Uptick in Food Prices, But Trend Lower
ROME - Jun 2/16 -SNS -- International food price indices showed a modest upward tendency in May, judging from the latest index calculations from the FAO.
The FAO food price index inched up 2% during May to 155.8 points, though dropping 7% below last year. Even so, the FAO believes "food commodity markets are on a stable path for the year ahead, with solid production prospects and abundant stocks pointing to a broadly stable outcome for prices and supplies."
This will have a significant impact on world trade in food. Lower average price should stimulate trading volumes, but lower average prices could see the dollar value of world trade end up around U.S. $986 million, dropping under $1 trillion for the first time since 2009.
Wheat production in 2016 will outstrip utilization for the fourth year in a row, boosting inventories of the world's most important cereal to a 15-year high, with major surges in China and the United States.
Total wheat utilization will actually decline marginally as more of the world's farmers turn to maize to feed their livestock. That's an increasingly popular option in China, where the government's decision to lower maize reserves is expected to boost consumption of that coarse grain. China's move should have important effects on international markets, leading to sharp declines in demand for barley and sorghum. Dwindling international trade may intensify competition among major exporters, FAO said.
Decisions to release government stockpiles may also affect rice prices, which began to stabilize in late 2015 after a prolonged decline, and even rebounded in May.
Dairy prices are projected to remain weak, while fish prices appear poised to remain contained due to a vibrant aquaculture production. Meat production in general is expected to be stable although poultry output - largely for export - is forecast to grow.
Upward price pressures do exist for vegetable oils as soy output in South America and palm oil in Southeast Asia were subject to heavy losses in the wake of El Nino and production prospects have deteriorated. Global palm oil output is expected to shrink for the first time in 18 years, FAO said.
Food Price Index Up in May
The FAO's updated Food Price Index rose for the fourth month in a row in May, increasing by 2.1% from April to 155.8 points - still some 7% below the level reported one year ago. Prices rose across the index - a trade-weighted index tracking international market prices for the cereals, vegetable oils, dairy, meat and sugar commodity groups - with the exception of vegetable oils, which subsided after a strong hike in April.
The FAO Sugar Price Index led the increase, surging 11.7% from the previous month, as deteriorating production prospects in India, the world's number two sugar producer, outweighed a bumper crop and large export availabilities in Brazil, the leading producer.
The FAO Cereal Price Index rose 1.6% from April, led by a sharp increase in maize prices and buoyed by stronger quotations for Indica and aromatic rice varieties.
The FAO Meat Price Index rose 2%, spurred by brisk import demand from Asia for pigmeat from the European Union.
The FAO Dairy Price Index, which is 24% below its level of a year-ago, also eked out a 0.4% increase thanks to improved prices in the EU and sustained international demand for whole milk powder and butter.
The FAO Vegetable Oil Price Index declined 1.8%, as palm oil receded after three months of sharp gains. Import demand for the food industry mainstay was weaker than anticipated in China, India and the EU.
STATPUB's world pulse price index rose 3% in May, reaching 247.32, for its eighth consecutive monthly increase.
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