Rising trade tensions drove the FAO Food Price Index down slightly in June. The 1.3-percent decline represents the first month-to-month drop since the beginning of 2018.

The Cereal Price Index fell by 3.7 percent but remains almost 8 percent higher than its June 2017 level. In June, wheat and maize prices fell sharply as a result of trade tensions, despite poor production prospects in many areas. Rice prices, on the other hand, rose based on tight supplies for some varieties.

The Vegetable Oil Price Index fell for the fifth straight month, declining 3 percent to reach a 29-month low. Palm, soybean, and sunflower oil prices all fell in June. Declining soybean prices are being driven by continuing trade tensions, as well as by accumulated country-level stocks.

The Dairy Price Index also fell in June by 0.9 percent but remains 2 percent higher than its June 2017 level. The Meat Price Index and Sugar Price Index both rose in June; sugar prices are being driven higher by concerns about production prospects in Brazil.

The latest edition of the AMIS Market Monitor also highlights the importance of trade tensions in a new Featured Article section. This section will go beyond the standard market analysis provided in the monthly report to provide a deeper look into important trends.
This month’s featured article looks at the impact that growing trade tensions are having on the world’s commodity markets. The report finds that in response to recent tariffs announced by the United States and retaliatory tariffs announced by China, Canada, the EU, and Mexico, future contract prices for maize, soybeans, and wheat declined by between 10 and 15 percent since June 1.

Soybeans will likely be most impacted by these trade tensions – China accounts for almost two-thirds of the world’s soybean imports, while the US accounts for around 40 percent of soybean exports to China. With the US expected to see a near-record harvest this year, US exports will likely be diverted to other markets and could displace more traditional suppliers; in addition, China will need to source soybeans or other oilseeds from suppliers outside of the US, which may drive up prices of non-US soybeans. To limit the negative impacts of these trade tensions in both the short and the long term, transparency and clarity ni global food markets will be needed.

According to the June Market Monitor, wheat production forecasts for 2018 declined slightly in June based on downward revisions in China, the EU, the Russian Federation, and Ukraine. Global wheat ending stocks were also revised downward in June. Maize production is expected to fall by 4 percent from 2017’s record volume, driven mainly by reduced production in Argentina, Brazil, and the US. Global maize ending stocks are also expected to fall to a five-year low based on increased drawdowns in the US and Ukraine. Rice and soybean production prospects remained virtually unchanged in June; soybean ending stocks, on the other hand, were revised up significantly based on upward revisions for the US, Brazil, and Argentina.

Global fertilizer prices saw overall upward movements in June, according to the Market Monitor. Ammonia prices rose based on slower global production combined with increased demand in Eastern Europe. Urea prices increased due to slowing Chinese exports and increased demand from India, while DAP prices increased based on slowing global production. Potash prices remained unchanged in June despite reduced global production.

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