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United Nations: Food commodity prices rise again in May
Published in SUNS #8926 dated 17 June 2019

Geneva, 14 Jun (Kanaga Raja) – The international prices of a basket of key agricultural food commodities rose for the fifth consecutive month in May, driven by rising prices for cheese and maize, the Food and Agriculture Organisation of the United Nations (FAO) has reported.

According to the FAO, its Food Price Index (FFPI) averaged 172.4 points in May 2019, up 1.2 percent (2.1 points) from April but still 1.9 percent below its level in the corresponding month last year.

While prices for sugar and oils fell, the other sub-indices registered increases, led again by strong month-on- month firming of prices of dairy products followed by cereals, 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.

The FAO’s Cereal Price Index averaged 162.3 points in May, up 1.4 percent (2.2 points) from April.

FAO said that the small month-on-month increase was entirely driven by a sudden surge in maize quotations in response to diminishing production prospects in the United States.

By contrast, wheat price quotations were generally lower in May in view of good global supply prospects and adequate export availabilities.

Meanwhile, FAO said that its rice price index held steady for the third successive month, as a mild increase in aromatic quotations was offset by slight price declines in most other rice market segments.

On the other hand, the FAO’s Vegetable Oil Price Index averaged 127.4 points in May, shedding 1.3 points (or 1.1 percent) from April and lingering well below its year-earlier level.

“The drop mainly reflected lower values of palm oil, whereas prices of soy, sunflower and rapeseed oils appreciated modestly.”

According to FAO, the further drop in international palm oil quotations was tied to continued pressure from large inventory levels in leading exporting countries as well as falling mineral oil prices.

Soy and sunflower oil prices received some support from firm global import demand, while rapeseed oil values were underpinned by concerns over reduced crop prospects in the European Union.

The FAO’s Dairy Price Index averaged 226.1 points in May, up 11.2 points (5.2 percent) from April, pushing the index 24.2 percent higher than at the start of the year and closer to a five-year high.

A sharp upswing in cheese price quotations was mainly behind the strong increase in May, with other dairy products represented in the index also remaining above their January levels.

FAO said that the dairy price increase reflected robust global import demand amid tight export availabilities from Oceania, as drought conditions reinforced the seasonal decline in milk production.

Concerns over milk production in Europe also provided support to prices, it added.

The FAO’s Meat Price Index averaged 170.2 points in May, up marginally from April and continuing the moderate month-on-month price increases registered since the beginning of the year.

In May, pig meat quotations continued to rise due to strong import demand, especially from East Asia, primarily driven by production declines associated with the spread of the African Swine Fever (ASF) in the region.

According to FAO, ovine (lamb and mutton) meat prices also received a push from robust import demand, notwithstanding record export volumes from Oceania, while poultry meat prices remained stable reflecting well-balanced market conditions.

By contrast, price quotations of bovine meat eased from the highs recorded in April, reflecting elevated global export supplies.

The FAO’s Sugar Price Index averaged 176 points in May 2019, down 5.8 points (3.2 percent) from April.

The latest monthly decline in international sugar prices was largely driven by the prospects of increased sugar output in India, the world’s largest sugar producer, said FAO.

In addition, weaker international energy prices negatively affected international sugar prices by encouraging producers to process sugarcane into sugar instead of ethanol.

Reports that Brazil’s sugar production in 2018/19 marketing year, which ended on 31 March 2019, registered a fall of 17 percent year-on-year, were not sufficient to offset the downward pressure on prices, said FAO.

DIM PROSPECTS FOR MAIZE PRODUCTION

In its latest Cereal Supply and Demand Brief, FAO said its latest forecast for world cereal production in 2019 points to an increase of 1.2 percent from 2018, to 2,685 million tonnes.

However, the year-on-year expansion is now much less significant than earlier predicted, as global maize production is now seen to fall in 2019, largely because of sharp downward revisions since the previous report concerning maize production prospects in the United States.

Due to prolonged excessive wet conditions resulting in major delays in crop plantings, this year’s maize production in the United States is now pegged at 330 million tonnes, down 45 million tonnes from FAO’s first production forecast published in May and almost 10 percent (36 million tonnes) short of last year’s level.

According to FAO, the recent US Department of Agriculture (USDA) crop progress report pointed to a sharply reduced planted area of only 58 percent of planting intentions as of 26 May, well below the 5-year average level of 90 percent and the slowest pace ever recorded.

Most of the expected rebound in global cereal production in 2019 is attributed to expected expansions in wheat and barley production, with year-on-year increases of 5.3 percent and 5.8 percent, respectively.

According to FAO, total rice production is likely to remain close to last year’s record level as expectations of area-driven expansions in Asia could offset foreseen contractions in most other regions, triggered by inclement weather and prospects of reduced profit margins.

FAO has forecast world cereal utilization to reach 2,707 million tonnes in 2019/20, down 15.5 million tonnes, or 0.6 percent, from the May forecast but still 1 percent (26 million tonnes) higher than in 2018/19.

Most of this month’s downward adjustment again concerns the United States, where, because of deteriorating production prospects, total domestic utilization of maize is seen to fall below the 2018/19 level, said FAO.

Following the revision for the United States, world utilization of coarse grains in 2019/20 is now anticipated to reach 1,434 million tonnes, down 0.9 percent from the previous forecast but 0.7 percent higher than in 2018/19.

Global wheat utilization is expected to grow by 1.2 percent, reaching 755 million tonnes, while that of rice is predicted to reach 518 million tonnes, 1.4 percent higher than in 2018/19.

Based on the latest production and utilization forecasts, FAO said that world cereal stocks could decline by as much as 26 million tonnes, or 3 percent, in the new season to a four-year low of 830 million tonnes.

This figure is around 18 million tonnes, or 2 percent, below the FAO’s May forecast.

“The sharp month-on-month downward revision is mostly associated with maize, whereas the forecasts for wheat and rice inventories have been raised slightly since the previous report.”

The projected fall in cereal stocks would result in a drop in the global cereal stock-to-use ratio to just below 30 percent, which still points to a relatively comfortable supply level.

Globally, coarse grain inventories are seen heading towards a second consecutive annual decline in 2019/20, falling by 9 percent to just over 369 million tonnes, the lowest level since 2014/15.

By contrast, said FAO, total wheat stocks could expand by 4.6 percent year-on-year and approach a near-record level of 281 million tonnes.

The increase of 1 percent in wheat stocks since May reflects upward adjustments made for the EU and the United States, outweighing downward revisions in Australia and the Russian Federation.

World rice stocks at the close of 2019/20 are still envisaged to fall slightly (0.9 percent) from their record opening levels, to 179 million tonnes, despite some upward revisions to forecasts for the United States and Viet Nam.

FAO has forecast world trade in cereals in 2019/20 at around 414 million tonnes, up 1.2 million tonnes, or 0.3 percent, from the previous forecast and nearly 6 million tonnes, or 1.4 percent, higher than the estimated total shipments of cereals in 2018/19.

Most of the predicted expansion in world cereal trade is associated with greater wheat and rice trade, while trade in coarse grains, most notably maize, is expected to fall below the 2018/19 level, mainly on expectations of reduced imports by the EU and a sharp reduction in exports by the United States, it said.

By contrast, wheat trade is predicted to rebound by 3.3 percent from the 2018/19 reduced level, driven by stronger import demand by several countries, especially in Africa and Asia, and supported by the expectation of large export availabilities in the Black Sea region and the EU.

On the other hand, world rice trade is likely to contract by 3.5 percent in 2019 before a possible rebound in 2020 on expectation of greater purchases by several countries in Africa, said FAO.

 


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