Photo Credit: Flickr: Elliot Scott

The latest FAO Food Price Index, released today, rose 3.2 points from April. This is the fourth consecutive month to see a slight increase in the Index; however, prices remain 7 percent below May 2015 levels.

The Cereals Price Index also rose slightly (2.5 points) from April, due mainly to sharp increases in maize prices as export supplies tighten. Rice prices also increased for some varieties due to concern over availability from several major trade sources and strengthening import demand. Wheat price increases were contained by ample global supplies and good production prospects. Despite these minor increases, however, the Cereals Index also remains 5.3 percent below May 2015 levels.

The Vegetable Oil Price Index dropped 3.1 points in May. This decline was due mainly to falling palm oil prices driven by weaker demand. The Dairy Price Index rose only marginally (0.4 percent), while the Meat Price Index rose 3 points due to increased import demand in Asia for pigmeat.

The Sugar Price Index, on the other hand, spiked by 25.1 points in May. This spike was driven mainly by significantly reduced production prospects in India, as well as lower output, and thus higher import demand, in China. An expected bumper crop in Brazil, the world's largest sugar producer and exporter, kept prices from rising even further.

The latest AMIS Market Monitor was also released this week. That report also sees rising prices for staple crops, driven mainly by various weather concerns. Excessive rainfall in Argentina has severely damaged crops and led to a rise in soybean prices, while dry weather in Brazil has increased maize prices. Rice production is still threatened by the effects of El NiƱo, causing that commodity to rise in price as well.

Despite these increases in price, however, AMIS still reports favorable 2016 production prospects for most crops. Wheat, maize, and soybeans are all expected to see increased production, and rice production is anticipated to fall slightly.

Global ending stocks are more mixed. Wheat stocks are expected to reach a 15-year high based on this month's improved inventory predictions for the EU, China, and the Russian Federation. Maize ending stocks are expected to decline, but by much less than predicted in last month's report. This change is mainly due to improved inventories in the US. Rice ending stocks will be drawn down by 5 million tonnes in 2016-2017 in order to compensate the lowered global production. Soybean stocks could also drop from their recent high levels due to significant drawdowns from Argentina, the US, and China.

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