Trade

The FAO Food Price Index rose again in June for the fifth consecutive month, based largely on surging sugar prices and more moderate increases for cereals, dairy, and meat. The 6.6 point increase represents the largest monthly movement in the last four years.

The Cereals Index rose 4.4 points from May, but remains 3.9 percent below June 2015 levels. Strengthened maize prices drove most of this month's increases, as tightening export supplies in Brazil caused prices to rise.

The June FAO Monthly Report on Food Price Trends saw mixed trends for international wheat prices in May, but prices generally remained lower than May 2015. The benchmark US wheat price averaged USD 193 per tonne in May; this was down four percent from April and 17 percent below its May 2015 level. The report cites that this drop in price is due mainly to improved global 2016-2017 production prospects. Prices for EU (France), Black Sea, and Argentina wheat all rose slightly in May (by 2.3, 4, and 1.6 percent, respectively), but as noted, remain well below May 2015 levels.

The FAO’s biannual report on global food markets was released this month. The report provides an overview of global trends for several main agricultural products, including wheat, coarse grains, rice, oilcrops, meat, and milk and fishery products, as well as a special feature on pulses. The report also provides a country-level review of major policy developments for grains, rice, oilcrops, meat, and dairy.

In December 2015, the World Trade Organization reached an agreement on the Nairobi Package , the latest set of rules governing global trade. The agreement represents some progress on several major agricultural and food issues that have held up previous negotiations, including export subsidies , food aid, public stockholding for food security purposes, special safeguard measures for Least Developed Countries (LDCs), and the global cotton trade.

Soybean futures prices have seen a lot of movement in recent weeks, beginning in April when they twice saw record daily trading in combined futures and options volume on the Chicago market. Our early warning excessive food price volatility system has immediately reflected this trend, identifying extreme positive returns, i.e. returns that exceeds the 95% conditional quantile predicted by our NEXQ model . The days in which we observe excessive volatility are identified in the graph below.
Soybean Excessive Food Price Variability