FAO Food Price Index posts biggest monthly jump in four years
Weather conditions crimp sugar output, but also leads to expectations of a larger wheat harvest
International food commodity prices shot up 4.2 percent in June, their steepest monthly increase of the past four years.
The FAO Food Price Index, released today, averaged 163.4 points in June and is now one percent below the level reached a year earlier. The June rise, which affected all commodity categories except vegetable oils, was the fifth consecutive monthly increase.
The price movement reflects FAO's updating of its cereal supply and demand forecasts for the 2016/17 marketing season.
FAO's Food Price Index is a trade-weighted index tracking international market prices for key traded food groups.
The FAO Sugar Price Index rose 14.8 percent from May, as Brazil, the world's largest sugar producer and exporter, endured heavy rains that hindered harvesting and dented yields.
The FAO Cereal Price Index rose 2.9 percent in the month and is now 3.9 percent below its level of June 2015. Maize prices drove that increase, primarily due to tightening export supplies from Brazil. Ample wheat supplies and reports of record yields in the United States held down wheat prices.
The FAO Dairy Price Index rose 7.8 percent from May, spurred by an uncertain outlook in Oceania and slower production growth in the European Union. Nonetheless, the index remained 14 percent below its level of a year ago.
The FAO Meat Price Index rose 2.4 percent from its revised May value, as average quotations for pork, beef and poultry all rose for the third consecutive month.
The FAO Vegetable Oil Price Index defied the trend, declining 0.8 percent from its May level.
Higher forecasts for wheat output and cereal consumption in 2016/17
FAO's Cereal Supply and Demand Brief, also released today, pointed to improved production prospects primarily for wheat.
Global wheat production is now pegged at 732 million tonnes, more than one percent higher than anticipated in June, mainly due to improved prospects in the EU, the Russian Federation and the U.S., as a result of better weather conditions.
The forecast for world maize production in 2016 was, however, cut down as prospects for the second crop in Brazil have dimmed and as reduced government support in China led to lower planting. Overall coarse grain production for this year is now expected to be 1 316.4 million tonnes, some 0.6 percent lower than last month's forecast.
World total cereal utilization in the 2016/17 marketing year, meanwhile, is now projected at 2 555.6 million tonnes, 1.3 percent higher than the estimate for 2015/16.
As a result, global cereal stocks by the end of farming season in 2017 are expected to stand at 635 million tonnes, 1.5 percent below their opening level. The resulting world stocks-to-use ratio for cereals would stand at 24.2 percent in 2016/17, compared to the 2007/08 historical low of 20.5 percent.