United Nations: Higher dairy prices drives up food commodity prices
Published in SUNS #8864 dated 12 March 2019

Geneva, 11 Mar (Kanaga Raja) – The international prices of a basket of key agricultural food commodities rose in February, with dairy prices registering sharp increases, the Food and Agriculture Organisation of the United Nations (FAO ) has reported.

According to FAO, its Food Price Index (FFPI) averaged 167.5 points in February 2019, up 2.7 points (1.7 percent) from January.

The prices of all commodities represented in the FFPI rose in February, with sharp increases registered for dairy prices, it said.

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 almost 169 points in February, up marginally from January and nearly 8 points (4.7 percent) above its February 2018 level.

Among the major cereals, maize prices rose the most, driven up by higher export quotations from the United States mostly because of worries over shipping disruptions.

However, wheat prices, which started the month on a firmer note due mostly to supply concerns, fell under significant downward pressure on weaker pace in purchases.

FAO said that it rice price index held steady, as slow demand depressed Indica quotations, offsetting continued gains registered in the Japonica market driven by brisker trade.

Meanwhile, the FAO Vegetable Oil Price Index averaged 133.5 points in February, up 2.3 points (or 1.8 percent) from the previous month and marking its highest level since October 2018.

The rise of the index mainly reflects higher values of palm, soy and sunflower oils. Palm oil prices rose for the third consecutive month as pronounced seasonal output contractions in leading producing countries coincided with robust domestic demand.

“Soy and sunflower oil prices firmed in response to limited global supplies. Strong mineral oil prices also contributed to the increase in vegetable oils values.”

The FAO Meat Price Index averaged 163.6 points in February, up slightly (1.2 points or 0.7 percent) from January but still 4 percent below the corresponding month last year.

In February, price quotations for bovine and pigmeat increased, underpinned by robust import demand, along with limited export supplies of bovine meat, especially from New Zealand, and of pigmeat from the European Union.

However, said FAO, poultry prices fell due largely to slower pace in foreign sales, while ovine (lamb and mutton) meat prices also declined, reflecting abundant export supplies from New Zealand.

The FAO Dairy Price Index averaged 192.4 points in February, up 10.3 points (5.6 percent) from January and now close to last year’s February value.

According to FAO, international price quotations for all dairy products (represented in the Index) rose in February, with the highest month-on-month rise in percentage terms registered for Skim Milk Powder (SMP), followed by Whole Milk Powder (WMP), cheese and butter.

Strong import demand, especially for supplies from Oceania, drove up SMP, WMP and cheese prices.

As for butter, a seasonal drop in production anticipated in Oceania over the coming months was supportive to prices.

The FAO Sugar Price Index averaged just over 184 points in February 2019, up 2.2 points (1.2 percent) from January 2019.

FAO said that the increase largely reflected concerns over production prospects in some of the main producing countries.

Sugar production in India in 2018/19 is now expected to contract by 5 percent from last year’s level, while in Brazil’s centre-south region, the country’s heart of the sugar sector, output during October 2018-January 2019 is estimated to have declined by 26 percent from the same period in the previous season.

An increase in gasoline prices in Brazil lent further support to international sugar price quotations, by making Brazil’s sugar mills use more sugarcane for domestic ethanol production instead of sugar, said FAO.


Meanwhile, in its latest Cereal Supply and Demand Brief, FAO has estimated world cereal production at 2,609 million tonnes (including rice in milled terms) in 2018, down 2.8 million tonnes from the previous report in February.

FAO said the downward revision rests almost entirely on a lower estimate for the United States’ maize output and reinforces an overall year-on-year decrease in global cereal production, currently estimated at 1.9 percent.

Global rice production in 2018 is forecast to reach 515 million tonnes, up 1.6 percent from 2017 and representing an all-time high.

The latest forecast is up 800,000 tonnes from February, with much of the upward adjustment stemming from revisions to historical production estimates in Nigeria. Rice production was also raised for Colombia and the United States, mostly on higher reported yields.

For the 2019 cereal crops, while the bulk of the winter wheat crop in the northern hemisphere is still in dormancy phase, FAO’s first forecast for world wheat production in 2019 is pegged at 757.4 million tonnes.

“At this level, this year’s output would be 4.0 percent above the level attained in 2018 but still short of the record high registered in 2017,” said FAO.

For coarse grains, harvesting of the 2019 crops in southern hemisphere countries is expected to begin in the coming months, while planting operations will commence in May in the northern hemisphere, it noted.

Following this month’s downward revision of the 2018 world cereal production, the forecast of global cereal utilization in 2018/19 has also been lowered to 2,652 million tonnes, with most of the revision driven by expected cuts in the feed use of major coarse grains, especially in the United States.

However, world utilization of coarse grains in 2018/19 is still set at 2.0 percent above the previous season’s level, while global utilization of rice is seen to expand by 0.9 percent and that of wheat by 0.5 percent.

FAO lowered its forecast of global cereal stocks for crop years ending in 2019 to 766.5 million tonnes.

At these forecast levels, the ratio of global cereal carry-overs to utilization (stock-to-use) in 2018/19 would fall from 30.5 percent in 2017/18 to 28.3 percent in 2018/19, which, nevertheless, still represents a relatively high level, it said.

“The latest downward adjustment mostly concerns the inventories of wheat and maize, while forecasts for end- season stocks of barley and rice have been raised since the previous report.”

Larger-than-earlier anticipated drawdowns of maize stocks in southern hemisphere countries and the United States are also seen to push down total coarse grains stocks in 2018/19 by almost 11 percent.

FAO said following further downward revisions to wheat stocks in several Asian countries and Argentina, total wheat inventories are expected to decline by almost 4 percent from their opening levels.

By contrast, global rice stocks are set to reach a new record high, up 3 percent from their opening level, with India and China leading the season’s stock expansion.

FAO lowered its forecast for world trade in cereals in 2018/19 by 2 million tonnes since last month to just over 413 million tonnes.

At almost 171 million tonnes, the forecast of global wheat trade has been trimmed by around 800,000 tonnes since last month, largely on account of lower-than-earlier anticipated purchases by several Asian and South America n countries.

At this level, world wheat trade would be down 3.3 percent from the 2017/18 record level.

Total trade in coarse grains is also seen heading to a contraction, falling by 0.7 percent from 2017/18 to around 195 million tonnes in 2018/19.

FAO said the latest forecast points to a 1.1 million tonnes drop from February, as a downward adjustment to global trade in barley (reflecting further cuts in China’s imports) should more than offset an expected increase in maize trade (reflecting scaling up of imports by China and the EU).

The forecast of international trade in rice in 2019 has been revised down marginally, by 200,000 tonnes, and now points to a 2.1 percent year-on-year contraction to 47 million tonnes.

“Deteriorating export prospects for Brazil, Argentina, and Uruguay owing to expected harvest reductions account for most of this month’s slight, downward trade revision,” said FAO.