ROME – Although international prices of many key food staples have dropped during the first five months of 2010, prices in the meat sector have risen sharply, primarily due to declines in production while consumption is increasing, according to the latest edition of the Food and Agriculture Organization of the United Nation’s (F.A.O.'s) biannual Food Outlook report just released.

The F.A.O. Food Price Index averaged 164 points in May, down from 174 points in January and substantially less than its peak of 214 in the spring of 2008, the report states. A decrease in international prices of cereals and sugar were among the main drivers behind this decline. Sugar prices have decreased by half from their peak at the beginning of the year under prospects of significant production increases.

But the cost of the typical food commodity basket around the world today is approximately 69% higher than in 2002-04.

Despite price decreases, the global cost of imported foodstuffs is set to reach $921 billion in 2010, some $100 billion — or 11% more than in 2009 — but still short of the record mark of $1 trillion set in 2008, when the food price crisis was at its peak. Much of the anticipated increase will be fuelled by higher expenditures on non-cereal products, which could rise by as much as 17%, to $650 billion, or around two-thirds of global food import expenditures, according to the F.A.O.

Dairy products, vegetable oils and sugar are among the foodstuffs expected to drive bills higher, through a combination of higher import volumes and prices. Expenditures on these imported commodities are forecast to surpass or near the record levels witnessed in 2008.

Rising freight costs are another factor spurring food import bills, according to the Food Outlook report. Indicators of freight rate movements are running around 75% higher so far this year compared to 2009.

Sugar prices have plummeted by half from their peak at the beginning of the year — they reached a 30-year high average of $583/tonne in January — under prospects of significant production increases. The drop for cereals has been more modest, around 10%, but the expectation of another good season ahead could put further downward pressure on prices.

Oilseed prices have so far resisted a major downturn, as demand remains strong and supply somewhat tighter than in the case of cereals. But early indications suggest that oilseed prices may decline in the coming months as supply responds to high prices to ease the current tightness.

The fish sector is benefiting from some revival in demand, but, especially, of limitations on supplies. The market for Atlantic salmon remains particularly tight because of unfavorable supply developments in Chile resulting from disease outbreaks in that country's aquaculture sector.

Poor prospects for milk production in important dairy exporting countries, against a backdrop of brisk import demand, are underpinning firm international dairy prices, the report concluded.