United Nations: Food commodity prices fall for fifth consecutive month
Published in SUNS #8789 dated 6 November 2018

Geneva, 5 Nov (Kanaga Raja) - The international prices of a basket of key agricultural food commodities fell in October, the Food and Agriculture Organisation of the United Nations (FAO) has reported.

FAO said that falling dairy, meat and vegetable oils prices more than offset a surge in sugar prices and a more moderate increase in the prices of cereals.

According to FAO, its latest Food Price Index (FFPI) averaged 163.5 points in October 2018, down 1.4 points (0.9 percent) from September and some 13 points (7.4 percent) below its level in the corresponding period last year, and reaching its lowest level since last May.

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 166.3 points in October, marking a rebound of 2.2 points (1.3 percent) from September and representing a 13.6 point (8.9 percent) year-on-year increase.

"Among the major cereals, maize quotations from the United States firmed the most, supported by strong export sales, while wheat prices also averaged higher, driven by a tighter supply outlook especially in view of deteriorating crop prospects in Australia," it said.

In contrast, rice prices fell, as harvest pressure, competition among exporters and currency movements weighed on Japonica and fragrant quotations.

The FAO Vegetable Oil Price Index averaged 132.9 points in October, down 2 points (1.5 percent) month-on-month.

Falling for the ninth month in succession, the index dropped to its lowest level since April 2009, with the latest slide being mostly driven by lower price quotations of palm oil, reflecting persistent pressure from large inventories held by major exporting countries amid sluggish global import demand.

In contrast, international soy oil prices rebounded slightly, underpinned by robust demand from the biodiesel sector, while rapeseed oil values were supported by reduced availabilities in the European Union.

On the other hand, international sunflower oil prices remained virtually unchanged from September.

The FAO Dairy Price Index averaged 181.8 points in October, down 9.2 points (4.8 percent) from the previous month, continuing the downward trend for the fifth consecutive month.

Price quotations of all the dairy products represented in the index fell in October, plummeting the overall index 15.3 percent below its value in the corresponding month last year and 34 percent below the peak reached in February 2014.

"The latest price weakness reflects the growing evidence of increased export supplies across all major dairy products, especially from New Zealand," said FAO.

The FAO Meat Price Index averaged 161.6 points in October, down 3.3 points (2.0 percent) from September and 11 points below its value a year ago.

In October, the prices of all main meat categories represented in the index eased, with ovine meat (lamb and mutton) falling the most, followed by pigmeat, bovine and poultry meat.

After four months of continuous strength, ovine meat prices lessened, underpinned by the availability of new season supplies from Oceania, said FAO.

"Import restrictions associated with new cases of African swine fever, coupled with large export availabilities from the main producing countries, continued to weigh on pigmeat prices."

Bovine meat prices declined for the third consecutive month on continued abundant export supplies, while the current market sluggishness weighed on the prices of poultry meat.

The FAO Sugar Price Index averaged 175.4 points in October, up 14 points (8 .7 percent) from September, marking the second consecutive monthly gain.

FAO attributed the rapid increase in sugar price quotations to negative production prospects in the major sugar producing regions, notably in India and Indonesia, mostly as a result of climate-related events.

"In Brazil, the world's largest sugar producer and exporter, the latest indications pointing to an increasing share of sugarcane output being used for ethanol production, have also underpinned international sugar prices," it said.


Meanwhile, in its latest Cereal Supply and Demand Brief, FAO has forecast global cereal production in 2018 at 2,601 million tonnes, up nearly 10 million tonnes from the previous month's forecast, but still 57 million tonnes (2.1 percent) below the 2017 record level.

"The monthly change was primarily driven by upward revisions for wheat production in Canada and China more than compensating downward revisions in Australia and the EU," it said.

FAO has forecast world wheat production in 2018 at around 728 million tonnes, down 4.3 percent from 2017.

For next year, the winter wheat crop is currently being planted in the Northern Hemisphere, it noted.

"Generally remunerative prices are expected to stimulate an increase in plantings in the EU, the United States and India, while weather-related concerns could hamper sowings in parts of China and Pakistan."

