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FAO Food Price Index Declines in June for First Time in 2018

09 July 2018

GLOBAL - International agricultural food commodity prices fell in June for the first time in 2018, as trade tensions affected markets even with global production prospects down.

The FAO Food Price Index averaged 173.7 points in June, down 1.3 per cent from its level in May.

FAO reports that the decline was driven primarily by lower benchmark price quotations for wheat, maize and vegetable oils including those made from soybeans.

The FAO Food Price Index is a measure of the monthly change in international prices of a basket of food commodities.

The FAO Cereal Price Index dropped 3.7 per cent in the month. Despite overall worsening production prospects for the main grains, there were "relatively sharp falls" in international maize and wheat prices, reflecting heightened trade tensions. Rice prices increased.

The FAO Vegetable Oil Price Index declined 3.0 per cent from May to reach a 29-month low. Palm, soybean and sunflower oil prices all declined.

Heightened trade tensions between the United States of America and its trading partners, particularly China, weighed particularly hard on the US origin export prices, led by soybeans, with the strength of the dollar exerting further downward pressure.

The FAO Dairy Price Index dropped 0.9 per cent as lower price quotations for cheese - reflecting greater export availabilities in the European Union and the United States of America - more than offseting a rise in Skim Milk Powder prices.

The FAO Meat Price Index inched up 0.3 per cent from May, led by an upswing in ovine and pig meat values.

The FAO Sugar Price Index rose 1.2 per cent, reversing six consecutive monthly declines, due mostly to concerns that dry weather in Brazil, the world's largest sugar producing and exporting country, would negatively affect sugarcane yields and production.

FAO expects drop in cereal output and stocks

FAO also updated its forecast for world cereal output this year, now pegged at 2586 million tonnes, which is 64.5 million tonnes or 2.4 per cent less than the record production of 2017.

The new forecast issued last week in FAO's Cereal Supply and Demand Brief, is 24 million tonnes less than projected by FAO last month, largely reflecting lower output prospects for wheat in the European Union and for wheat and coarse grains in the Russian Federation and Ukraine.

World cereal utilization is forecast to rise to 2641 million tonnes in 2018/19.

As utilization is foreseen to outpace new production, global cereal stocks accumulated over the past five seasons will have to be drawn down, by around 7 per cent from their season-opening levels. This should result in the world stocks-to-use ratio for cereals dropping to 27.7 per cent, representing the first decrease in four years - down from 30.6 per cent - although still well above the record low of 20.4 per cent registered in the 2007/08 season.

The inventory drawdown is expected to be largest for maize, while rice stocks may increase for the third year in a row.

World trade in cereals is expected to remain generally robust also in 2018/19, close to near-record level of 2017/18.

You can view the the FAO Food Price Index by clicking here.

TheCattleSite News Desk

Top image via Shutterstock


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