World Ag Prices Advance in May

ROME - Jun 7/18 - SNS -- International agricultural commodity prices advanced in May, with the FAO Food Price Index averaging 176.2 points during the month, up 1.2% from April.

The main reason was strength in dairy markets. The Dairy Price Index gained 5.5% in May, averaging 11.5% higher than a year earlier. Tight supplies in New Zealand, the leading exporter of dairy products, are behind much of the market firmness in recent months.

The FAO Cereal Price index rose 2.4% from April, marking a 17% increase on the year to reach its highest level since January 2015. Wheat values increased largely on concerns over production prospects in a number of major exporting countries, while deteriorating harvest prospects in South America led coarse grain prices up. International rice prices were also firm, buoyed by sizable purchases by Southeast Asian buyers.

The FAO Vegetable Oil Price Index declined by 2.6% to a 27-month slow. Quoted prices for palm, soy and sunflower oils all dropped, due in part to large global inventories.

The FAO Meat Price Index fell marginally, while the FAO Sugar Price Index posted its sixth consecutive monthly drop, declining 0.5% from April, reflecting favorable harvesting conditions in major production areas in Brazil - the largest producer and exporter of sugar in the world.

STAT's world pulse price index inched up 1% in May to average 123.23 points on early season weather worries in Australia and Canada. Even so, prices averaged 14% less than the same month last year, when India remained a demand factor in world markets. Initial long term forecasts for Australia predicted conditions would remain dry through seeding in key pulse producing areas. However, current forecasts indicate western and southern Australia could receive soaking rains this month, which suggests yields could be better than feared.

More Positive World Cereal Outlook

In its latest Cereal Supply and Demand Brief, the FAO increased its forecast for the world cereal production in 2018 to 2,610 million metric tons (MT), which if confirmed would represent a 1.5% annual drop from the high level of the previous year.

FAO pegs this year's world wheat production at 754.1 million MT, up from the previous month's forecast on account of improved outlooks in several major producing countries, while predicting the production of coarse grains to stand at 1 345 million MT, down 3.2% from last year's record high due in part to farmers shifting to more profitable crops and to dry weather in some countries.

Worldwide rice output is expected to rise 1.3% from the 2017 level to set a new record of 511.3 million MT, with the increase primarily reflecting improved prospects for India.

The new FAO report offers the latest forecasts regarding cereal utilization and also trade - which is expected to reach a record high in the coming year.

The forecast for global cereal stocks at the close of seasons ending in 2019 was raised by 5% since the last report in May to 772 million MT, with most of the revision reflecting an upward adjustment to the historical estimates of China's maize stockpiles. However, despite the month-on-month increase, world cereal stocks would still be down 5.4% from their opening level.

The new estimates point to a relatively high global cereal stock-to-use ratio of 28.5%, though down slightly from the 2017-18 season.