FAO Food Price Index: Adverse weather conditions and African Swine Fever weigh in on meat and maize prices

07 Jun 2019 --- World food prices climbed in May, marking an increase for the fifth consecutive month, the FAO Food Price Index shows. They were driven up by an upswing in cheese prices and a jump in meat prices, amid strong import demand from East Asia, where an outbreak of African Swine Fever (ASF) over the last few months has decimated regional production. A sudden surge in maize prices also came about after diminished production forecasts in the US, where planting has been hindered following widespread flooding caused by heavy rainfall.

A deluge of rain in key cereal-growing regions in the US has led to some concerns over climate change. The planting of certain crops was slowed as farmers struggled with wet and marshy ground conditions. In late May, approximately 58 percent of the corn that could be planted was in the ground, while soybean planting remained under 30 percent, according to the US Department of Agriculture, which monitors crop progress during the planting season. 

The FAO Food Price Index, which tracks monthly changes in the international prices of commonly traded food commodities, averaged 172.4 points in May. This is a 1.2 percent increase from April, yet still 1.9 percent below its level in May 2018.

The FAO Dairy Price Index rose 5.2 percent from April, nearing a five-year high. The upswing, centered on cheese prices, reflected robust global import demand amid tight export availabilities from drought-ridden Oceania.

In cereals, wheat prices generally dipped, while rice prices were steady at a 1.4 percent climb, according to the FAO Cereal Price Index. 

The FAO Meat Price Index was also up marginally in May as pork price quotations continued to rise, amid strong import demand from East Asia. Bovine meat prices eased from their April highs, reflecting elevated global export supplies. China has culled more than one million pigs since ASF broke out in the country last August, ravaging farmed swine populations across the country. Live pig stocks have fallen as the country continues to get a handle on the outbreak. The ASF outbreak is also giving new opportunities to meat exporters from other markets, including India, which have been plugging the gaps in supply as China, the world’s largest consumer of pork, looks to alternative markets.

The FAO Sugar Price Index declined 3.2 percent for the month, as prospects of increased output in India, the world's largest producer, outweighed a reported 17 percent annual drop in production in Brazil. Weaker international energy prices, which reduced demand for sugarcane to produce biofuels, also negatively affected sugar prices.

The FAO Vegetable Oil Price Index declined 1.1 percent as palm oil values dropped on account of large inventory levels in leading exporting countries. Prices of soy, sunflower and rapeseed oils increased modestly.

Cereal outlook
The FAO reports a dim outlook for maize in particular. The organization’s latest forecast for world cereal production in 2019 – the Cereal Supply and Demand Brief – points to an increase of 1.2 percent from the previous year to reach 2685 million tons, a sharp downward revision from the forecast made in May when global cereal production was predicted to expand by 2.7 percent.

The year-on-year increase in global cereal production reflects expansions of wheat and barley production, while global rice output is likely to remain close to last year’s record level. Worldwide maize output, however, is now projected to fall, with US production expected to shrink by 10 percent from the previous year amid a much-reduced pace of plantings due to unfavorable weather conditions.

World cereal utilization in the year ahead is now forecast to reach 2707 million tons, which is still 1 percent higher than in 2018/19. Global rice utilization is predicted to reach 518 million tons, a 1.4 percent annual increase, while that of wheat is expected to grow 1.2 percent, reaching 755 million tons.

Based on the new estimates for production and utilization, world cereal stocks could decline by as much as 3 percent in the new season, hitting a four-year low of 830 million tons. The anticipated decline would result in the global cereal stock-to-use ration dipping below 30 percent, which, nonetheless, still points to a relatively comfortable supply level.

World trade in cereals is forecast to rise to 414 million tons, up 1.4 percent from the estimated level for the previous year, led by a strong rebound in wheat trade driven by a stronger import demand by several countries in Africa and Asia, combined with expectations of large export availabilities in the Black Sea region and the EU. 

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