World production of coarse grains is forecast at 1,360 million tonnes in 20 18, down 2.2 percent from 2017. For 2019, coarse grain crops are currently being planted in Southern Hemisphere countries.

Early prospects indicate an expansion in maize plantings in South America, buoyed by robust export demand, and in South Africa, resting on higher prices and crop rotation practices.

However, concerns associated with a potential El Nino event weigh on prospects, said FAO.

FAO said that there have been only minor adjustments to its rice production outlook since October.

As a result, global rice output in 2018 continues to be forecast to surpass the 2017 all-time high by 1.3 percent to reach 513.0 million tonnes.

"The increase is envisaged to be led by area expansion, owing to more remunerative prices, and smaller losses incurred as a result of inclement weather, especially in Asia," it said.

FAO has raised its forecast for world cereal utilization for 2018/19 by 0.2 percent to 2,653 million tonnes, up 39 million tonnes (1.5 percent) from the estimated level for 2017/18.

It said that higher feed and industrial uses of maize make up the bulk of the anticipated rise in global cereal utilization, from both the previous season and last month.

"In fact, global utilization of coarse grains is expected to peak in 2018/19, reflecting robust demand for feed and industrial use, especially in China and the United States."

Total wheat utilization is expected to increase marginally in 2018/19, with the global growth in wheat feed use in retreat due to large supplies of cheaper alternatives, while wheat use for food consumption is expected to increase by 1.0 percent.

FAO said that global rice utilization in 2018/19 remains pegged at an historical high, up 1.1 percent year-on-year, with food use projected to account for all of this increase, expanding at a slightly faster pace than the global population.

Meanwhile, FAO has lowered slightly the forecast for world trade in cereals since last month, to almost 416 million tonnes, which would be down 4.5 million tonnes (1.1 percent) from the 2017/18 record level.

"The downward revision mainly reflects expectations for smaller wheat trade than was earlier anticipated," it said.

According to FAO, world wheat trade is now forecast to contract in 2018/19, albeit from the record levels achieved in the past two seasons, to 173 million tonnes, 3.4 million tonnes lower than in 2017/18 and almost 1 million tonnes below the October forecast.

The month-to-month drop reflects downward adjustments to imports by several countries, including India, Indonesia and South Africa.

World trade in coarse grains in 2018/19 is still forecast to remain close to the 2017/18 record level, at around 195 million tonnes, underpinned by an anticipated rise in maize trade, offsetting a decline in sorghum.

On the other hand, world trade in rice in 2019 is currently predicted to contract by 1.3 percent, to total 47.3 million tonnes, as larger African and Near Eastern purchases are foreseen to only partly compensate for subsiding demand from a few Far Eastern buyers.

According to FAO, the forecast for world cereal stocks, by the close of sea sons in 2019, has been raised from October by 10.6 million tonnes (1.4 percent), to almost 762 million tonnes, but still down substantially by 53 million tonnes (6.5 percent) from their record high opening level.

"The latest revisions reflect higher forecasts for wheat and barley (mostly in China), more than offsetting lower forecasts for maize and sorghum."

While the forecast for global wheat inventories has been raised by 9 million tonnes since the previous report, total wheat stocks would still decline by at least 12 million tonnes (4.5 percent) from their record high opening level, to 26 4 million tonnes.

The year-on-year drawdown in wheat stocks is expected to be concentrated among the major exporters, said FAO.

"As a result, for the major wheat exporters, the ratio of closing stocks to their total disappearance (defined as domestic utilization plus exports) - a measure of global market availabilities - is forecast to fall to a five-year low of 16.3 percent."

Total inventories of coarse grains are also forecast to fall in 2018/19, marking the first decline since 2012/13.

FAO said maize would account for the bulk of the contraction, much of which is seen to be concentrated in major exporting countries and in China, consistent with the country's maize de-stocking policy.

In contrast, world rice stocks at the close of 2018/19 are envisaged to reach a new high of 176.6 million tonnes, up 2.6 percent from their opening levels while unchanged from October's forecast, said FAO.