - Market News/Refinitiv