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FAO Food Price Index Sees Slight Rise for Third Consecutive Month

The latest FAO Food Price Index , released this week, rose 1.1 points from March. This is the third consecutive month that the Index has risen, but levels remain almost 10 percent below those seen in April 2015. This latest increase was driven mainly by increased vegetable oil quotations, combined with smaller gains in cereal prices.

The Vegetable Oil Index rose 6.6 points from March. This increase can be attributed to rising palm oil prices; these reached a 17-month high in April due to low expected production and increasing global demand. Soy oil prices also firmed in April based on less favorable production prospects in South America.

The Cereal Index rose 2.2 points in April but remains down 10.4 percent year-on-year. Maize prices saw the largest increase, driven by a weakening US dollar and spillover from higher vegetable oil prices. Wheat prices, on the other hand, remained stable due to favorable weather expectations and large projected global supplies. Rice prices fell slightly in April due to falling quotations for the Japonica variety.

The latest AMIS Market Monitor also came out this week and reports that wheat and maize production are projected to increase in 2016, despite unfavorable weather in some regions. For wheat, utilization is also expected to decrease based on declines in the amount of wheat used for feed; due to this and larger than expected inventories in Russia and Ukraine, the report finds that wheat ending stocks will decline by less than previously thought.

For maize, production is expected to increase by 1.2 percent despite weather-related declines in output in southern Africa. However, utilization is expected to see large increases of as much as 24 percent, leading maize ending stocks to potentially decline by as much as 5 percent.

Soybean production is expected to drop by 4.9 million tons, according to the report, based on poor weather conditions throughout South America, particularly Argentina. Utilization predictions also declined slightly, but overall soybean ending stocks are predicted to fall by 3.3 million tons as South American countries release their inventories to meet export commitments.

For rice, production in 2016 should remain generally unchanged; utilization is expected to rise by 1.5 percent, surpassing production for the second consecutive year. This will mean a reduction in global ending stocks of 3 percent, with the majority of this decline seen in major exporting countries.

The AMIS report also provides an update on the 2015-2016 El Niño cycle, which weakened in April and should reach neutral conditions in the coming months. Drought conditions could persist through May-June in southeast Asia and northern South America; southeast Brazil and Uruguay, on the other hand, are predicted to see continued above average rainfall. By July, according to the report, no further effects of El Niño are expected, but looking beyond the end of the northern hemisphere growing season, there may be a transition to La Niña conditions by November.

By: Sara Gustafson, IFPRI