Global food prices fall 1% as supply prospects improve

Global food prices fell 1% in June due to improving supply prospects, the United Nations' food agency has said , raising forecasts for wheat and maize output in the new season.

Food prices spiked during the summer of 2012 due to a historic drought in the US but prospects for a rebound in global grain supply and good weather forecasts are now weighing on markets.

The Food and Agriculture Organisation's (FAO) price index that measures price changes for a basket of cereals, oil seeds, dairy, meat and sugar, fell for a second month running to 211.3 points in June – its lowest level since February.

"Crop prospects are even better than what we anticipated last month, while demand is subdued," said FAO senior economist Abdolreza Abbassian. "We should be in for a season with lower prices and as inventories are being rebuilt, especially for corn, prices should be more stable," he added.

FAO and the Agriculture Market Information System (Amis) raised their estimate for 2013/14 world wheat output by 2m tonnes to 704m tonnes, pointing to improving prospects in nearly all major producing countries with the exception of the US.

The organisations also raised their estimates for maize output in 2013/14 to 972m tonnes from a previous forecast of 963m tonnes in June.

The fall in FAO's index was driven above all by a 4% drop in dairy costs from high levels reached in April and May, and a 3% decline in sugar prices on the back of improved supply prospects.

Its cereal prices index fell about 1% while prices of edible oils reached a six-month low.

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