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August 2016 UN: FOOD COMMODITY PRICES SEE HIGHEST MONTHLY RISE IN 4 YEARS The surge in prices is led by sugar and followed by cereals, dairy and meat. By Kanaga Raja
According to the FAO, its Food Price Index (FFPI) released in July averaged 163.4 points in June 2016, 6.6 points (4.2%) higher than in May, and one percent below the corresponding month last year. Not only did the June increase mark the fifth consecutive monthly rise in the value of the FFPI, but it also represented the largest monthly increase witnessed over the past four years, said FAO. 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. FAO reported that with the exception of vegetable oils, the values of all the commodity sub-indices moved up in June, led by a surge in the price of sugar and more moderate increases for cereals, dairy and meat. The FAO Cereal Price Index averaged 156.9 points in June, up 4.4 points (2.9%) from May, but still 3.9 percent below the June 2015 level, said FAO. The increase was driven by a strengthening of maize prices, primarily due to a tightening of export supplies in Brazil. "Wheat values rose during the first half of the month, before reversing course subsequently on reports of record yields in the United States and better than expected harvests in the Black Sea region." FAO said that international rice prices varied little from May levels, as upward pressure exerted by generally tight export availabilities was countered by subdued buying interest. The FAO Vegetable Oil Price Index averaged 162.1 points in June, down 1.3 points (0.8%) from May, primarily reflecting lower quotations of palm oil, due to subdued global import demand and a seasonal recovery in production in Indonesia and Malaysia. "By contrast, soy oil prices increased, underpinned by reduced export availabilities in South America and less favourable than initially anticipated production prospects for 2016/17." FAO said its Dairy Price Index averaged 137.9 points in June, up 9.9 points (7.8%) from May, with a rise in average monthly prices for all the dairy commodities that compose the Index. "An uncertain outlook for the 2016/17 milk year in Oceania and a slowdown of monthly milk production growth in the EU in April caused quotations to strengthen. Despite the magnitude of the increase, the June rise only represented a recovery from the low prices prevailing in the preceding three months." The FAO Meat Price Index averaged 158.3 points in June, 3.8 points (2.4%) higher than its revised May value, as average quotations strengthened for the third consecutive month for all categories of meat, particularly those of pigmeat and ovine meat (lamb and mutton). On the other hand, bovine and poultry meat registered smaller increases, said FAO, adding that in the European Union, a shortage of pigs for slaughter and lighter slaughter weights constrained supply and caused export quotations to move up strongly. Similarly, reduced export supplies boosted quotations of sheep meat and bovine meat in Oceania. According to FAO, poultry meat prices have exhibited a moderate but steady increase for the year so far, rising by 10% since January. Brazil in particular has experienced strong growth in sales, especially to Japan and Saudi Arabia. The FAO Sugar Price Index averaged 276.0 points in June, up as much as 35.6 points (14.8%) from May. "The surge mostly mirrored less positive production prospects in Brazil, the world's largest sugar producer and exporter, following heavy rains which hampered harvesting operations and affected sugar yields. In addition, as wet weather tends to reduce the amount of recoverable sugar per tonne of cane, larger volumes of sugarcane output were reportedly diverted from sugar to ethanol production, lending further support to prices." Meanwhile, in its latest Cereal Supply and Demand Brief, also released in July, FAO has forecast world cereal production for 2016 at 2,544 million tonnes, 0.6% (15.3 million tonnes) higher than the 2015 estimate and fractionally above the previous month's forecast. Prospects mainly improved for wheat, but also for rice and barley, while the maize production forecast was sharply cut, it said. FAO revised downwards its expectations for global coarse grains production in 2016 by 8.2 million tonnes to 1,316.4 million tonnes, with the decrease being attributed mostly to a deteriorated outlook for Brazil, where dry weather impaired prospects for the second maize crop. FAO also downscaled its expectations for maize output in China, as plantings contracted following reduced government support. By contrast, it said, world wheat production in 2016 is now pegged at 732 million tonnes, 8 million tonnes higher than anticipated in June, but still slightly below the 2015 record, with the upward revision resting on improved crop prospects in the EU, the Russian Federation (where a record crop is expected) and the United States, owing to favourable weather. "Larger harvests are also foreseen in China and India, while dry conditions dampened the outlook for Turkey." FAO said that its forecasts of rice production in 2016 have been upgraded by 0.8 million tonnes since last month, now pointing to world rice output surpassing the 2015 depressed level by 1.0% to 495.2 million tonnes. "The revisions chiefly reflect improved expectations for crops in Asia, in particular the Lao PDR and Pakistan, more than offsetting reduced prospects mainly for Brazil." FAO raised its forecast for world cereal utilization in 2016/17 by nearly 10 million tonnes, to 2,555.6 million tonnes, or 1.3 percent above the 2015/16 estimate. "The new outlook reflects prospects for increased wheat utilization, in particular for feed use, which has been raised by 4 million tonnes, mostly on expectation of stronger demand in the EU, Indonesia and the United States, but also for food consumption and industrial usage." As a result, it said, total wheat consumption is now forecast to rise to 726 million tonnes, some 8 million tonnes higher than anticipated last month and 0.8% above the 2015/16 estimate. Total utilization of coarse grains is projected at 1,326 million tonnes, up 1 million tonnes from the previous forecast and 1.4% above the 2015/16 estimate, while global rice utilization is expected to reach around 503 million tonnes in 2016/17, up 7.2 million tonnes year-on-year. FAO trimmed its forecast for global cereal stocks by the end of seasons in 2017 by almost 7 million tonnes since June. It now stands at 635 million tonnes, 1.5% below their opening level. On the other hand, FAO raised its forecast for global wheat stocks in 2017 by 1.4 million tonnes from last month to 217 million tonnes, up almost 5 million tonnes, or 2.3%, from the previous season. This represents the highest stock level in fifteen years. "Higher forecasts for Australia and India were largely responsible for the upward adjustment. However, much of the overall year-on-year increase in world wheat inventories is likely to be driven by accumulations in China (from 60 million tonnes to 70 million tonnes), the Russian Federation and the United States. Combined, these would more than offset declines in North Africa and several countries in Asia." The FAO has forecast world trade in cereals in 2016/17 to approach 374 million tonnes, up 4.8 million tonnes from June, but still 1.9% (around 7 million tonnes) below the 2015/16 estimate. If confirmed, this would be the first contraction since 2012/13. World wheat trade is expected to set a new record of 158.5 million tonnes, up 0.8% from 2015/16, mainly sustained by stronger import demand by Morocco and several countries in Asia, it said. – Third World Network Features. -ends-
The above article is reproduced from SUNS #8279, 11 July 2016. When reproducing this feature, please credit Third World Network Features and (if applicable) the cooperating magazine or agency involved in the article, and give the byline. Please send us cuttings. And if reproduced on the internet, please send the web link where the article appears to twn@twnetwork.org. 4417/16
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