World food price index expected to fall for May

Wed Jun 6, 2012 10:01pm GMT
 

* Commodities hammered by economic gloom in May
    * Benchmark U.S. corn, soybean futures tumble in May
    * Wheat, soybeans down on physical markets in May -FAO data

    By Svetlana Kovalyova	
    MILAN, June 7 (Reuters) - World food prices are expected to
have fallen in May for a second month, easing inflation and food
security concerns, as intensifying worries about a slowing
global economy and euro zone debt led to a sell-off in grains
and other commodities.	
    The United Nations' Food and Agriculture Organisation (FAO)
will update its monthly Food Price Index on Thursday. It is also
due to update its outlook for crops.	
    The FAO index, which measures price changes for a basket of
cereals, oilseeds, dairy products, meat and sugar, fell in April
after rising in the first three months of 2012.	
    Improvement in the security of food supplies amid the
economic downturn was high on the agenda of a summit of leaders
of the G8 industrial powers last month. Last year record high
food prices in February contributed to the protests known as the
Arab Spring in the Middle East and North Africa.	
    In May, an improved outlook for crops in some major
producing countries, a strengthening U.S. dollar, which hits
competitiveness of dollar-denominated commodities, and growing
concerns about the debt crisis in Europe pushed prices down.	
    "We had a combination of generally better supply prospects,
stronger dollar and the problems in the European Union, which is
a huge market for almost all commodities," FAO senior economist
and grain analyst Abdolreza Abbassian said.	
    On the broad commodities markets, May was one of the worst
months since the 2008 financial crisis as growing fears over the
euro zone's debt problems and weak U.S. data crushed investor
risk appetite.	
    Economic gloom in Europe and fears about Greece's potential
exit from the common currency zone will keep the pressure on
prices, Abbassian said.	
    "There are real economic problems in Europe, and there are
no real solutions for them at this stage, which definitely sends
a negative sentiment to the market across the board," he said.	
    	
    The benchmark Thomson Reuters-Jefferies CRB index 
tumbled nearly 11 percent in May, the second-largest monthly
drop since the darkest days of 2008, stoking debate over whether
the decade-long bull market for raw materials may be winding
down.	
    Benchmark Chicago Board of Trade corn futures dropped more
than 12 percent in May as financial investors and others bailed
out of the market amid prospects for a record large crop. 	
    CBOT soybean futures fell 11 percent last month, weighed by
weak demand and as speculators cut their positions. Wheat fell
just 2 percent amid concerns over dry weather in the United
States and in exporting countries including Russia and France.	
    Crude oil tumbled into its biggest monthly loss since
December 2008 in May, cutting costs of food and inputs
transportation, output of fertilizers and farm machinery use.	
    On the physical markets, whose prices FAO uses to calculate
its food index, the average monthly price of U.S. wheat fell to
$276.25 a tonne in May from $279.50 a tonne in April, the FAO's
database showed.	
    U.S. soybeans fell 2.6 percent to $542.31 a tonne, while
corn edged 0.4 percent up to $274.30 a tonne, the database
showed.	
	
 (editing by Jane Baird)

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