FAO Food Price Index Reaches Six-Month High
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The FAO Food Price Index rose for the third consecutive time in August to hit a a six-month high in August. The 2 percent increase was driven by cereals, vegetable oils, and sugar prices
The Cereals Price Index rose 1.9 percent from July and 7 percent from July 2019. Recent damage to the U.S. maize crop drove global maize prices up by 2.2 percent, while global rice prices rose due to seasonally reduced availability and increased demand from Africa. Wheat export prices rose as a result of reduced production prospects in Europe and increased demand toward the end of the month. The Vegetable Oil Price Index rose by 5.9 percent in August to reach its highest level since January. Palm oil prices drove most of the gains, as production slowdowns in several countries and strong global demand led to reduced inventory forecasts. Soy oil values also rose due to higher than expected demand from the U.S. biodiesel industry. The Sugar Price Index rose by 6.7 percent, while the Meat Price Index and Dairy Price Index both remained stable. The latest edition of the AMIS Market Monitor reports favorable supply prospects for major staple crops in 2020-2021. However, the report still highlights the threat to food market stability posed by the COVID-19 pandemic and calls for increased global cooperation to maintain a secure flow of food in the coming months. AMIS forecasts for 2020 wheat production declined slightly due to downward revisions in the EU, Argentina, and the U.S. Overall wheat utilization is forecast to increase from 2019-2020; while feed demand is expected to decrease and industrial demand to remain stable, demand for food use is expected to rise. Wheat trade is also seen to increase in 2020-2021 due to growth in both demand and export supplies. Expectations for global wheat ending stocks fell slightly from July, stocks are still expected to increase by 2 percent from their opening levels to reach the second highest recorded level. Maize production is expected to reach a record high in 2020, despite recent crop damage and subsequent reduced production prospects in the U.S. Maize utilization is expected to increase due to rising demand for feed and industrial use. Maize trade is forecast to reach a record high in 2020-2021, driven by ample export supplies and strong import demand from Asia. Global ending stock forecasts fell by 7.3 percent, based largely on recent crop damage in the U.S., but are still expected to reach a record high. AMIS forecasts for 2020 rice production remained unchanged in August, with production still expected to reach a record high. Expectations for 2020-2021 rice utilization increased slightly due to higher than expected feed and industrial use, particularly in China. Rice trade expectations fell somewhat in August but trade is still expected to increase by around 6 percent in 2021 due to expected increased imports from Africa. Global rice ending stocks are expected to decline slightly due to reduced stocks in China but will remain at around their third highest level on record. Soybean production for 2020-2021 is expected to increase due to higher forecast production in the U.S. and Brazil. Forecasts for soybean utilization also increased based on higher than expected use in China, the EU, and the U.S. Soybean trade for 2020-2021 is expected to be driven up by higher import demand from China, the EU, and Argentina and increased exports from Brazil and the U.S. Global soybean ending stocks are forecast up by 8 percent from July’s forecasts, with overall ending stocks expected to rise slightly from last year. Natural gas prices rose by over 25 percent between July and April due to hotter than average temperatures in the northern hemisphere and the start of the southern hemisphere planting season, and the price of several fertilizers followed suit. Urea prices rose as a result of higher input prices, increased demand from Brazil and India, and reduced supply from China. DAP prices also rose due to disruptions in supply from North Africa. Ammonia prices remained generally stable in August thanks to ample global inventories. Potash prices, on the other hand, fell for another month in both the U.S. Gulf and the Baltic; this decline is due to large global supplies.