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United Nations: Food commodity prices hold steady in September
Published in SUNS #8991 dated 7 October 2019

Geneva, 4 Oct (Kanaga Raja) – The international prices of a basket of key agricultural food commodities held steady in September, with falling sugar prices being offset by higher prices for vegetable oils and meat, the UN Food and Agriculture Organisation (FAO) has reported.

According to FAO, its Food Price Index (FFPI) averaged nearly 170 points in September 2019, unchanged from August but 3.3 percent higher than in the corresponding period last year.

While sugar prices fell sharply in September, the decline was almost entirely offset by higher prices of vegetable oils and meat, 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 157.6 points in September, nearly identical to its August average and down 3.9 percent (6.4 points) from September 2018.

However, among the major cereals, prices moved in different directions, it said.

Wheat prices were firmer in September amid brisk trade activity, though they remained well below (by 11 percent) the same time last year, pressured by the overall good supply outlook.

In contrast, maize price quotations were down month-on-month, as international prices continued to slide because of large export availabilities in both southern and northern hemisphere exporting countries.

International rice prices were steady to mildly lower in September, as the support provided by seasonal tightness and currency movements was countered by slow import demand and uncertainties surrounding policies in the Philippines and Nigeria.

The FAO Vegetable Oil Price Index averaged 135.7 points in September, up 1.8 points (or 1.4 percent) from August, marking the highest level in 13 months, said FAO.

It attributed the modest increase mostly to higher price quotations for palm and rapeseed oils, whereas those for soy and sunflower oil fell month-on-month.

While international palm oil values rose on steady import demand from India and China, rapeseed oil price quotations continued to increase, fuelled by the EU’s deteriorating production outlook amid firm demand from the biodiesel sector.

In addition, rising crude mineral oil prices lent support to vegetable oil values.

In contrast, soy and sunflower oil prices dropped on account, respectively, of sluggish global import demand and prospects of large supplies in the Black Sea region.

According to FAO, its Dairy Price Index averaged 193.4 points in September, down 0.6 percent (1.1 points) from the previous month but still 1.3 percent higher than its value in the corresponding month last year.

In September, price quotations for cheese and butter fell, especially at the lower end of the price range.

Moderate increases in export availabilities, principally in New Zealand, where milk production is nearing the seasonal peak, contributed to the decline.

In contrast, Skim Milk Powder (SMP) and Whole Milk Powder (WMP) price quotations firmed on strong import demand amid limited export availabilities, especially in Europe.

The FAO Meat Price Index averaged 181.5 points in September, up 0.8 percent (1.4 points) from August, continuing the moderate month-on-month price increases observed since February 2019.

In September, price quotations for ovine (lamb and mutton) and bovine meats continued to firm on solid import demand, especially from China, despite elevated export availabilities in Oceania.

In contrast, while domestic pigmeat prices in China – the world’s largest market – remained at the high levels recorded in the previous month, pigmeat prices in international markets tended lower, pressured by increased export supplies in Europe.

Price quotations for poultry meat remained stable, as export availabilities were adequate to meet import demand.

The FAO Sugar Price Index averaged 168.0 points in September, down nearly 6.8 points (3.9 percent) from August.

The month-on-month decline was largely driven by the expectation of ample sugar stocks due to positive production prospects for the upcoming 2019/20 marketing season, said FAO.

Furthermore, weaker international energy prices in the second half of September contributed to the decline in international sugar prices by encouraging producers to reduce the use of sugarcane for the production of ethanol, notably in Brazil, the world’s largest sugar exporter, said FAO.

LOWER FORECAST FOR CEREAL PRODUCTION

Meanwhile, in its latest Cereal Supply and Demand Brief, FAO lowered its forecast for global cereal production in 2019 by 2.2 million tonnes, pegging the world cereal output at 2,706 million tonnes, but still up 53 million tonnes (2.0 percent) from the out-turn in 2018.

The latest cut emanates mostly from reduced prospects for global rice and wheat outputs, which outweighed a bigger production forecast for coarse grains, it said.

Global wheat production is pegged at 766 million tonnes, down nearly 1 million tonnes from last month’s forecast, though still a record high.

The reduction reflects a cut to Australia’s production forecast on account of continued dryness in eastern regions.

However, this decline more than offset an upward revision to the production estimate for the European Union, where recent field data indicate better than previously anticipated yields.

FAO has forecast global rice production (milled equivalent) at 513.5 million tonnes, down 3.8 million tonnes from the previous report and just 0.8 percent below the high output level registered in 2018.

India accounts for the bulk of the month-on-month downward revision, as a series of weather setbacks caused planting delays leading to expectations that farmers would plant less than previously anticipated.

Production prospects also deteriorated in the United States, where excess rains are now estimated to have triggered more pronounced area cuts than earlier envisaged.

Similarly, in the Philippines and China, recent reports indicate a lower area planted in 2019, resulting in a small downgrade of the production forecasts for these countries.

In contrast, production outlooks improved in Colombia and Madagascar, where crops have already been harvested and official estimates indicate better than previously anticipated yields.

