F.A.O. Food Price Index declines, but shows signs of stabilizing

by Eric Schroeder
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ROME — The Food and Agriculture Organization of the United Nations said the F.A.O. Food Price Index was 192.3 in October, down 0.4 points, or 0.2%, from September. It was the seventh consecutive monthly decline, but the 0.2% drop was in sharp contrast to the steep declines of 3% in each of the past two months.

“A firming of international prices of oils and, especially, of sugar, compensated for a retreat of dairy and meat, while cereal prices remained stable around their relatively low September value,” the F.A.O. said.

The F.A.O. Cereal Price Index was at 178.4 points in October, up 0.5 points from 177.9 points in September, but down 18.2 points, or 9.3%, from October 2013.

“After five months of steep falls, international prices of wheat and coarse grains firmed slightly in October, supported by harvest delays in the United States (maize) and deteriorating prospects in Australia (wheat),” the F.A.O. said. “On the other hand, rice prices tended to soften on newly harvested supplies and a slowing pace of sales.”

The Meat Price Index averaged 208.9 points, down 2.3 points from 211.2 points in September, reflecting lower bovine meat and pig meat prices. Despite the month-over-month decline, the F.A.O. said quotations for most types of meat remained at historic highs, and the Meat Price Index was 21.6 points, or 11.5%, above its corresponding level in 2013.

The Dairy Price Index averaged 184.3 points, down 3.5 points from September. The F.A.O. said quotations for butter and whole and skimmed milk powder fell, while those for cheese were unchanged. The decline in October represented the eighth consecutive monthly decline, bringing the Dairy Price Index to its lowest level since August 2012.

The Sugar Price Index averaged 237.6 points in October, up 9.5 points from 228.1 points in September.

“Last month’s rebounding mainly followed reports of a smaller-than-expected sugarcane crop in drought-affected areas in Brazil,” the F.A.O. said. “However, against a backdrop of ample supplies, international sugar prices remain more than 10% below their level in October 2013.”

The Vegetable Oil Price Index was 163.7 points in October, up 1.7 points from September, ending a string of month-over-month declines dating back to April.

“Palm oil strongly contributed to the reversal, as production slowdowns in Malaysia and Indonesia, combined with a revival in global import demand caused palm oil prices to strengthen after six consecutive months of contraction,” the F.A.O. said. “Sunflower seed quotations also rose, mostly reflecting smaller than anticipated harvests in the Black Sea region. By contrast, soyoil prices weakened further, still driven by the prospect of ample availabilities.”

The Food Price Index consists of the average of five commodity group price indices weighted with the average export shares of each of the groups for 2002-04. In total, 73 commodity quotations considered by F.A.O. commodity specialists as representing the international prices of the food commodities are included in the overall index.

The F.A.O. also released its Cereal Supply and Demand Brief, noting  bumper crops may boost global cereal stocks to a 15-year high. The organization trimmed its forecast for 2014 world cereal production by about one million tonnes from October. At 2,522 million tonnes, the full year production figure would be 3.7 million tonnes below 2013’s record output, the F.A.O. said.

The F.A.O. indicated the downward revision reflected a dimmer outlook for China’s maize production, which more than offset upward revisions of maize output figures in the United States. World maize production is expected to reach 1,014 million tonnes, down about 3.6 million tonnes from the F.A.O.’s earlier forecast but still 3.8 million tonnes above last year’s peak.

Meanwhile, the forecast for global wheat production was raised by 4 million tonnes to 722.6 million tonnes, reflecting larger production in the European Union and Ukraine than previously expected.

The forecast for rice production held at 496.3 million tonnes, unchanged from the October forecast but 0.3% below 2013. If the forecast holds it would be the first decline in global rice production since 2009, the F.A.O. said.

Global cereal utilization in 2014/15 is forecast at 2,459 million tonnes, up 1.7% from 2013/14.

“Most of the anticipated increase is expected to concern feed use of cereals, which is foreseen to rise by 2.6% to 874 million tonnes,” the F.A.O. said. “The predicted expansion is largely driven by this season’s ample supplies and lower prices. Even in the case of wheat, which is mainly a food crop, feed use is set to grow significantly, by 6.6%, reflecting large quantities of low quality feed wheat in markets. Total use of cereals for direct human consumption is set to expand by 0.9% in 2014/15, to 1,104 million tonnes, which would result in global per caput consumption remaining stable at around 153 kg. Industrial use of cereals is expected to remain generally steady, with use of grains for biofuel production (mostly ethanol) unchanged from the previous season.”
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