Food Price Index Declined in August, While Rice Prices Spiked

The FAO Food Price Index fell by around 2 percent in August, driven by declines in cereal, vegetable oil, dairy, and meat indices. This decline placed the Index 24 percent below the peak seen in March 2022. The major exception was rice prices, which saw a significant increase in August.

The Cereal Price Index declined by 0.7 percent from July and by 14.1 percent from August 2022. Seasonal increases in availability in the northern hemisphere drove wheat prices down by almost 4 percent, while maize prices declined to their lowest level seen since September 2020 based partly on a record harvest in Brazil. On the other hand, rice prices rose by almost 10 months to reach a 15-year (nominal) record high; this increase can be largely attributed to India’s recent ban on Indica white rice exports and the subsequent trade implications.

The Vegetable Oil Price Index fell by 3.1 percent in August, with palm, sunflower, soy, and rapeseed oils all declining month-on-month. Good production conditions in the U.S. and ample global supplies supported the decline in soy oil prices.

The Dairy and Meat Price Indices fell by 4 and 3 percent, respectively, in August, while the Sugar Price Index increased by 1.3 percent.

The latest AMIS Market Monitor also highlighted rising rice prices as a result of India’s export ban coupled with concerns about the impacts of El Niño. The report similarly emphasized the potential of the recent termination of the Black Sea Grain Initiative to disrupt wheat markets and cause price volatility in the near term.

Global wheat production is expected to be 2.6 below 2022 levels due to poor weather conditions in Canada, the EU, and China. Wheat utilization forecasts increased in August and are expected to be above 2022-2023 levels. Global wheat trade forecasts fell due to declines in exports from Australia and Ukraine, while total wheat ending stock prospects rose slightly.

Global maize production forecasts increased in August due to higher production in Brazil, India, and Ukraine. Maize utilization prospects remained stable, with utilization still expected to rise by almost 2 percent due to increased feed use. Global maize trade forecasts fell in August based on lower exports by Ukraine and the U.S. and lower demand in Asia. Total global maize ending stocks are now expected to rise by over 6 percent above opening levels.

Rice production forecasts for 2023-2024 fell in August due to lowered expectations in several major producing countries. Rice utilization prospects increased, driven by higher expectations for food and industrial use in India. Global rice trade forecasts fell, largely a result of India’s export ban, while global rice ending stock prospects remained largely unchanged in August.

Global soybean production expectations for 2023-2024 fell in August due to dry weather conditions in the U.S. Overall utilization prospects also declined slightly, despite the fact that global soybean consumption is expected to increase by 6 percent over 2022-2023 levels. Soybean trade forecasts fell based on smaller expected exports from the U.S. and lower import demand in Egypt, the EU, and Vietnam. Total soybean ending stocks are still expected to rise above their opening level.

Fertilizer prices rose across the board in August following over a year of decline. Urea prices rose by almost 10 percent from July, although this increase was tempered later in the month due to news of ample supplies in China and the effect of declining maize prices on demand. Potash prices also rose due to strong demand in Brazil. Nitrogen-based fertilizer prices were driven up by tight supplies in several regions.  

Natural gas prices remained stable in the U.S. but saw significant volatility in Europe. AMIS reports that natural gas supplies remain at high levels, which should help stabilize supply concerns.