International food prices soared to around two-year highs during June, fueled by higher prices for wheat, meats and dairy products such as butter.
In fact, global meat prices have risen every month so far this year, and the gains have outpaced most other major food commodity groups, according to data released Thursday by a United Nations agency.
Analysts say stronger global demand for meat is helping to keep prices strong. Beef is one of the fastest-growing meat categories in Asia, and the U.S. last month returned to shipping supplies to the Chinese market for the first time in 13 years.
According to the U.N. Food and Agriculture Organization's Food Price Index, global food prices are up 7 percent from a year ago and ahead 17 percent from a low set in early 2016. The monthly index, which in June was up 1.3 percent from May, is a trade-weighted index which tracks prices of meats, dairy, sugar, cereals and vegetable oil in more than 80 countries.
The FAO Meat Price Index is up about 10 percent from a year ago and June rose nearly 2 percent, marking its seven straight month of gains. Year-to-date, the meat index is up about 12 percent and is ahead almost 21 percent from its low set in early 2016.
Australia has been a major exporter to China as well as to South Korea and Japan, but the opening of U.S. beef sales to China could make it a multibillion-dollar market to American producers within a few years. Beef demand in China has grown due to a rise in household incomes and a taste for more Western foods.
In the U.S. market, the barbecue-grilling season has helped spur demand and helped support recent prices for meats.
"We're getting a seasonal run up in some of the meat prices," said Bill Lapp, president at Advanced Economic Solutions in Omaha. "Supplies still appear ample to meet demand and that is probably going to lead to moderation in prices."
Lapp said the price of beef trimmings, which are added to ground beef to add more flavor to burgers, have been volatile in recent months. "Chicken breast is having its turn now as well," he said.
U.S. wholesale prices for chicken breast meat was elevated in June. Also, there were reports of large poultry producers in some international markets, including India, raising prices during the month.
Similarly, pork prices have been particularly strong, with U.S. lean hog futures closing out June at 2-1/2 year highs. Some experts were looking for the hog market to peak soon.
Global dairy prices also are finding support, leading to the FAO's Dairy Price Index soaring 8 percent in June alone. It is up more than 50 percent from a year ago and butter's continued resurgence is helping it stay elevated.
"Prices of all dairy products that constitute the index rose, but butter price increased the most," said FAO. It said butter prices rose 14.1 percent from May to an all-time high.
Added FAO, "Limited export availabilities of dairy products in all major producing countries caused the prices of butter, cheese and skim milk powder to rise significantly, contributing also to stronger whole milk powder prices."
"Butter prices are extremely high in the U.S. while cheese prices remain more stable," said Lapp, a former chief economist at ConAgra. New Zealand, which is also a major dairy producer, saw its butter prices rise sharply in June but not as high as the FAO's international index, while whole milk powder was weak.
Meantime, the FAO Cereals Price Index rose 4 percent last month from May levels, and is up about 8 percent so far this year and at one-year highs. Wheat price jumps more than offset softness in corn prices due to record harvests in South America.
"There are varieties of wheat that are short, like in Minneapolis [with the spring wheat]," said James Cordier, president and head trader at Optionsellers.com in Tampa, Florida. "But for the most part, [for] corn, soybeans and wheat there's plenty of supply to go around and only an absolute disastrous crop would support prices higher than where they are now."
Global wheat price increases in June were due to yield concerns from a worsening drought in U.S. and Canadian regions growing high-protein spring wheat crop. The drought is in the Dakotas, Montana as well as Canada's prairie provinces of Alberta and Saskatchewan.
The high-protein spring wheat is used in artisan wheat foods such as hearth breads, rolls and pizza crust.
Minneapolis-traded soft red winter wheat futures rose more than 30 percent last month to a three-high year and the Chicago-traded winter wheat futures were up about 16 percent. Both sold off on Thursday as traders looked to take profits and ignored the new U.S. Drought Report issued in the morning that showed expanded areas with "extreme drought" conditions.
The Chicago-traded December winter wheat futures settled at $5.612 a bushel Thursday, down 18.2 cents. Cordier believes the winter wheat has more downside, predicting the Chicago variety will go back down to $5.40 to $5.50 per bushel in the short term.
On the Minneapolis Grain Exchange, the September contract for hard red spring wheat closed down 6.2 percent.
"Wheat captured the headlines, so it's been the leader per se," Cordier said. "But 30 days from now everyone will be watching corn and soybeans. They won't be watching wheat so close."