Nations: Food commodity prices begin new year on buoyant note
Geneva, 8 Feb (Kanaga Raja) – The international prices of a basket of key agricultural food commodities rose in January 2019, driven by a sharp rebound in dairy price quotations and firmer prices for palm and soy oils, the Food an d Agriculture Organisation of the United Nations (FAO) has reported.
According to FAO, its latest Food Price Index (FFPI) averaged 164.8 points in January 2019, up almost 3 points (1.8 percent) from December 2018 but still 3.7 points (2.2 percent) below the corresponding month last year.
After three successive months of relatively stable levels, the increase in January was largely driven by a sharp rebound in dairy price quotations as well as firmer prices of vegetable oils and sugar, said FAO.
The FAO Food Price Index is a trade-weighted index that tracks the monthly change in the international prices of a basket of key food commodities.
According to FAO, its Cereal Price Index averaged 168.1 points in January, up marginally from December and almost 11.5 points (7.3 percent) above its level in January 2018.
Except for rice, the prices of other major cereals remained generally firm, supported by the decline in global production in 2018, tightening export supplies and robust world demand.
However, FAO said that January was a particularly quiet month for wheat and maize markets, in part due to the absence of several key reports in the United States on account of the US Government shutdown.
Nonetheless, grain prices were up during the month, with maize values rising the most, in reaction to adverse weather conditions in South America.
International rice prices also increased, primarily owing to upbeat demand for Japonica supplies and a firmer Thai Baht.
According to FAO, its Vegetable Oil Price Index averaged 131.2 points in January, rising 5.4 points (or 4.3 percent) from the previous month and marking the second consecutive increase after a protracted fall.
“The rise mainly reflects additional gains in palm oil values, underpinned by a seasonal decline of production in the major producing countries and a firm global import demand.”
International soy oil prices also rose, largely reflecting robust demand for South American supplies.
Meanwhile, FAO’s Meat Price Index averaged 162.9 points in January, almost unchanged from December 2018.
“In view of the non-availability of data from official sources in the Unite d States because of the Government shutdown, the January value of the Index was calculated assuming stable prices for meat products in the United States,” FAO explained.
Elsewhere, international price quotations for bovine, pig and poultry meat remained steady.
However, ovine meat (lamb and mutton) prices declined by as much as 8.4 percent month-on-month, pressured by ample exportable supplies in Oceania.
The FAO Dairy Price Index averaged 182.1 points in January, up 12.2 points (7.2 percent) from December 2018.
The sharp rebound followed seven months of falling prices, FAO noted.
All dairy products represented in the index registered higher prices in January, with Skim Milk Powder (SMP) quotations rising by as much as 16.5 percent month-on-month.
“The sharp increase resulted from limited export supplies from Europe, due to strong internal demand, and expectations of a seasonal tightening of export availability from Oceania in the coming months.”
FAO’s Sugar Price Index averaged 181.9 points in January 2019, up 2.4 point s (1.3 percent) from December 2018.
According to FAO, international sugar prices were largely influenced by movements in the Brazilian currency (Real), which gained strength against the US dollar.
A stronger Real supports sugar prices because it limits the supply of Brazilian sugar to the world market, as domestic producers process sugarcane into ethanol for local sale.
Firmer crude oil prices lent further support to international sugar price quotations, said FAO.
RISE IN CEREAL PRODUCTION
Meanwhile, in its latest Cereal Supply and Demand Brief, FAO has forecast world cereal production at 2,611 million tonnes for 2018, marginally higher than its estimate last December, reflecting upward revisions made for maize, wheat and rice.
FAO has forecast global rice production to grow by 1.6 percent to 514 million tonnes, 1.2 million tonnes higher than previously forecast. It attributed most of the revision to yield-driven improvements in China.
Also, greater than previously expected plantings have raised production estimates for Pakistan, while losses from Tropical Storm Usbam and expectations of dryer weather led to a production forecast cut for the Philippines.
Despite this month’s upward revisions, global cereal production still remains 1.8 percent (47.4 million tonnes) below the record high of 2017.
“With the bulk of the winter wheat crop in dormancy in the Northern Hemisphere, the early outlook portends a rebound in production, although the output is still expected to fall short of 2017’s record high”.
FAO said that much of the projected growth is associated with expected increases in Europe, where beneficial weather has so far shored up yield prospects while also sowings are forecast to expand, largely driven by attractive prices.
The FAO has forecast the biggest year-on-year production increases for the EU, the Russian Federation and Ukraine.
In North America, excessive wet weather in the leading winter wheat growing regions of the United States is expected to offset the positive impact of firmer prices, resulting in only a marginal expansion in the area sown. However, assuming average yields, production is still forecast to increase this year.
