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FAO Food Price Index Continues to Surge

The FAO Food Price Index continued to surge in May, rising 4.8 percent from the previous month. Prices are now 38.9 percent higher than May 2020 and the highest seen since September 2011. This twelfth consecutive month of increases also brings the Index just 7.6 percent below the record highs of February 2011.


The Cereal Price Index rose 6 percent from April and 36.6 percent from May 2020. Maize prices saw the most significant increase – 8.8 percent from the previous month and 89.3 percent from 2020. Reduced production prospects in Brazil coupled with strong global demand to drive prices up. While wheat prices declined later in the month due to improved crop conditions in several major producing regions, they still registered an increase of 6.8 percent month-on-month and 28.5 percent year-on-year in May. Rice prices remained generally steady as high shipping costs kept trade activity down.


The Vegetable Oil Price Index rose 7.8 percent in May. Palm oil prices rose to their highest level since February 2011; this increase was driven by slow production growth in Southeast Asia and increased global demand. Soybean oil prices were driven up by increased demand, largely for biodiesel.


The Dairy, Meat, and Sugar rose by 1.5, 2.2, and 6.8 percent in May, respectively.


The latest edition of the AMIS Market Monitor also took note of the continued rise in global food commodity prices. In addition, the report highlighted potential vulnerabilities in global supplies of some major crops, including grains and soybeans. As global demand begins to rebound as economies recover from the COVID-19 pandemic, any shortfalls in production could have a significant impact on inventories. What happens in the next few months will be critical for food market functioning.


Global wheat production forecasts for 2021 increased in May due to improved conditions in several major producing regions. Expected maize utilization also increased, driven largely by higher feed use in China. Wheat trade forecasts rose based on higher import expectations in several countries. Global wheat ending stocks are forecast to be higher than previously expected, particularly in Australia, India, Pakistan, and Turkey.


Global maize production is expected to reach a new record in 2021; maize production is forecast to increase 3.7 percent from 2020 due to higher than anticipated harvests in China, the EU, Ukraine, and the U.S. Maize utilization is forecast up by 2 percent due to increased demand for industrial and animal feed use. Global maize trade is expected to grow slightly based on higher import demand from China, the EU, Mexico, and Turkey. Global maize ending stocks for 2021 are expected to fall by 2.7 percent from the previous year.


Global rice production forecasts rose in May by 1 percent, driven by increases in Asia, West Africa, and Australia. Utilization for 2021-2022 is expected to grow by 1.4 percent due to increased demand for food and feed use. Rice trade is forecast to grow in 2021 despite slowing import expectations for several African countries. Global rice ending stocks are forecast up marginally, as accumulations in several regions offset large stock drawdowns in China.  


Global soybean production is expected to reach a record high in 2011-2022, based largely on harvests in the U.S., Brazil, and Argentina. Soybean utilization is also forecast up by around 2.6 percent from last season due to increased livestock production and feed demand in China. Trade is forecast up slightly based on expanding imports by China and exports from South America. Global soybean ending stocks may recover from the low seen last season but will still remain well below recent years.


Natural gas prices continued to rise in May, largely due to interrupted supplies in the U.S. Potash prices also increased in May due to increased seasonal demand. Ammonia and Baltic DAP prices both remained steady in May, but DAP prices in the U.S. rose slightly based on restrictions that impacted imports from Russia and Morocco. Urea prices fell slightly due to strong supplies in the Middle East and Russia. Fertilizer prices were steady in May but remain at the highest level in 12 months.