Food prices near four-year low as milk to cooking oils fall

Food prices fell to the lowest in almost four years in August as costs of milk, cheese and cooking oils tumbled on signs of rising production.

An index of 55 food items dropped 3.6 percent to 196.6 points, the lowest since September 2010, the United Nation's Rome-based Food & Agriculture Organization said in an online report today. The agency's gauge of dairy prices slumped 11 percent and the vegetable-oil price index declined 8 percent to the lowest since November 2009, the FAO said.

Cotton, soybeans, corn and wheat prices fell into bear markets this year as farmers in the U.S., the largest grain grower, prepare to collect what the government predicts will be record harvests. In the past three years, all agricultural values on the Bloomberg Commodity Index other than cattle and hogs have declined, led by corn, soybean oil and sugar.

"I don't think we've seen the bottom yet," Abdolreza Abbassian, a senior economist at the FAO, wrote in an e-mailed reply to questions. "Grains could fall further."

The food index is down 3.9 percent from a year earlier, lead by a 19 percent drop for dairy values and a 12 percent slide for the FAO's grain-price index.

The FAO's dairy index declined to 200.8 points last month from 226.1 points in July. A trend of falling prices was further exacerbated by Russia's ban last month on EU dairy imports, the UN agency said. Dutch spot prices for skimmed milk powder fell 22 percent last month, the biggest monthly drop since at least 2004, while prices for butter from France slumped 19 percent.

Vegetable Oils

The vegetable-oil index slipped to 166.6 points from 181.1 points amid an improved outlook for palm-oil production in Southeast Asia and lower-than-forecast import demand from China and India, according to the FAO. Malaysia palm oil futures retreated 15 percent last month, the most since September 2012.

The FAO cereal price index fell 1.5 percent to 182.5 points in August. Corn, soybeans and wheat futures are trading near the lowest level since 2010 in Chicago as production is expected to outpace consumption, padding stockpiles. The U.S. Department of Agriculture may forecast later today that corn and soybean harvests in the U.S., the top grower, will climb to a record, according to a Bloomberg News survey.

Sugar prices declined 5.7 percent on improved production prospects in India. A gauge of meat costs rose 1.2 percent to 207.3 points, the highest on record dating to 1990, boosted by rising beef prices in Australia, according to the report.