Food prices stable as UN predicts strong wheat output

World food prices stabilised in February near a seven-year low as rising vegetable oil and meat prices offset declines in cereals, sugar and dairy, the United Nations food agency stated.

Food prices have fallen for four straight years and remain under pressure from ample agricultural supply, a slowing global economy and a strengthening US dollar.

The Food and Agriculture Organisation’s (FAO) food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat and sugar, averaged 150.2 points in February against a revised 150.0 points the month before.

The flat result follows an almost 19% slide in 2015 and a further slump in January. Food on international markets in February was 14.5% cheaper than a year ago, the FAO said.

The FAO forecast world cereal output in 2015 would be 2.525 billion tonnes, down 6.3 million tonnes from its prior prediction, mainly due to lower wheat production estimates in India and Iran.

Making its first global production forecast for wheat in 2016, FAO estimate the year’s harvest will total 723 million tonnes, 10 million tonnes lower than the record hit in 2015.

World wheat output is expected to have reached 733 million tonnes in 2015-16 and world cereals ending stocks are forecast at 636.2 million tonnes, FAO said.

Any slowdown in trade, combined with already low prices, could weigh on the 2016 wheat output forecast, said FAO senior economist Abdolreza Abbassian. “It’s a matter of wait and see. Right now there is no great concern on the horizon,” he said.

The vegetable oil index was pushed up by palm oil prices, which leapt 13% on reports of falling inventories and a poor near-term production outlook. Soy oil prices also firmed.