FAO Sees Steady Food Prices, Warns of Tight Supplies
Updated at 1360249025

After a volatile few months following the US drought, global food prices stabilized in January, according to the FAO's latest edition of the Food Price Index. The Index averaged 210 points in January, unchanged from a revised December average.

The Cereals Price Index dropped 3 points in January, mainly on improved crop conditions and slower global trade. Rice prices remained generally steady, while maize and wheat prices experienced declines. However, the latest edition of the AMIS Market Monitor reports that maize prices did experience a jump mid-month due to weather concerns in South America and higher-than-expected feed use predictions in the US.

Unlike cereals, the Oils and Fats Index rose in January, up 9 points. The rise was driven mainly by weather concerns for palm oil in Southeast Asia and soybeans in Brazil and Argentina. However, prices in January were still lower than those seen in the summer and fall of 2012.

While the FAO raised its estimated 2012 global cereal output to 2.302 billion metric tons, 2013 global cereal ending stocks are estimated at 495 million metric tons, down 3 percent from their opening level. Lower stocks are being driven by increased global use, which is estimated up nearly 13 million metric tons from last season. This increased use can be attributed largely to increased feed use and higher oil prices, which translate to higher transport costs that are then passed on to consumers. The FAO warns that while production estimates for 2013 are generally good, these tight global stocks mean that any negative shock, such as the 2012 US drought, could have a strong impact on prices.