Cereal prices continue to rise, defying improved supplies FAO Food Price Index rebounds, approaching two-year highs
The FAO Food
Price Index rose notably in January, led by sugar and cereals, even
as global markets remain well supplied.
The FAO Food Price Index averaged 173.8
percent in January, its highest value in almost two years, marking a
2.1 percent increase from its revised December value and 16.4 percent
above its 2016 January level.
The FAO Sugar Price Index surged 9.9
percent in the month, driven by expectations of protracted supply
tightness in Brazil, India and Thailand.
The FAO Cereal Price Index rose 3.4
percent from December to a six-month high, with wheat, maize and rice
values all increasing. Wheat markets reacted to unfavourable weather
conditions hampering this season's crops as well as reduced plantings
in the United States of America, while higher maize prices mostly
reflected strong demand and uncertain crop prospects across South
America. International prices of rice also rose, in part due to
India's ongoing state procurement programme, reducing the quantities
available for export.
FAO's Food Price Index is a
trade-weighted index tracking international market prices for five
major food commodity groups. While 2016 marked the fifth consecutive
year the index has fallen, January marked its sixth monthly increase
in a row.
The FAO Vegetable Oil Price Index rose
1.8 percent, due mostly to low global inventory levels of palm oil
coupled with a slow production recovery in Southeast Asia. Soy oil
prices, by contrast, eased on expectations of ample global
availability.
The FAO Dairy Price Index was unchanged
from December, a marked departure from the 50 percent increase it
posted between May and December last year. The FAO Meat Price Index
was also practically unchanged, with a rise in bovine meat quotations
- the result of herd rebuilding in Australia - offset by lower prices
of ovine and other meats.
World cereal stocks at all-time high
boosted by record production
Worldwide inventories of cereals are on
course to reach an all-time record level by the end of seasons in
2017, according to FAO's latest Cereal Supply and Demand Brief.
Latest figures put global cereal stocks
at 681 million tonnes, up 1.5 percent from their December forecasted
level and 3 percent from the previous season. World wheat inventories
would likely hit a new record of 245 million tonnes, marking an 8.3
percent annual increase. Coarse grain stocks are forecast to grow by
0.7 percent to reach their second-highest level on record, while rice
stocks are set to decline slightly although ending the season at a
near-record 170 million tonnes.
FAO has also raised its estimate of
global cereal output in 2016 by 15 million tonnes to 2 592 million
tonnes, due primarily to larger-than-expected wheat harvests in
Australia and the Russian Federation.
World cereal utilization as well as
trade are also set to be significantly higher than earlier
anticipated.
Looking further ahead, early production
prospects for 2017 are mixed, according to FAO. Low prices prompted
farmers in North America to reduce acreage sowed to wheat - to their
second-lowest level on record in the United States - while the
opposite trend was seen in the Russian Federation.
For rice, excess rains over parts of
Viet Nam and inadequate rainfall in Sri Lanka will likely curb rice
output. For other grains, generally positive conditions appear to be
in place. Maize output in Southern African countries is poised to
rebound to near-average levels, thanks to more plantings and better
yields after last year's severely dry conditions. High local prices
and conducive weather point to larger grain plantings in Argentina
and Brazil.
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