Photo credit: Dana McMahan

By: Sara Gustafson

The FAO Food Price Index continued to rise in January for the fourth consecutive month. While the month-on-month increase from December was marginal (0.7 percent), the Index reached 11.3 percent higher than its January 2019 levels. The increase was driven mainly by vegetable oil prices, although cereal prices also played a role to a lesser extent.

The Cereal Price Index rose 2.9 percent in January, and cereal prices also reached their highest point since May 2018. Wheat prices saw the most significant increase; port strikes in France and rumors of an export quota by the Russian Federation, combined with increased purchases in several countries, all contributed to drive up wheat prices. Strong export activity and seasonally tight supplies in the southern hemisphere also drove up maize prices. Rice prices rose less drastically due to weather concerns in some regions.

The Vegetable Oils Index rose the most in January, up 7 percent from December and reaching a three-year high. Palm oil prices increased for the sixth consecutive month based on strong demand for biodiesel and subsequent drawing down of global supplies. Soybean and sunflower oil prices also rose again in January due to strong import demand and lower than expected export quantities. Vegetable oil prices began to fall again in mid-January, however, due to trade uncertainties stemming from the U.S.-China trade deal, as well as trade tensions between India and Malaysia and concerns over the potential spread of the coronavirus.

The Dairy Price Index and Sugar Price Index also both rose in January by 0.9 percent and 5.5 percent, respectively. The Meat Price Index is the only index that declined in January, falling by 4 percent.

The latest AMIS Market Monitor also cites U.S.-China trade, ongoing other trade tensions, and the coronavirus as reasons to keep close watch on commodities markets in the coming months. In addition, agricultural commodities markets may experience even further uncertainty due to weather and climate extremes, the report says.

While 2019 wheat production is still forecast at an all-time high, expectations fell in December due to cuts from Australia and the Russian Federation. Wheat utilization rates for 2019-2020 increased slightly at the end of the year; this increase is based on an expected 3.2 percent expansion in global feed use. Larger anticipated imports by several Asian countries, as well as increased sales from the EU and Ukraine, are expected to drive up wheat trade for 2019-2020. Several countries lowered their ending stock expectations this month due to higher domestic use and increased exports; however, AMIS still forecasts global wheat ending stocks for 2020 to increase from last year.

Expectations for 2019 maize production rose in December based on reported increases in China, the EU, the Russian Federation, and the U.S. Maize utilization rates for 2019-2020 are also expected to increase more quickly than originally forecast based on stronger feed use in the Russian Federation, Vietnam, and the U.S. Stronger than anticipated import demand will help 2019-2020 maize trade reach the record levels seen in the previous year, according to AMIS. Global ending stocks, on the other hand, are forecast to decline by 5.4 percent from last year.

Rice production for 2019 was downgraded in December due to revisions from Laos and Myanmar; over all, reduced planting is expected to lower global rice output by 0.5 percent from 2018. At the same time, rice utilization for 2019-2020 is forecast to reach a historical high due to increased per capita food use. Rice trade expectations declined this month due to lower than anticipated shipments from India and Thailand. While rice reserves held by several major exporting countries are expected to reach to a five-year high in 2019-2020, larger expected import demand will result in slightly decreased global ending stocks.

Forecasts for 2019-2020 soybean production remained unchanged this month; increased forecasts for Brazil and China were balanced out by lowered expectations for India, Canada, and Argentina. Soybean utilization rates for 2019-2020 increased slightly based on larger feed use in China. Forecasts for 2019-2020 soybean trade were reduced slightly despite higher Chinese imports. Overall global ending stock expectations remained unchanged this month and continue to forecast a steep decline in global stocks from last year.

AMIS expectations for fertilizer prices see declines for ammonia and potash due to weaker demand and increased inventories, respectively. Urea prices remained largely unchanged this month but fell from last year. Decreased supplies in the U.S. drove up expectations for DAP prices. Natural gas prices continued to decline this month due to a warmer than usual winter in the northern hemisphere.

Sara Gustafson is a freelance writer.

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