Global food prices rebound in June – FAO

In June, global food commodity prices rose for the first time since the beginning of the year driven primarily by a ‘rebound’ in vegetable oils, sugar and dairy quotations, the Food and Agriculture Organisation (FAO) has said.

It, however, said in the cereal and meat markets, most prices remained under downward pressure amid market uncertainties posed by the COVID-19 pandemic.

According to the Food Price Index report published on Thursday on the FAO webpage which tracks international prices, most traded food commodities averaged 93.2 points in June, some 2.4 per cent higher than the previous month.

“Effective from July 2020, the price coverage of the Food Price Index has been expanded and its base period revised from 2002-2004 to 2014-2016.”

Specifics

It said the FAO Vegetable Oil Price Index gained 11.3 per cent in June after declining for four consecutive months.

“The rebound mainly reflects a sharp rise in palm oil prices due to recovering global import demand following the easing of COVID-19 related lockdowns in a number of countries and concerns over possible production setbacks amid prolonged migrant labour shortages.

“Price quotations of soy, sunflower and rapeseed oils also went up,” the report said.

The report said the FAO Sugar Price Index climbed 10.6 per cent in June from the previous month.

“The surge in crude oil prices provided strong support to sugar markets encouraging Brazil’s sugar mills to use more sugarcane supplies to produce ethanol instead of sugar thereby affecting sugar export availabilities and prices,” it said.

In the report, the FAO Dairy Price Index rose by 4.0 per cent from May marking the first increase after four months of successive declines.

“Renewed import demand for spot supplies especially from Middle East Asia, coupled with seasonally declining supplies in Europe and limited availability of uncommitted supplies in Oceania, underpinned the recent price increases,” the report said.

It said the FAO Cereal Price Index declined 0.6 per cent from May.

“Downward pressure on wheat prices in June was in part due to new harvests in the northern hemisphere and improved production prospects in a number of major exporting countries including the Black Sea region.”

In the report, the FAO Meat Price Index fell 0.6 per cent from May, averaging 6.0 per cent below its June 2019 value.

“Bovine meat and poultry price quotations fell largely due to increased export availabilities in major producing regions, whereas pig meat prices registered a small increase mostly in Europe on the expectation of the further easing of COVID-19 market restrictions.”

Forecast

The FAO’s Cereal Supply and Demand Brief was also released on Thursday.

It said “the world cereal production is Poised to reach a new record level of 2790 million tonnes in 2020 up 9.3 million tonnes from the May forecast surpassing the record high registered in 2019 by as much as 3.0 per cent.”

It said the wheat production forecasts have been raised for India and the Russian Federation more than offsetting a cutback to the EU and the UK expected outputs.

“The forecast of the world coarse grains production in 2020 has also been revised up to 1519 million tonnes up 5.7 million tonnes from the previous month reflecting expectations of larger outputs of barley in Australia, the EU and Turkey,” it said.

The report said, the FAO’s global rice production forecast for 2020 is now pegged at 509.2 million tonnes, 400,000 tonnes above June’s figure, “primarily reflecting improved prospects for South American countries where conducive weather raised yield expectations to all-time highs.”

“World cereal utilisation in the year ahead is forecast to rise to 2735 million tonnes -1.6 per cent up from the previous month’s forecast mostly driven by an upturn in feed and industrial uses of coarse grains compared to earlier expectations.

“World rice utilisation is also predicted to reach a fresh peak of 510.4 million tonnes in 2020/2021, 1.6 per cent up from June based on expanding food use,” it said.

Reflecting new production and consumption forecasts, FAO now expects world cereal stocks by the end of seasons in 2021 to reach 929 million tonnes, representing a robust year on year expansion of 6.0 per cent.

“This would drive the global cereal stock to use ratio in 2020/2021 to a twenty-year high of 33.0 per cent highlighting the comfortable global supply prospects in the new season,” it explained.