— This is the script of CNBC's news report for China's CCTV on June 4, 2021, Friday.
The latest readings of FAO Food Price Index show that prices of all five major groups of food went up past month, sitting at levels much higher than a year ago. Meat and dairy price increase were relatively moderate, up 1.5% and 2.2% month-on-month respectively. Vegetable oils, sugar, and cereals reported more significant monthly price gain, up 7.8%, 6.8%, and 6% respectively. And among major cereals, international maize prices rose the most, gaining 8.8% in May. The increase can be explained by demand rebound, logistic disruption due to pandemics, and dry weather. Brazil is now facing the worst dry spell not seen in almost a century, bringing pressure to the global supply of sugar and corn.
Raw material prices for beverages are rising as well. Coffee futures traded on the Intercontinental Exchange have gone up 20% since the start of the year. The prices are now at a five-year high, partly due to the drought in Brazil. Besides coffee, tea, another popular drink, is becoming more expensive. The Covid outbreak in India and local dry weather are pushing the price of tea higher. Local media reported that tea prices at domestic auctions in the first 4 months of this year have risen 47% from a year ago. This could weaken the competitiveness of Indian tea in the international market.
The rising food and drink prices bring about inflation risks. However, there are some positive signals in terms of food security. FAO expects the world cereal output in 2021 to reach 2.821 billion tonnes. This will be a new record high and the third successive year of moderate growth. As the population grows, consumption for 2021/22 will also rise to a new peak of 2.826 billion tonnes. With over 800 million tonnes of global cereal stock, food security is yet to be a concern.