Improved cereal production expected but staple food prices also rise – UN agricultural agency

8 September 2016

Despite a fall in global grain prices and the expectation of improved cereal production, global staple food prices have risen in August, the United Nations Food and Agricultural Organization (FAO) said today.

Releasing its Food Price Index, a measure of the monthly change in international prices of a basket of food commodities, the FAO said today that the Index’s August average was 165.6 points, up 1.9 per cent from July and almost seven per cent higher compared to the corresponding period last year.

“The monthly jump was mostly driven by cheese and palm oil quotations, while those for wheat, maize and rice all fell,” FAO noted in a news release today.

The agency also raised its world cereal production forecast for the year to 2,566 million tonnes, up 22 million tonnes (0.85 per cent) from July projections.

According to the FAO Cereal Supply and Demand Brief, also released today, the primary reason for the increase is the anticipated record global wheat harvest and a large upward revision to this year’s maize crop in the United States of America.

The higher forecast of maize production has also pushed up the expected coarse grain global output for the year to around 1,329 million tonnes, some 2.1 per cent higher than in 2015, the UN agency said.

It further noted that the wheat output forecast has been raised to 741 million tonnes, driven because of upward revisions to projections in Australia, India, Russia and North America. Rice production, too, is expected to hit a new record this year at almost 496 million tonnes, owing to favourable weather conditions in much of Asia and more farmers in the United States shifting to the crop.

“The expected increase in grain output is forecast to boost inventories and push up the global stock-to-use ratio to 25.3 per cent, an even more comfortable (supply and demand) situation than predicted at the start of the season,” FAO said.

Additionally, the agency did not significantly change its forecast for world cereal utilization in the coming year, which is expected to grow by 1.6 per cent, led by maize – and to some extent lower-quality wheat supplies – used as animal feed.

FAO also said that its Dairy Price Index rose 8.6 per cent; the Vegetable Oil Price Index rose 7.4 per cent; the Sugar Price Index rose 2.5 per cent; and the Meat Price Index remained broadly stable, rising 0.3 per cent.

On the other hand, on the back of increased cereal production expected, the FAO Cereal Price Index declined by 3.0 percent from July and is 7.4 per cent below its August 2015 level.

 

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