In Canada, total wheat production is also projected to rise, resting on a price-induced expansion in spring wheat plantings expected to more than offset reduced winter sowings.
In Asia, favourable weather has lifted production prospects in India, with the output foreseen to increase despite a contraction in sowings, while in Pakistan, diminished water availability has dampened the country’s production outlook, further affected by an estimated contraction in the sown area.
In the Southern Hemisphere, harvesting of the 2019 summer cereal crops, predominantly coarse grains, is expected to begin in the coming months, FAO noted.
In South America, the production outlook points to increases in Argentina and Brazil, owing to higher plantings and good crop conditions.
By contrast, in South Africa, dry weather has adversely affected maize plantings and impaired yield prospects, with the output forecast to decline, while in neighbouring Southern African countries, harvests are expected close to average levels.
FAO has forecast world cereal utilization in 2018/19 at 2,657 million tonnes, up 45 million tonnes (1.7 percent) from 2017/18 and 8 million tonnes above the December forecast.
The increase from December reflects upward adjustments made to the feed use of wheat (mostly in Australia) and the industrial use of coarse grains, predominantly maize and barley, it said.
FAO has forecast global wheat utilization to reach almost 743 million tonnes in 2018/19, up 3 million tonnes from December and 5.6 million tonnes (0.8 percent) above the estimated level in 2017/18.
It said the increase is concentrated in more wheat used for animal feed, especially in Australia where dry weather conditions have reduced grazing area and necessitated the use of wheat to feed livestock.
Elsewhere, an expected slight increase is the feed use of wheat in the European Union is more than offset by a reduction in the Russian Federation where, reportedly, poultry producers are switching to maize for feed.
FAO has raised its forecast for total utilization of coarse grains in 2018/ 19 to 1,405 million tonnes, 4.7 million tonnes higher than in December.
At this level, it said, world utilization of coarse grains would be some 34 million tonnes (2.5 percent) above the estimated level in 2017/18, with feed use reaching an all-time high of almost 786 million tonnes, up 2.7 percent from the estimated level in 2017/18, with the largest yearly increases projected for China, Mexico and the United States.
Global rice utilization in 2018/19 is pegged at 509 million tonnes, representing an annual expansion of 1.1 percent, sustained primarily by greater levels of food consumption in Asia and Africa, it said.
Meanwhile, world cereal stocks are projected to fall by 45 million tonnes ( 5.6 percent) from their record high opening levels to 772 million tonnes – some 10 million tonnes above the December forecast.
At this level, the world stocks-to-use ratio of cereals would remain relatively comfortable at 28.5 percent, albeit down slightly from the 2017/18 level of 30.8 percent, the highest since 2000/01.
The FAO’s forecast for wheat inventories (ending in 2019) has been revised up by 2.4 million tonnes since December, reflecting upward adjustments in Canada, the Russian Federation and the United States.
Wheat stocks are now set to reach almost 267 million tonnes, still down 10 million tonnes from their opening levels, as drawdowns in several countries more than offset further build-ups in China.
World rice stocks at the close of 2018/19 are anticipated to reach 178 million tonnes, 2.9 percent higher year- on-year, driven mainly by larger carry-overs in China, India, Indonesia, and the Philippines.
FAO has forecast international trade in all cereals to approach 416 million tonnes in 2018/19, a fall of 5.7 million tonnes (1.4 percent) from the previous season’s record volume. Trade in all the major cereals, except for maize, is seen to contract in 2018/19.
World wheat trade in 2018/19 (July/June) is pegged at 171.8 million tonnes, slightly lower than the December forecast but down 4.4 million tonnes (2.5 percent) from 2017/18.
The decline from the previous season reflects expectations of smaller purchases by Algeria, India, Morocco, South Africa, Turkey and the United States, more than offsetting higher imports by the EU and several Asian countries.
Global trade in coarse grains in 2018/19 (July/June) is forecast at 196.4 million tonnes, down marginally from December and now almost unchanged from the previous year’s level with increased exports of maize offsetting slow-downs in the trade of both barley and sorghum, said FAO.
It has forecast maize trade in 2018/19 at almost 159 million tonnes, 2.3 percent (3.5 million tonnes) higher than in 2017/18, with the year-on-year increase resulting from expected larger purchases by Iran, Mexico and Saudi Arabia, but above all by the EU as maize prices remain competitive compared to other feed grains.
Barley trade in 2018/19 is expected to fall to 28.1 million tonnes and sorghum trade to 5.4 million tonnes – its lowest level since 2006/07 – both on lower import prospects by China, said FAO.