Dairy pushes FAO food price up 1% in March

The average for last year was 212‚ which was 7% lower than the 2011 average.

The March monthly increase was driven mainly by an 11% increase in dairy product prices caused in part by a drought in New Zealand.

Dairy products carry a 17% weight among the various commodity prices included in the calculation of the overall index.

The global cereal supply and demand situation was slightly revised with the 2012 crop production estimate upwardly revised by nearly 3-million tons‚ which now stands 2% lower than the record set in 2011.

The dairy prices used in the index calculation are based on exports from New Zealand‚ as it is the world's largest dairy exporter‚ accounting for about one-third of global trade. Export prices for dairy products have also risen for other important exporters‚ such as the European Union and the US‚ but not to the same degree.

"The exceptional increase is in part a reflection of market uncertainty as buyers seek alternative sources of supply. In addition‚ dairy output in Europe has yet to come fully online after a particularly cold winter‚ which has delayed pasture growth to feed dairy animals‚" the FAO said.

The FAO Cereal Price Index averaged 244 points‚ unchanged from February. While maize prices increased last month on a fall in exportable supplies from the United States‚ lower wheat prices on prospects of a good world harvest offset those increases. Global rice prices remained stable.

The FAO Oils/Fats Price Index fell 2.5% from February‚ due mostly to soy oil prices‚ which dropped on account of favourable weather conditions in South America‚ a record 2013 US soybean crop and a cancellation of purchases by China. Palm oil prices were also slightly down.

The FAO Meat Price Index averaged nearly 176 points in March‚ down 2% from February. The FAO Sugar Price Index edged up by 1% m/m.

The FAO price index peaked at 237.9 in February 2011 and its decline since then allowed many central banks to reduce interest rates in 2012.

The South African Reserve Bank cut its benchmark lending rate‚ the repo rate‚ by 50 basis points to 5.0% in July last year.