commodity prices fall amidst rising trade tensions
Published in SUNS #8720 dated 12 July 2018
Geneva, 11 Jul (Kanaga Raja) - The international prices of a basket
of key agricultural food commodities fell in June, representing the
first month-on-month decline since the beginning of this year, the
United Nations Food and Agriculture Organisation (FAO) has said.
According to FAO, its Food Price Index averaged 173.7 points in June
2018, down 2.4 points (1.3 percent) from its level in May.
The decline was driven primarily by lower benchmark price quotations
for wheat, maize and vegetable oils including those made from soybeans,
"Most markets have generally taken on a weaker tone recently
largely because of rising tensions in international trade relations,"
FAO pointed out.
The FAO Food Price Index is a trade-weighted index that tracks the
monthly change in international prices of a basket of key food commodities.
The FAO Cereal Price Index averaged 166.2 points in June, down 6.4
points ( 3.7 percent) from May but still nearly 8 percent higher than
its level in the corresponding period last year.
According to FAO, the decline in June was driven by relatively sharp
falls in maize and wheat quotations. On the other hand, rice prices
saw an increase.
"Despite overall worsening production prospects, wheat and maize
prices fell in June, following similar trends observed across most
commodities arising from heightened trade tensions," it said.
In contrast, international rice prices increased, as supply tightness
under pinned higher quotations of Japonica and fragrant rice, outweighing
declines in Indica prices.
The FAO Vegetable Oil Price Index averaged 146.1 points in June, down
4.5 points (3 percent) from May, marking its fifth consecutive fall
and a 29-month low.
FAO attributed the fall to lower quotations for palm, soybean and
The continued slide in palm oil prices reflects lack lustre global
demand as well as spill-over weakness from the soybean complex fuelled
by the recent trade tensions, it said.
With regards to soy oil, FAO said that further stock accumulations
in several countries also weighed on prices, whereas sunflower oil
quotations declined on higher-than-expected production, notably in
the European Union and Ukraine.
Heightened trade tensions between the United States and its trading
partners, particularly China, weighed particularly hard on the US
origin export prices, led by soybeans, with the strength of the dollar
exerting further downward pressure, said FAO.
The FAO Dairy Price Index averaged 213.2 points in June, down 2 points
(0.9 percent) from May but still 2 percent higher than the corresponding
month last year.
The decline in June was driven by lower price quotations for cheese,
more than offsetting a rise in Skim Milk Powder (SMP) prices, while
those of butter and Whole Milk Powder (WMP) remained steady.
"Increased export availabilities in the United States and the
EU weighed on price quotations for cheese, whereas persistent import
demand provided support to the prices of SMP. Butter and WMP quotations
rose in Europe, but fell slightly in Oceania."
The FAO Meat Price Index averaged 169.8 points in June, up marginally
(0.3 percent) from May but still down 3.3 percent from June 2017.
The small month-on-month increase was largely driven by an upswing
in ovine meat (lamb and mutton) values as well as a small rise in
pigmeat prices. On the other hand, bovine and poultry price quotations
According to FAO, the higher ovine meat prices were due to solid import
demand, amid weak offerings from Oceania, while higher pigmeat prices
were driven by firm demand, especially in Europe.
Large export supplies from Australia underpinned the decrease in bovine
prices. Ample export availabilities, especially from Brazil, amid
weak import demand, pushed down poultry prices, it said.
The FAO Sugar Price Index averaged 177.4 points in June, up 2.1 points
(1.2 percent) from May. This marked the first increase after six months
of consecutive declines, said FAO.
The rise in sugar prices was due mostly to worries over sugar production
prospects in Brazil, the world's largest sugar producing and exporting
country, as dry weather conditions continued to negatively affect
Reports indicating higher use of sugarcane for the production of fuel
ethanol in Brazil had also lent support to international sugar prices.
Meanwhile, in its latest Cereal Supply and Demand Brief, FAO said
the latest indications continue to point to a reduction in cereal
output in 2018 and negative prospects for the cereal supply outlook
for the forthcoming 2018/19 marketing season.
Based on the condition of crops already in the ground and assuming
normal weather for the remainder of the 2018 cropping seasons, FAO
has forecast world cereal output this year at 2,586 million tonnes
(including rice in milled terms), 64.5 million tonnes (2.4 percent)
less than the record output in 2017.
The year-on-year decrease mostly reflects anticipated reduced maize
output, while a predicted decline in the 2018 wheat production also
weighs on global prospects.
On the other hand, rice output is seen expanding to fresh peaks in
The latest forecast for cereals is down nearly 24 million tonnes than
that projected by FAO last month, mainly on lower than previously
anticipated projections for wheat production in the EU as well as
wheat, maize and barley production in the Russian Federation and Ukraine.
FAO has forecast world cereal utilization at 2,641 million tonnes,
26.5 million tonnes (1.0 percent) higher than in 2017/18.
Total utilization of all major cereals is likely to continue growing
in 201 8/19, keeping pace with rising food demand, while overall feed
and industrial uses are also likely to expand further, it said.
If current production forecasts materialize, cereal output would not
be sufficient to meet the expected total utilization requirements
in 2018/19 and, as a result, global cereal stocks accumulated over
the past five seasons would have to be drawn down to 749 million tonnes,
over 7 percent down from their opening levels.
FAO said that at the current levels of utilization and stock forecasts,
the stock-to-use ratio would drop from 30.6 percent in 2017/18 to
27.7 percent in 2018/19, its first decline in four years, while still
well above the record low of 20.4 percent registered in 2007/08.
Among the major cereals, the drawdown in maize inventories is expected
to be the largest, while wheat and barley stocks are also forecast
On the other hand, rice ending stocks could increase for the third
According to FAO, world trade in cereals is expected to remain generally
robust in 2018/19, with wheat trade seen exceeding the previous season's
level, but to still remain short of the peak registered in 2016/17.
Global trade in coarse grains is forecast to hover around record levels,
supported by strong import demand for maize, barley and sorghum.
International trade in rice in both 2018 and 2019 is also predicted
to remain close to the 2017 all-time record, said FAO.