- Wheat and maize prices lead the increase
The FAO Food Price Index rose in March, driven by robust increases in grains and dairy prices.
In March, the index averaged 172.8 points, 1.1% higher than in February and 0.7% above its value a year earlier.
Declines in price quotations for sugar and most vegetable oils were more than offset by increases for maize, wheat and most dairy products. The trade-weighted price index tracks international market prices for five major food commodity groups.
Worldwide cereal production hit a record level in 2017, up 33 million tonnes from 2016, to nearly 2,646 million tonnes, according to FAO’s latest estimate in the Cereal Supply and Demand Brief. However, FAO’s anticipates this year’s world maize and wheat production to decline based on early forecasts. The FAO Cereal Price Index continued on its upward path, averaging 2.7% higher than in February and 12.1% above its March 2017 value. Wheat prices rose mostly on weather worries, including prolonged dryness in the US and cold wet conditions in parts of Europe.
Maize prices turned even firmer, driven by a combination of robust world demand and deteriorating crop prospects in Argentina.
The FAO Dairy Price Index was 3.3% higher in March, as strong global demand pushed up butter, cheese and whole milk powder prices.
The FAO Sugar Price Index declined 3.4% and stood at 27.5% below its March 2017 value, owing to large export availabilities.
The FAO Vegetable Oil Price Index declined modestly due to price drops for soy, rape and sunflower oils, while palm oil prices firmed up, buoyed by expectations the European Union will resume imports of palm oil-based biodiesel from Indonesia.
The FAO Meat Price Index was mostly unchanged from February, as bovine meat prices eased and those for ovine and pig meat rose on the back of strong import demand, especially by China. The prospects for global cereal production in 2018 are more restrained.
Worldwide wheat output is expected to drop to 750 million tonnes, about 1% below its near-record level of the previous year. Forecasts suggest that US output may rebound from its 2017 decline, while production in China, India and the Russian Federation may fall after a record year.
Coarse grain output is also expected to decline from the 2017 record, amid bad weather in Argentina, a shift from maize to soybean cultivation in Brazil and a price-induced reduction in plantings in South Africa.
FAO’s latest forecast for world cereal stocks at the close of crop seasons ending in 2018 stands at nearly 748 million tonnes, almost 4% higher than a year earlier and hitting a record level, with the increase led by wheat. This large carryover would go some way to mitigate the effect of the projected decline in this year’s global production.