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November Editions of the FAO Food Price Index and AMIS Market Monitor Released

The latest editions of the FAO Food Price Index and AMIS Market Monitor were both released on November 10. The FAO Food Price Index is a measure of the monthly change in international prices of a basket of five food commodity groups; the monthly AMIS Market Monitor covers the international markets for wheat, rice, maize, and soy and provides an overview of the market situation and outlook for each of these crops.

The FAO Food Price Index increased by 1.2 points from September to reach 172.6 points in October, which is 9.1 percent higher than October 2015. This month’s increases were predominantly driven by significant increases in the sugar and dairy sectors and moderate increases in cereal prices. Simultaneously, sharp declines in oil and meat prices lessened the overall intensity of price gains.

The Cereal Price Increase rose for the first time in three months to 142.3 points; this is still 9.6 percent below the year-earlier level. This moderate decrease was mainly driven by a good rice harvest and subsequent weak buying interest for rice. By contrast, global wheat prices increased slightly due to tightening supplies of high quality wheat.

The Vegetable Oil Price Index averaged 168 points in October, down 4 points (2.4 percent) from September. This decrease was mainly driven by improvements in palm oil production in Southeast Asia, coupled with low global import demand for palm oil. The drop in the index was mitigated by stable soy, sunflower, and rapeseed oil prices.

The Dairy Price Index experienced the largest monthly percent increase of all the indices, up 3.9 percent over September, continuing significant price increases since April. All dairy products experienced price increases, especially butter and cheese due to strong internal demand in the EU. Due to falling month-on-month milk production in the EU and Oceania, continued price rises are expected. By contrast, the Meat Price Index declined only marginally by 1 percent, mainly due to excess domestic supplies in the EU and a reduction in import demand in China.

The Sugar Price Index also rose by 3.4 percent from September, marking six consecutive months of price increases. This increase is mainly due to drier-than-normal weather in Brazil, the world’s largest sugar producer and exporter. Indications of a production shortfall in India also supported price increases.

The latest edition of the AMIS Market Monitor highlights that production of wheat, maize, rice, and soybeans generally have a favourable outlook for 2016-2017 due to favorable weather and planting prospects which will keep markets well-supplied at least until the end of the year. In this context, changes in international prices in all four crops are being mainly driven by short-term market events, including unseasonal strong trade activities and exchange rate movements.

Wheat production is expected to reach an all-time high of 747 million metric tons in 2016-2017, up 5 million tons from the October outlook. This increase is driven by generally favorable global growing conditions and higher outputs in Russia, Kazakhstan, and the Ukraine. Trade estimates were also raised by 3 million tons, as low wheat prices are expected to sustain imports. End-of-year stocks were revised up, with the largest increases predicted in China, Russia, and the US.

Maize production estimates for 2016 were lowered to 1,025 million tons due to expected production decreases in Brazil, China, the EU, and the US. Maize utilization was lowered slightly, while international trade increased due to strong import demand in the EU and Vietnam. End-of-year maize stocks were lowered slightly by 1 million tons due to reduced forecasts in China and the US.

Rice production remained relatively stable, with increased production in Thailand being offset by production decreases in Sierra Leone and Vietnam. Rice utilization and trade remained almost unchanged at 501 and 43.4 million tons, respectively. Similarly, end-of-year global stocks remained almost unchanged, decreasing by 1 million tons, as cuts in Bangladesh, India, and Thailand were offset by build-ups in China, South Korea, and the US.

Soybean production was revised up by 3 million tons to a record 333 million tons due to improved production in the US, Canada, Brazil, and Argentina. However, estimates for soybean production were reduced in Canada due to dry weather in Ontario. Soybean trade estimates were up slightly, and end-of-year stocks were revised upward to 39 million tons. However, global reserves remain at a three-year low.

The next updates to the FAO Food Price Index and AMIS Market Monitor will be released on December 8.