FAO Food Price Index declines in November

The Food and Agriculture Organization of the United Nations has commented on how globally traded food commodity prices declined in November this year, led by marked drops for palm oil and other vegetable oils.

The FAO Food Price Index averaged 160.8 points for the month of November, down 1.3 per cent from October and 8.5 per cent from a year earlier. The index, an indicator of the monthly change in international prices of a basket of food commodities, is now at its lowest level since May 2016.

The FAO Vegetable Oil Price Index hit a 12-year low, declining 5.7 per cent from October. Large palm oil inventories and abundant supplies of soy and sunflower oils fueled the decline. The FAO Cereal Price Index, covering wheat, coarse grains and rice, dropped 1.1 per cent during the month, reflecting large export supplies of wheat, intensified export competition for maize and new crop arrivals of rice. The Dairy Price Index declined for the sixth consecutive month, falling 3.3 per cent from October, as large stocks and increased availability of export supplies – especially from New Zealand – led to lower price quotations for butter, cheese and whole milk powder.

Despite this, the Sugar Price Index defied the downward trend, rising 4.4 per cent in the month. The increase was mostly due to a significant production decrease expected in Brazil, which has also lowered the share of sugarcane used to produce sugar to 35.8 per cent from almost half a year ago.

The FAO Meat Price Index came in marginally lower, with only bovine meat prices rising during the month.

Updated forecasts for cereals output and trade

FAO also released a new Cereal Supply and Demand Brief, marking down its forecast for world cereal production in 2018 to 2,595 million tonnes, some 2.4 per cent below the record high reached last year.

The new forecast figures do not incorporate recent and significant historical revisions made by China to its grain production estimates, for maize in particular, which are under review by FAO with an eye to updated assessments early next year.

World rice production this year remains on course to reach a new high of 513 million tonnes, representing a 1.3 per cent increase from 2017. By contrast, FAO lowered its forecast for global wheat output to 725.1 million tonnes due to smaller-than-earlier expected harvests in Turkey and the Russian Federation. The projection for world production of coarse grains was also lowered, to 1 357 million tonnes, due to downward revisions to barley and sorghum outputs.

FAO expects greater planting of winter wheat crops in  the northern hemisphere as well as higher maize production in much of the southern hemisphere, although the prospects of a possible El Nino event impair the outlook in South Africa and neighboring countries.

World cereal utilisation during the 2018/19 season is expected to rise by 1.3 per cent to 2 649 million tonnes, led by stronger feed and industrial uses of maize.

World cereal stocks are forecast to stand at 762 million tonnes by the close of seasons in 2019, some 6.5 per cent below their all-time high opening levels. Maize inventories are anticipated to contract by 14 per cent, while wheat stocks should decline by at least 12 per cent. World rice stocks, by contrast, are expected to increase by 2.7 per cent to hit an historical high of 177 million tonnes.

International trade in cereals is still forecast to contract in 2018/19, though the decline, estimated at 1.1 per cent, is smaller than it was anticipated in November.