Sugarcane harvester in Brazil. Photo credit: flickr (John McQuaid)

The FAO Food Price Index averaged nearly 162 points in October, up 3.9 percent from the previous month. This was the sharpest increase since July 2012, but the index is still down 16 percent from this time last year.

While the FAO’s Cereal Price Index rose by only 1.7 percent, the Sugar Price Index surged 17.2 percent amid fears that excessive rains in the main growing regions in Brazil would impact the sugarcane harvest. Reports of drought in India and Thailand were also a factor. The sharp jump reversed the sub-index's decline since February. The Vegetable Oil Price Index also increased by 6.2 percent, with concerns intensifying over El Niño’s potential effects on next year’s palm oil supply in Indonesia and the weather in Brazil slowing soybean planting as well.

Even though it raised its forecast for global wheat production, FAO's Cereal Supply and Demand Brief reduced its overall global cereal production estimates for October to 2.53 billion tons (1.1 percent below last year's record output). Half of the cut in cereal production estimates is attributable to reduced expectations for maize crops in India and Ukraine, primarily due to adverse weather, while drought in Thailand prompted a reduction in the seasonal rice harvest projection. Still, world cereal stocks are expected to remain at a comfortable level, with global wheat inventories rising to their highest level in 15 years.

The Dairy Price Index rose 9.4 percent due to concerns that milk output in New Zealand would decline. The Meat Price Index was stable.

The latest AMIS Market Monitor reported that while international prices for all four AMIS commodities (wheat, maize, rice, and soybeans) rose slightly in October, they remained below the corresponding period last year due to generally frail import demand (especially in the case of wheat and maize). Rice stocks for 2015/2016 were raised since October but are still expected to shrink year-on-year, particularly in major exporting countries. Maize production decreased more than anticipated in October, reflecting lower prospects in India, the US and Ukraine. Utilization in 2015/2016 is expected to increase by 1.4 percent year-on-year, well below the pace of growth in the previous two seasons, and lower shipments from Argentina, EU, Ukraine and the US is projected to lead to a decline in trade despite increased sales from Brazil and Russia.

The Market Monitor also increased their forecast of global soybean production for 2015/2016 by one million tons based on improved prospects for production in Brazil and the EU. Stocks are projected to hit 6.7 percent above the record 2014/2015 levels, and expectations for exports from Brazil and Argentina have increased.

For information on additional commodities and more price and crop forecasts, read the full reports:

FAO Food Price Index
AMIS Market Monitor No.33 – November 2015
WASDE 547

BY: Rachel Kohn, IFPRI

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