FAO Food Price Index Rebounds in June

The FAO Food Price Index rose in June, making the first such increase in 2020. Higher prices for vegetable oils, sugar, and dairy products drove the 2.4 percent increase.

The Cereals Price Index continued to decline in June, falling 0.6 percent from May and 1.9 percent from June 2019. Harvests in the northern hemisphere coupled with improved production forecasts in the Black Sea region drove wheat prices down, while reduced trade resulted in a slight decline in rice prices. Maize prices rose, however, based on poor growing conditions in the U.S. and recovering global demand. The Vegetable Oils Price Index rose significantly in June, up 11.3 percent from the previous month. Palm oil prices led the increase due to strengthening global demand, concerns over production shortfalls due to COVID-19-related labor shortages. Soybean and sunflower oil prices rose based on strengthened demand as well as limited export supplies. The Dairy and Sugar Price Indices rose by 4 and 10.6 percent, respectively. The Meat Price Index declined slightly by 0.6 percent. The latest AMIS Market Monitor was also released this week, reflecting favorable prospects for global supplies of staple commodities. However, the report also cautions about potential local market disruptions related to the COVID-19 pandemic that could threaten food security at the local and national levels. AMIS revised its 2020 wheat production forecast slightly in June due to increased production in India and favorable production prospects in Australia and the Russian Federation. Wheat utilization rates are forecast to fall from 2019-2020 based on slowing demand for feed and industry. Wheat trade for 2020-2021 is expected to increase slightly due to ample export supplies and competitive prices. Global wheat ending stocks are forecast up by 3.2 percent. Forecasts for 2020 maize production also increased to almost 6 percent above the record crop seen in 2019. Improved crop prospects in Brazil and the EU are driving the higher forecasts. Maize utilization forecasts remain nearly unchanged from May but are still expected to increase by 2.7 percent from the previous year due to increased demand for feed and industrial use. Trade for 2020-2021 is expected to rise above the 2019-2020 record by 1.2 percent based on abundant export supplies and relatively low global prices. Maize ending stock prospects fell slightly in June but global stocks are still expected to set a new record at more than 10 percent higher than the previous season. Global rice production forecasts rose slightly in June based on improved prospects in several South American producers. Rice utilization is expected to reach a record high; increased food assistance programs and abundant supplies have increased utilization in both Asia and Africa. Expectations for rice trade for 2021 remained generally unchanged in June, although trade is forecast to rise overall for the year based on increased exports from India and Thailand. Global rice ending stocks are forecast down slightly from the previous years based on larger drawdowns in China, Indonesia, and Bangladesh. Forecasts for 2020-2021 soybean production were reduced slightly in June based on downward revisions for India and the Ukraine, but global production is still expected to rise from the previous year. Soybean utilization rates are forecast slightly down. Soybean trade for 2020-2021 is expected to increase from the previous year based on growing demand in China. Overall global ending stocks are expected to fall slightly from the previous year as several countries have downgraded their inventory forecasts. Prices continue to decline in the energy sector, according to the latest AMIS report. Natural gas, ammonia, urea, and potash prices all declined in June. Slowing demand and increased inventories, stemming from milder weather in the northern hemisphere and from the COVID-19 pandemic, contributed to the continued decline. DAP prices, on the other hand, rose slightly due to recovering demand but remain well below the previous year’s prices. Sara Gustafson is a freelance writer.