The FAO Food Price Index spiked sharply in November to hit its highest level in almost six years and the largest month-on-month increase since July 2012. The steep rise was driven by increases in commodity prices across the board.
The Cereals Price Index rose 2.5 percent from October and 19.9 percent from November 2019. Tightening export supplies and lowered harvest forecasts in Argentina drove wheat prices up, while maize prices rose on cuts to production estimates in the U.S. and Ukraine and high demand from China. Rice prices remained steady in November, as reduced demand and adequate harvests in several major producing regions balanced tight export supplies in South East Asia.
The Vegetable Oil Price Index rose the most in November, gaining 14.5 percent from October to reach its highest level since March 2014. Palm oil prices drove the spike, increasing for the sixth straight month based on sharply lowered global supplies, reduced production, and strong import demand. Soy oil prices also rose due to reduced export supplies in South America and increasing import demand. Rising petroleum prices also played a part in the spike in vegetable oil prices.
The Dairy, Meat, and Sugar Price Indices also increased in November, by 0.9 percent, 0.9 percent, and 3.3 percent, respectively.
The latest edition of the AMIS Market Monitor remains confident about global supplies despite reductions in production forecasts for all crops covered by the report. However, the Monitor continues to highlight the increased risk of food insecurity that low-income and food-deficit countries are facing due to the COVID-19 pandemic. These risks include diminished purchasing power, disruptions to domestic supply chains, and higher food imports due to rising global prices.
AMIS forecasts for wheat production fell based on reduced prospects in Argentina, Brazil, and Kazakhstan. Wheat utilization for 2020-2021 is expected to increase slightly due to higher demand for food use. Wheat trade remained unchanged from the previous month; trade is still anticipated to reach its 2019-2020 record. Forecasts for global wheat ending stocks rose by 1.9 million tons based on adjustments to China’s inventories and revisions to estimates of opening stocks in the EU.
Maize production is expected to reach a record high in 2020 despite a sharp reduction in output forecasts in the U.S. and Ukraine. Maize utilization for 2020-2021 is also expected to increase based on stronger demand for feed use. Trade forecasts also rose in November, reflecting an increasing pace of purchasing from China. Global maize ending stocks fell by 10 million tons; inventories in the U.S. decreased the most and are anticipated to fall to the lowest level since 2013-2014.
Rice production estimates decreased slightly based on reduced prospects in Bangladesh and Vietnam. Utilization for 2020-2021 is still expected to increase, with food use potentially reaching an all-time high and other uses remaining close to 2019-2020 levels. Rice trade expectations for 2021 also rose in November despite reductions in expected shipments from China, Thailand, and Vietnam. Global rice ending stocks declined slightly based on lower expectations for India, Vietnam, and the Philippines; however, increased forecasts for stocks in China and Thailand helped temper the decline.
Soybean production forecasts also declined slightly in November based on downward revisions for the U.S. and Argentina, but global production is still expected to reach record highs. Utilization expectations also increased; AMIS expects global soybean consumption to increase by 3.5 percent from last year. Soybean trade forecasts rose slightly from last month due to strengthening import demand from several countries; however, global trade is forecast to decline slightly from 2019-2020. Global soybean ending stocks could reach a seven-year low based on the latest revisions, which include reductions in the U.S., China, and Argentina.
Major fuel and fertilizer prices continued to rise in November. Natural gas prices increased again as cold weather arrived in the northern hemisphere. Ammonia prices rose due to constrained supplies, higher demand for phosphate production, and increased seasonal use in the U.S. Supply constraints also drove up urea prices, particularly in the U.S., while U.S. potash prices rose by over 10 percent from October due to high seasonal demand. DAP prices were the outlier, flattening slightly based on steady supply and balanced demand.