Lower ethanol prices in Brazil weighed on global sugar prices in June, highlighting the growing influence of the biofuel market on international sugar trade, according to the latest Food and Agriculture Organization (FAO) Food Price Index.
The FAO said its Sugar Price Index fell 5.7% from May, with the decline mainly driven by lower domestic ethanol prices in Brazil and the depreciation of the Brazilian real. However, concerns over the possible impact of El Niño on sugar production in India and Thailand prevented a steeper fall in global sugar prices.
The report also showed that weaker ethanol demand contributed to a decline in international maize prices. The FAO Cereal Price Index fell 3.5% from May, with world maize prices dropping 6.2% amid expectations of abundant supplies from South America and reduced demand from the ethanol sector.
Overall, the FAO Food Price Index averaged 130.3 points in June, down 0.3% from the previous month, as lower prices for cereals, sugar and dairy products outweighed gains in vegetable oils and meat.
In contrast, the FAO Vegetable Oil Price Index rose 3.8% during the month, supported by stronger mandated biofuel demand, which boosted international palm and rapeseed oil prices.
FAO said global food commodity markets continue to respond differently to changing market conditions, underlining the increasing role of biofuel demand in influencing agricultural commodity prices alongside weather conditions, currency movements and global supply trends.
