Global agri food commodity prices fell in June amid escalating trade tensions, says FAO

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International agricultural food commodity prices fell in June for the first time in 2018, as trade tensions affected markets even with global production prospects down, the UN food agency said in its latest monthly report.

The FAO Food Price Index averaged 173.7 points in June, down 1.3 percent from its level in May.

The decline was driven primarily by lower benchmark price quotations for wheat, maize and vegetable oils including those made from soybeans, the report said.

The FAO Cereal Price Index dropped 3.7 percent in the month. Despite overall worsening production prospects for the main grains, there were “relatively sharp falls” in international maize and wheat prices, reflecting heightened trade tensions. Rice prices, however, increased.

The FAO Vegetable Oil Price Index declined 3.0 percent from May to reach a 29-month low. Palm, soybean and sunflower oil prices all declined.

Heightened trade tensions between the United States of America and its trading partners, particularly China, weighed particularly hard on the US origin export prices, led by soybeans, with the strength of the dollar exerting further downward pressure.

The FAO Dairy Price Index dropped 0.9 percent as lower price quotations for cheese – reflecting greater export availabilities in the European Union and the United States of America – more than offseting a rise in Skim Milk Powder prices.

The FAO Meat Price Index inched up 0.3 percent from May, led by an upswing in ovine and pig meat values.

The FAO Sugar Price Index rose 1.2 percent, reversing six consecutive monthly declines, due mostly to concerns that dry weather in Brazil, the world’s largest sugar producing and exporting country, would negatively affect sugarcane yields and production.

FAO expects drop in cereal output and stocks

FAO also updated its forecast for world cereal output this year, now pegged at 2 586 million tonnes, which is 64.5 million tonnes or 2.4 percent less than the record production of 2017.

The new forecast issued in FAO’s Cereal Supply and Demand Brief, is 24 million tonnes less than projected by FAO last month, largely reflecting lower output prospects for wheat in the European Union and for wheat and coarse grains in the Russian Federation and Ukraine.

World cereal utilization is forecast to rise to 2 641 million tonnes in 2018/19.

As utilization is foreseen to outpace new production, global cereal stocks accumulated over the past five seasons will have to be drawn down, by around 7 percent from their season-opening levels. This should result in the world stocks-to-use ratio for cereals dropping to 27.7 percent, representing the first decrease in four years – down from 30.6 percent – although still well above the record low of 20.4 percent registered in the 2007/08 season.

The inventory drawdown is expected to be largest for maize, while rice stocks may increase for the third year in a row.

World trade in cereals is expected to remain generally robust also in 2018/19, close to near-record level of 2017/18.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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