Food Price Index Falls for Third Consecutive Month
The FAO Food Price Index fell for the third consecutive month in April as global markets continue to see the effects of COVID-19. The 3.4-percent decrease brought the Index to the lowest point seen since January 2019.
The Cereal Price Index saw the smallest decline in April and remains 4 percent higher than its March 2019 levels. The decrease stemmed mainly from global maize markets, which fell for the third straight month. Large export supplies and good production in South America combined with slowing demand for maize for feed and fuel use to drive down maize prices in April. Wheat prices, on the other hand, rose by 2.5 percent. This increase was driven by strong demand and concerns about the export quota imposed by Russia in late March. Rice prices also increased in April by 7.2 percent due to concerns over temporary export quotas from Vietnam which were later repealed. The Vegetable Oil Price Index fell by 7.2 percent to reach its lowest level since August 2019. Global prices of palm oil, rapeseed oil, and soy oil fell due to slowing demand and higher than expected output. Sunflower oil prices rose in April thanks to concerns over supplies and subsequent strengthening demand. The Dairy, Meat, and Sugar Indices all fell in April by 3.6, 2.7, and 14.6 percent, respectively. The latest AMIS Market Monitor also reports significant declines in both food and fuel prices at the global level. Wheat production in 2020 is expected to remain at near-record levels, while wheat utilization for 2020-2021 will likely experience stagnation as demand for feed and fuel use falls. Global wheat trade forecasts see a small overall decline despite good export prospects in Australia and Canada. Overall wheat ending stocks are expected to increase slightly due to build-ups in China; however, when data from China is excluded, global stocks are forecast to fall by 5 percent to the lowest level since 2013. Maize 2019 production expectations remained unchanged in April; overall reported production was higher than 2018 levels by around 2 percent. Forecasts for maize utilization fell due to declining demand for feed and fuel use in the face of COVID-19. Maize trade for 2019/2020 is still expected to increase slightly, a result of strong export supplies. Overall maize ending stocks rose significantly, another impact of falling feed and fuel use. Reported rice production for 2019 fell in April, due largely to reduced yields in Pakistan and Nigeria. Rice utilization forecasts also declined with reduced industrial use in China. Rice trade is forecast to fall in 2020 to levels close to those seen in 2019, when trade was significantly depressed. Overall rice ending stocks rose slightly. Soybean production for 2019-2020 is expected to decline due to poor production prospects in South America. Utilization forecasts also fell in April; this is largely the result of declining demand in South America and Europe. Soybean trade for 2019-2020 is forecast up slightly due to upward revisions for imports from China; other countries in Southeast Asia reduced their import forecasts. Overall soybean ending stocks are expected to increase thanks to build-ups in the US, upward revisions to Brazil’s carry-in stocks, and replenished stocks in China. Natural gas prices continued to plunge in April, as COVID-19 continues to drive down economic activity and collapse oil prices. In the US, ammonia and urea prices rose with the start of the domestic planting season; prices varied throughout Europe, while ammonia prices dropped significantly in the Middle East. DAP prices rose slightly in the US but remain low globally. Potash prices remain at a near-12-month low. The AMIS report also calls for international cooperation and collaboration to help stabilize food markets and soften the impact of economic shocks caused by the COVID-19 pandemic. The April editorial, with contributions from IFPRI, highlights the negative impacts of reactionary policies like export restrictions and quotas. During the 2007-2008 food price crisis, export restrictions from several major cereal producers and subsequent removal of import tariffs from several major importing countries led to significant increases in both food prices and food price volatility. In today’s environment, according to the editorial’s authors, ample global cereal supplies and lower risk of supply chain disruptions for those staples will hopefully stave off policy behavior like that seen in 2007-2008. However, policymakers need to continue to work cooperatively in order to ensure the flow of food and crucial agricultural inputs across borders. Sara Gustafson is a freelance writer.