FAO Food Price Index Records Decline in August

rice in a wooden bowl
rice in a wooden bowl

The Food and Agriculture Organization of the United Nations (FAO) has reported a decline in international food commodity prices in August, particularly for staples other than rice and sugar.

The FAO Food Price Index, a measure of monthly changes in global prices for internationally traded food commodities, averaged 121.4 points in August. This represented a 2.1 percent decrease from July and marked a substantial 24 percent drop from its peak in March 2022.

The FAO Vegetable Oil Price Index experienced a decline of 3.1 percent in August, partially offsetting a significant 12.1 percent increase in July. Notably, sunflower oil prices plummeted by nearly 8 percent due to weakened global import demand and increased supply from major exporters. Meanwhile, soy oil prices decreased due to improved soybean crop conditions in the United States, and palm oil prices saw a moderate decrease as Southeast Asian countries witnessed seasonal increases in production.

The FAO Cereal Price Index recorded a 0.7 percent decline from July. International wheat prices fell by 3.8 percent, driven by higher seasonal supplies from leading wheat exporters. Similarly, international coarse grain prices decreased by 3.4 percent, thanks to ample global maize supplies resulting from a record harvest in Brazil and the forthcoming harvest in the USA.

In stark contrast, the FAO All Rice Price Index surged by 9.8 percent from July, reaching a 15-year nominal high. This increase was attributed to disruptions in the rice trade following India’s ban on Indica white rice exports, a significant global rice exporter. Concerns regarding the duration of the ban and export restrictions led to supply chain disruptions, contract renegotiations, and limited trade volumes.

The FAO Dairy Price Index declined by 4.0 percent in August, driven primarily by abundant supplies of whole milk powder from Oceania. International butter and cheese prices also experienced declines, partly due to reduced market activities during the European summer holidays.

The FAO Meat Price Index witnessed a 3.0 percent dip, with ovine (sheep) prices leading the decline due to increased export supplies from Australia and weaker demand from China. Robust meat supplies also contributed to lower prices for pig, poultry, and bovine meats.

Conversely, the FAO Sugar Price Index rose by 1.3 percent from July, with August prices standing 34.1 percent higher than the previous year. This increase was driven by concerns about the impact of the El Niño phenomenon on sugarcane crops, coupled with below-average rainfall in August and persistent dry conditions in Thailand. However, the large sugarcane crop currently being harvested in Brazil mitigated upward pressure on global sugar prices, as did lower ethanol prices and the depreciation of the Brazilian Real.

The FAO’s Cereal Supply and Demand Brief also provided insights into the world cereal production forecast for 2023. Predictions indicate a 0.9 percent increase in global cereal production compared to the previous year, reaching 2,815 million tonnes, equivalent to the record output achieved in 2021.

While global wheat production is expected to decrease by 2.6 percent compared to 2022, coarse grain output is projected to rise by 2.7 percent, with maize production reaching a new record of 1,215 million tonnes, driven by robust yields in Brazil and Ukraine.

World rice production in 2023/24 is anticipated to recover by 1.1 percent from the previous season, despite a slight revision since July.

World cereal utilization for the upcoming season is forecasted at 2,807 million tonnes, reflecting an increase of 0.8 percent from the 2022/23 level.

World cereal stocks at the close of the 2023/24 marketing season are predicted to reach 878 million tonnes, marking a 2.2 percent annual increase. This indicates an overall comfortable global supply level from a historical perspective, with a world stocks-to-use ratio for cereals of 30.5 percent, as per FAO’s assessment.

Moreover, world rice stocks are expected to reach an all-time high of 198.1 million tonnes, driven by India and China, which together hold a substantial portion of these reserves.

FAO has revised its projection for world cereal trade in 2023/24 to 466 million tonnes, representing a 1.7 percent decline from the previous marketing season. Lower volumes of wheat and maize trade are expected, partly due to trade disruptions related to the ongoing conflict in Ukraine. Additionally, FAO has adjusted its forecast for world rice trade considering increased export restrictions by India. The duration and extent of these restrictions remain uncertain, and they could impact the anticipated recovery in rice trade in 2024, particularly if El Niño-related production constraints affect other Asian rice-exporting nations, FAO cautioned.

The FAO’s comprehensive report provides valuable insights into the dynamics of global food prices and cereal production, offering valuable information for policymakers, industry stakeholders, and consumers alike.

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