FAO Food Price Index Continues Decline, But Concerns over Black Sea Grain Initiative Remain

Commodity prices continued to fall in June, according to the FAO Food Price Index, which declined 1.4 percent from its May level. This reflects at 23.4 percent drop from June 2022.

The Cereal Price Index declined 2.1 percent from May and 23.9 percent from June 2022. Maize prices fell for the fifth month in a row, due largely to the current harvests in South America and to improved weather conditions in the United States. Wheat prices also fell due to harvests in the Americas and to a decrease in wheat export taxes in Russia. Rice prices fell by 1.2 percent, driven by reduced demand.

The Vegetable Oil Price index fell by 2.4 percent in June to reach the lowest level seen since November 2020. Palm oil and sunflower oil prices fell the most due to higher seasonal outputs and ample supplies. Soy oil prices, on the other hand, rose in June due to poor weather prospects in the United States.

The Dairy and Sugar Price Indices fell by 0.8 and 3.2 percent, respectively, while the Meat Price Index remained largely unchanged in June.

The July AMIS Market Monitor reflects adequate global stocks for major staple commodities but emphasizes the risks posed by recent events in Ukraine and Russia for long-term food price stability and food security. The collapse of the Nova Kakhovka dam and the damage to an important Russian ammonia pipeline could both threaten the continuance of the Black Sea Grain Initiative; termination of that agreement would reduce grain and oilseed exports from the key Black Sea region and negatively impact global food trade and prices. The flooding caused by the dam collapse also has strong negative implications for local food production and food security, which has already been greatly threatened by the ongoing conflict. AMIS reports that these challenges will extend well beyond the 2023 planting and harvest season.

Global wheat production forecasts for 2023 increased in June, as did utilization expectations. Global wheat trade for 2023-2024 is forecast higher than the previous month due to strong demand from China and increased exports from Canada, but overall trade is still expected to be lower than the record high seen in 2022-2023. Global wheat ending stocks are expected to be above opening levels.

Maize production forecasts for 2023 remained stable in June; production is still expected to be approximately 4 percent higher than 2022. Maize utilization is also expected to increase by almost 2 percent due to increased feed use in Brazil, China, and the United States. Global maize trade is forecast to fall due to declining demand in the EU and reduced exports from Ukraine and Paraguay. Global maize ending stock forecasts fell slightly in June but total stocks are still expected to be above opening levels.

Global rice production expectations rose slightly, while utilization forecasts remained unchanged. Trade forecasts fell slightly due to import reductions in several countries; global trade is expected to be around 5 percent lower than 2022-2023. Global rice ending stocks are forecast up slightly from last month.

Soybean production prospects fell slightly in June due to reduced forecasts in the United States. Utilization expectations increased, while trade forecasts remained unchanged. Global soybean ending stock forecasts fell due to downward revisions in the United States, but total ending stocks are still expected to rise by 17 percent from their opening levels.

Natural gas and fertilizer (ammonia, urea, DAP, and potash) prices also continued to decline in June, due in part to seasonal lower demand in the Northern Hemisphere. AMIS points out, however, that natural gas prices did experience higher volatility in June due to concerns over future supplies coming from the Black Sea region.