F.A.O. sees no respite from grain price strength

by Josh Sosland
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ROME — Agricultural commodity prices are likely to remain high and volatile for the balance of 2011 and into 2012, according to analysis published June 7 by the Food and Agriculture Organization of the United Nations.
Declining grain stocks and modest increases in prospective production were cited by the F.A.O. as underpinning its forecasts.

“The next few months will be critical in determining how the major crops will fare this year,” the group said. “Although prospects are encouraging in some countries such as the Russian Federation and Ukraine, weather conditions, featuring too little and in some cases too much rain could hamper maize and wheat yields in Europe and North America.”

The F.A.O. analysis was published in the groups’ biannual Food Outlook publication.

“The general situation for agricultural crops and food commodities is tight with world prices at stubbornly high levels, posing a threat to many low-income food deficit countries,” said David Hallam, director of F.A.O.’s markets and trade division.

The F.A.O. noted that food prices globally slipped about 1% in May from levels that were comparable to those in the 2007-08 food crisis. The organization’s food index was 232 points in May, down from a revised 235 in April but up 37% from May 2010.

Prices for cereals and sugar slipped in May, contributing to the slight weakness. Meat and dairy prices moved higher during the month.

Global wheat output was projected by the F.A.O. to be up 3.2% in 2011 from 2010, largely because of improved prospects for the Russian Federation.

“Demand for cereals has also been increasing so that the 2011 crops, even at record levels, are expected to barely meet consumption, providing support to prices,” the F.A.O. said. “But the Russian Federation’s announcement that it will remove its cereals export ban from July 2011 could help relieve some of that pressure.”

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