The FAO Food Price Index continued its upward climb in January. The Index rose 4.3 percent from December 2020 to reach the highest monthly level seen since July 2014. As in previous months, cereal, vegetable oil, and sugar prices were behind the rapidly mounting prices.
The Cereal Price Index soared by 7.1 percent in January, marking the seventh consecutive month of rising cereal prices. Maize prices led the charge, rising by 11.2 percent due to lower than expected production and stocks in the U.S., temporarily suspended maize export registrations in Argentina, dry weather in South America, and higher purchases from China. This surge brought maize prices to the highest level since 2013 and 42.3 percent higher than the levels seen just one year ago in January 2020. Wheat prices also rose strongly by 6.8 percent, driven by increased global demand and reduced sales forecasts from Russia; that country’s wheat export duty is set to double in March.
The Vegetable Oil Index increased by 5.8 percent in January to reach its highest level since May 2012. Soy oil prices rose for the eighth straight month due to reduced exports and ongoing labor strikes in Argentina. Palm oil prices also climbed to the highest level seen in eight and a half years; this increase was driven largely by lower production due to excessive rainfall in Indonesia and Malaysia.
The Dairy, Meat, and Sugar Price Indices also all rose in January, by 1.6, 1.0, and 8.1 percent, respectively.
The latest issue of the AMIS Market Monitor also cites the surge in many international commodity prices, particularly maize prices. In addition to hurting consumers, rising food prices could also have a detrimental effect on food assistance programs, limiting the ability of donor countries and development partners to provide aid when it’s needed most.
The report also calls for continued attention to food markets as the impacts of COVID-19 play out. The February editorial presents a stark picture of global food security, suggesting that up to 270 million people in low-income countries may face acute hunger as a result of the pandemic. The authors also highlight the high external debt of many low- and middle-income countries and the challenges faced by the world’s labor force due to increasing automation, lack of internet access, and slow job creation in many regions. These trends will all present significant barriers to income-generation and food security in the years ahead.
Forecasts for wheat production in 2020 reached a record high in January based on significant increases in Australia, Canada, and Iraq. Wheat utilization estimates for 2020-2021 fell slightly as high prices in the EU reduced feed use. Rising import demand from China, Iran, Morocco, and Pakistan helped keep wheat trade estimates near their 2019-2020 highs. Wheat ending stocks are also expected to rise based on increased estimates in Australia, the EU, and Russia.
AMIS forecasts 2020 maize production will still reach a record high despite decreases in Ukraine and the U.S. Maize utilization forecasts also rose in January based on increased feed use in China; 2020-2021 maize utilization is expected to be 2 percent higher than last year. Forecasts for 2020-2021 maize trade surged thanks to significantly larger purchases from China. That country’s maize imports could reach 20 million tons. Global maize ending stock forecasts fell due to significant decreases in Chinese and U.S. inventories.
Global rice production expectations rose thanks to higher than expected harvests in several major producing countries. Rice food use is expected to outpace population growth, while non-food uses are forecast to rebound from the lows seen in 2019-2020. Trade forecasts rose based on expected recovery in several Far Eastern and West African countries. Total global ending stocks should match their opening levels to reach their second highest level on record.
Soybean production expectations for 2020-2021 fell in January based on revisions in Argentina and Brazil and lowered estimates for the U.S. However, overall production is still up by 7 percent from 2019-2020. Soybean utilization is forecast to grow by 3.7 percent from the previous year due to higher use in China. Trade estimates rose due to higher import demand from China, while global inventories are anticipated to fall to a seven-year low based on revisions from Argentina, Brazil, and the U.S.