Uptick In World Food Costs

ROME - Oct 5/17 - SNS --- World food input prices managed to increase modestly in September, with the FAO's Food Price Index averaging 178.4 points, up 0.8% from August and up 4.3% from the same time last year.

The FAO Vegetable Oil Price Index increased by 4.6%, driven primarily by palm oil, although values for soy, rapeseed and sunflower oils also rose.

The FAO Dairy Price Index rose by 2.1% from August, driven by butter and cheese prices at a time of supply constraints in Australia, New Zealand and the European Union. Meat prices were broadly unchanged.

The FAO Cereal Price Index declined by 1.0%, as maize and wheat quotations fell in step with strong supply and harvest prospects. FAO expects the current growing season to yield record worldwide cereals output.

The FAO Sugar Price Index was unchanged for the month, but it was about 33% below its year-ago level - a decline due to oversupply in world markets and a slowdown in demand.

STATPUB's global pule price index averaged 173.5 points in September, down from 172.8 in August, but up from 171.9 during the same month last year. Slowing import demand from the Indian subcontinent and increased selling pressure relative to demand were key factors behind the downward adjustment.

Record Cereal Inventories

FAO updated its global cereal production forecast for 2017, raised to 2,612 million metric tons (MT), or almost 7 million MT above the record set in 2016, according to the Cereal Supply and Demand Brief, also released today.

September's forecasts were raised on account of robust wheat production trends in the European Union and the Russian Federation and expected maize outputs in China and the United States of America.

FAO now forecasts 750.1 million MT of wheat to be harvested in 2017 and 1 361 million MT of coarse grains, as well as 500.7 million MT of rice, slightly down from the previous forecast but close to last year's record output.

FAO forecasts world cereal stocks by the close of seasons in 2018 to reach a new all-time high of 720.5 million MT. That would take the stocks-to-use ratio of cereals - an indicator of the likely price direction - to 27%, well above the historical low of 20% registered exactly a decade ago.

The ratio is even higher - 34.6% - for wheat due to significant inventory build-ups in China and Russia.

World trade in cereals is expected to rise slightly over the marketing year to reach 403 million MT, a new record, led by much larger maize imports by China, the EU and the Islamic Republic of Iran. While Russia is set to consolidate its role as the world's largest wheat exporter, Argentina and Brazil are expected to be the main beneficiaries of the projected expansion in world trade in coarse grains.