FAO has forecast world coarse grains production at 1,427 million tonnes in 2019, up 2.5 million tonnes from the previous report issued in September.

It said the more buoyant expectations mostly rest on an improved outlook for global barley production, while the overall positive prospects for the world maize output were further reinforced following a lifting of the production estimate for Brazil, where the major second season harvest is nearing completion.

Additionally, the forecast for maize production in the United States has been raised on larger-than-expected plantings.

However, an equivalent cut in the forecast for the European Union’s production negated any impact on the global outlook.

Looking further ahead, planting of the 2020 wheat crop in the Northern Hemisphere is already underway, said FAO.

In the Russian Federation, early indications point to an area expansion, which would support the short-term trend underpinned by government policies that seek to boost exports.

In contrast, dry weather conditions have curtailed planting expectations in Ukraine.

For coarse grains, the 2020 crops are being planted in southern hemisphere countries, with harvesting expected to commence in the first quarter of next year.

In Brazil, following a record output in 2019, plantings of the first season crops are progressing under mostly favourable weather conditions and an increase in the minimum producer price for maize, set by the government, could prompt an area expansion.

In South Africa, higher year-on-year prices and tighter domestic supplies could instigate an increase in the sown area and result in a production rebound in 2020.

FAO has forecast world cereal utilization in 2019/20 at 2,714 million tonnes, down 1.7 million tonnes from September, but still 34 million tonnes (1.3 percent) higher than in 2018/19 and marking a record high.

The forecast for total wheat utilization has been raised by 1.5 million tonnes since the previous report to 761.5 million tonnes, which is also a record exceeding by 2.0 percent the 2018/19 estimated level.

Total utilization of coarse grains in 2019/20 is forecast at 1,436 million tonnes, down marginally from the September report but still a record high, up 1.0 percent (14 million tonnes) from 2018/19.

FAO has forecast world rice utilization in 2019/20 at 516 million tonnes, down 2.3 million tonnes from September due to less buoyant domestic use prospects for Asia.

Nonetheless, at this level, global utilization of rice would still exceed the 2018/19 record high by 1.1 percent, driven by expanding food intake.

It said the forecast for world cereal stocks by the close of the 2020 seasons has been raised by 2.4 million tonnes since the previous month to 850 million tonnes, but still down 17 million tonnes (2.0 percent) from their opening levels.

Among the major cereals, global wheat inventories are anticipated to register a 1.6 percent (4.2 million tonnes) increase from their record high opening level to total 273 million tonnes – the second highest on record.

The increase is expected to be concentrated in Asia, in particular in China and, to a lesser extent, India, more than offsetting anticipated declines in several major exporting countries.

In contrast, despite this month’s higher forecast of ending stocks in the United States, world maize inventories are still foreseen to register a significant decline in 2019/20, falling by as much as 7 percent (25 million tonnes) from their relatively high opening levels to a 4-year low of 337 million tonnes.

This is mostly because of a predicted sharp drop in maize stocks in China, making up almost 70 percent of the year-on-year projected decrease.

Global rice stocks at the close of 2019/20 are pegged at 179 million tonnes, up 800,000 tonnes from previous expectations, but still 1.9 percent below the all-time high of 183 million tonnes in 2018/2019.

According to FAO, this month’s adjustments mostly stem from upward revisions to carry-overs in India, where record-breaking local procurement during the 2018/19 season is likely to result in larger than previously anticipated public inventories.

These increases outweighed reductions to stock forecasts mainly for China and the United States, it said.

FAO has forecast world trade in cereals in 2019/20 at around 415 million tonnes, unchanged from last month and 0.7 percent (almost 3 million tonnes) above the 2018/19 level, with expectations of higher wheat, rice and barley trade just marginally offsetting lower maize and sorghum trade.

World wheat exports in 2019/20 (July/June) are set to rebound by 3.4 percent (5.7 million tonnes) to reach 173.5 million tonnes, mostly because of stronger import demand in Morocco and Asian countries.

To meet this increase, several countries are forecast to raise their sales in 2019/20, in particular Argentina, the EU and Ukraine.

On the other hand, shipments from Kazakhstan and the Russian Federation will most likely decrease, largely because of tighter domestic supplies than in the previous year, although the Russian Federation would remain the world’s largest wheat exporter also in 2019/20.

Following an 800,000 tonne downward revision since September, world rice trade in 2020 (January-December) is now forecast to amount to 48 million tonnes, up 3.5 percent from the 2019 level, with much of the expected recovery imputable to strong African import demand.

For coarse grains, however, even with this month’s small upward revision, trade in 2019/20 (July/June) is foreseen heading to an annual decline of 2.2 percent (4.4 million tonnes), with expected lower maize imports by the EU, China and Canada accounting for most of the decline.

FAO has pegged total maize trade in 2019/20 at around 161 million tonnes. While down by over 4 million tonnes from the peak registered in 2018/19, it would still be the second highest on record.

From the maize exporters’ perspective, shipments from the United States and Ukraine are foreseen to fall sharply, while sales from Argentina and Brazil could attain near-record, if not record, levels, said FAO.

 


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