World Food Prices Inch Higher

ROME - Mar 2/17 - SNS -- International food ingredient prices inched higher in February for the seventh month in a row, with the FAO Food Price Index averaging 175.5 points, its highest value in almost two years, marking a 0.5% increase from its revised January value and 17.2% above its February 2016 level.

The FAO Cereal Price Index rose 2.5% from January, led by increasing prices for wheat, even as maize and rice prices also posted modest increases.

FAO's Food Price Index is a trade-weighted index tracking international market prices of five major food commodity groups. Increases were reported for four of the five sub-indices in February.

The FAO Vegetable Oil Price Index bucked the trend, declining 4.1% amid slowing global import demand for palm oil along with higher soy crop forecasts for Brazil and Argentina, two important exporting countries.

The FAO Meat Price Index rose 1.1%, buoyed by higher bovine meat prices as ranchers in Australia rebuilt their herds. The Dairy Price Index rose slightly, led by butter and whole milk powder.

The FAO Sugar Price Index rose 0.6% in February, as ongoing supply tightness in Brazil was only partly offset by expanded beet plantings in the European Union.

The FAO does not track pulses, but STAT's world pulse price index bucked the trend for other field crops, dropping from an average 205.09 points in January to 196.07 in February.

First forecasts for 2017

FAO also released its first forecast of global wheat production in 2017, projecting 744.5 million metric tons (MT), which would signal a 1.8% decline from its record 2016 level.

Farmers in North America reduced plantings in favor of higher-priced crops, while winter wheat prospects are robust in the Russian Federation, the EU, China, India and Pakistan, according to the Cereal Supply and Demand Brief.

Prospects for coarse grains production, mainly maize, are generally favorable in the Southern Hemisphere, where the crop is in its final development stage. Large increases are forecast for Argentina and Brazil, while wetter conditions in most of Southern Africa point to a significant recovery from last year's drought-reduced output, although an outbreak of armyworms could limit production gains in some countries of the subregion.

Prospects for 2017 paddy crops along and south of the Equator remain mixed, and output and consumption are predicted to grow modestly.

The global cereal supply and demand situation in 2016/17 is poised to remain "broadly comfortable" for the third consecutive season, FAO said.

Total use of wheat for direct human consumption is expected to rise by 1.1% in the year ahead, while feed utilization to increase by as much as 6%. Worldwide wheat inventories are anticipated to rise by 6.6%, or 15 million MT, to nearly 240 million MT, led by stock build-ups in Australia, China, Russia and the U.S.

World trade in cereals in 2016/17 is forecast at 393 million MT, a slight drop from the previous marketing year, reflecting a sharp 4.5% reduction in the trade of coarse grains even as trade in wheat is anticipated to grow by 3% and that in rice at a brisk 4% clip.