FAO Food Price Index Declines in September, But High Food Prices Remain a Concern

The latest FAO Food Price Index reports that global food prices fell by 1.5 percent in September. However, the Index remains 5.5 higher than its September 2021 level. The decline from August was driven by significant drops in vegetable oil prices and more moderate drops in sugar, meat, and dairy products; cereal prices rose in September.

The Cereal Price Index increased by 1.5 percent in September to reach 11.23 percent above its September 2021 level. Wheat prices increased by 2.2 percent due to concerns over Ukrainian exports after November, dry weather in North and South America, and increased exports and internal demand in the EU. Maize prices remained generally stable, while rice prices also rose by 2.2 percent. This rise was driven largely by export policy changes in India and production and marketing disruptions following severe flooding in Pakistan.

The Vegetable Oil Index fell by 6.6 percent in September to reach its lowest level since February 2021. Palm oil prices fell for the sixth straight month due to rising production in Southeast Asia coupled with high global inventories. Soy prices also dropped due to increased export volumes in Argentina. Falling crude oil prices also played a role in declining vegetable oil prices.

The Dairy and Sugar Price Indices fell by 0.8 percent in September, while the Meat Price Index fell by 0.6 percent.

While overall global food prices have declined from the peak seen in early 2022, however, they remain concerningly high. According to the latest AMIS Market Monitor, many countries around the world have seen food prices increase by between 10 and 30 percent from last year. Continuing global risks include low stocks, poor weather conditions, continued high fertilizer and energy costs, and the impacts of the conflict in Ukraine.

Global wheat production is forecast up this month due to improved production prospects in several major producing areas. AMIS reports that 2022 wheat production could reach a record high. Wheat utilization prospects for 2022-2023 also increased marginally due to higher feed use in the EU. Global wheat trade forecasts remained generally unchanged in September, while global wheat ending stocks are forecast higher due to increased harvest prospects in the Russian Federation. Global wheat ending stocks are anticipated to increase by 3.2 percent above opening levels.

Global maize production forecasts declined sharply in September due to reduced prospects in the US and the EU. Global production is now forecast to be 3.7 percent below 2021 levels. Maize utilization for 2022-2023 is also expected to fall below 2021-2022 levels due to lower anticipated feed use. Global maize trade forecasts remained unchanged in September. Global maize ending stocks were revised down in September due to reduced production tallies in Brazil and the US; ending stocks are expected to fall by 5.3 percent from their opening levels.

Global rice production forecasts declined in September, driven largely by revised prospects in China and Pakistan. Rice utilization is expected to be 0.7 percent below its 2021-2022 high due to declines in feed use. Global rice trade forecasts also declined in September, with trade anticipated to by 1.4 percent below the expected level for 2022. Global rice ending stock forecasts rose in September, with stocks now anticipated to reach their third highest level on record.

Soybean production forecasts for 2022-2023 remained unchanged in September, as did utilization prospects. Global soybean trade forecasts fell slightly due to reduced export volumes in the US and reduced imports from China. Global soybean ending stock forecasts also declined due to lower forecasts for the US and Argentina; global stocks are anticipated to be below the five-year average.

Natural gas prices fell slightly in September due to seasonally lower household demand and increased liquified natural gas imports. However, decreased supplies from the Russian Federation continue to drive high prices and concerns over supply in the EU. DAP and potash prices also declined somewhat in September, driven by lower demand for both products; potash prices were also influenced by increased exports from Belarus and high inventories in several other producing countries. Ammonia prices rose slightly, driven by reduced production and high demand from the EU; however, the price increase was tempered by adequate global supplies and increased exports from China. Urea prices rose significantly in September, driven by increased demand from the EU.