ROME, ITALY — International food commodity prices continued to decline in August as ample supplies, a slump in energy prices and concerns over China's economic slowdown all contributed to the sharpest fall of the Food and Agriculture of the United Nations (FAO) Food Price Index in almost seven years.

The index averaged 155.7 points in August 2015, down 5.2% from July, the steepest monthly drop since December 2008, with virtually all major food commodities registering marked dips.

The trade-weighted FAO Food Price Index tracks international market prices for five major food commodity groups: cereals, meat, dairy products, vegetable oils and sugar.

In August, the cereal price index averaged 154.9 points, down 7% from July and 15.1% from last year – a decline driven by falling wheat and maize prices that reversed two consecutive months of modest increases. Continued improvements in production prospects for 2015-16 were largely behind the cereal price slides.

The vegetable oil price index averaged 134.9 points in August, down 8.6% from July, and its lowest level since March 2009. The fall primarily reflected a six-and-a-half year low in international palm oil prices, mainly the result of slowing import demand, notably by India and China, amid expectations of rising production.

Meanwhile, the latest FAO forecast for global cereal production in 2015 stands at 2.54 billion tonnes, 13.8 million tonnes more than expected in July, but still 21 million tonnes (0.8%) below the 2014 record. The upward revision resulted from more buoyant production prospects for coarse grains, wheat and rice.

A new FAO Cereal Supply and Demand Brief, also issued on Sept. 10, raises forecasts for global coarse grains output by 7.5 million tonnes to 1.311 billion tonnes. However, this remains 19.9 million tonnes (1.5%) short of the 2014 record. The upgrade from July was mostly driven by better than anticipated growing conditions in Argentina (maize), Brazil (maize) and the U.S. (maize and sorghum), which more than offset a drop in maize production in the E.U., where dry and hot weather dampened yield expectations.

As the harvest is nearing completion in the Northern Hemisphere, the global wheat production forecast for 2015 is becoming firmer, with 728 million tonnes now expected, 5 million tonnes more than previously foreseen.  The revision was driven by higher expectations for crops in Australia, the E.U., Russia and Ukraine, more than offsetting a lower production forecast for Canada, where major growing areas continued to be affected by dry conditions.

Prospects for world rice production (milled basis) have also improved since July 2015, albeit by only 1.3 million tonnes, mainly attributable to India, where plantings are progressing in line with last season in spite of the prevailing El Niño. Based on the current forecast of 501 million tonnes, global rice production would be 3.6 million tonnes (0.7%) greater than in 2014.

The FAO forecast for world cereal stocks by the close of the seasons in 2016 has been raised by almost 12 million tonnes since July, to 643 million tonnes, on account of more optimistic crop prospects, putting this season's ending inventories only 6 million tonnes (1%) below its record high opening level.

Read the full brief, here.