Food commodity prices rise amid “worrisome” rice hikes and Ukraine export uncertainty, reveals FAO

08 May 2023 --- The UN Food and Agriculture Organization (FAO)’s Food Price Index has increased amid higher international quotations for sugar, meat and rice. According to the FAO’s latest figures, the benchmark index of global food commodity prices rose in April for the first time in a year.

Meanwhile, prices for wheat, maize, dairy products and vegetable oils are in decline.

The FAO Food Price Index, which tracks monthly changes in the international prices of commonly-traded food commodities, averaged 127.2 points in April 2023, up 0.6% from March.

At that level, the Index was 19.7% below its level in April 2022 but still 5.2% higher than in April 2021.

“It is important that we continue to closely track the evolution of prices and the reasons for price increases. As economies recover from significant slowdowns, demand will increase, exerting upward pressure on food prices,” comments FAO chief economist Maximo Torero. 

“At the same time, the increase in rice prices is extremely worrisome, and it is essential that the Black Sea initiative is renewed to avoid any other spikes in wheat and maize,” he adds.

Sugar and meat prices rise 
The FAO Sugar Price Index rose significantly by 17.6% from March, reaching its highest level since October 2011. The sharp increase was due to reduced production expectations and outcomes in India, China, Thailand and the EU caused by dry weather conditions and a slow start of the sugarcane crop harvest in Brazil.The FAO Meat Price Index grew largely due to higher pig meat quotations, which increased amid Asian import demand.

Another factor is higher international crude oil prices, which can increase demand for sugarcane-based ethanol.

The FAO Meat Price Index also rose by 1.3% during the month, driven primarily by higher pig meat quotations, followed by poultry prices, which increased amid Asian import demand and production curbs spurred by animal health issues. 

International bovine meat prices also increased due to a decline in cattle supplies for slaughter, especially in the US.

Declines still prevalent 
In the meantime, price indices for other major food commodity categories, except rice, continued their declining trend.

The FAO Cereal Price Index dipped 1.7% from March and averaged 19.8% below its April 2022 value. 

International wheat prices declined 2.3% due to sizable exportable availability in Australia and Russia. 

World maize prices fell 3.2% as supplies in South America seasonally increased with ongoing harvests. On the other hand, against a backdrop of reduced yields caused by higher input costs and adverse weather, especially outside of Asia, sales to Asian buyers sustained an increase in international rice prices.

The FAO Vegetable Oil Price Index declined by 1.3%, registering its fifth consecutive monthly decline. World palm oil prices were stable, while quotations for soy, rapeseed and sunflower oils fell with seasonal harvest pressure from Brazil’s potentially record soybean crop.

The FAO Dairy Price Index dropped by 1.7%, impacted by the persistent slack global import demand for milk powders and higher cheese export availability in Western Europe.

Production and trade forecasts
In a new Cereal Supply and Demand Brief, FAO adjusted its world wheat production forecast for 2023. The global outturn is now pegged at 785 million metric tons, the second largest on record. However, it is down from last season primarily on declines in Australia and Russia from their record 2022 outputs.

Brazil’s production is expected to reach a record high for maize, while that of Argentina is projected to drop below average levels due to prolonged dry conditions and heat waves. 

Conducive weather conditions have bolstered yield expectations in South Africa, which expects the second-highest harvest on record.World maize prices fell 3.2% as supplies in South America seasonally increased with ongoing harvests.

Meanwhile, 2023/24 prospects for rice production along and south of the equator are mixed, largely due to the regionally varied impact of the La Niña event. In the future, the possible emergence of the El Niño phenomenon during the northern hemisphere summer will need to be closely watched. 

FoodIngredientsFirst recently reported that La Niña has left the global atmospheric scene after a three-year presence. That could relieve some drought-affected areas, such as the Horn of Africa, but may spell trouble for other regions.

FAO raised its earlier projection for world trade in cereals in 2022/23 to 472 million metric tons, now some 2.2% below its record level in the previous season. 

Further, global wheat trade is forecast to rise 2.3%, while global trade in coarse grains will likely be 5.5%. International trade in rice in 2023 is predicted to contract by 4.4% year-to-year.

Last week, the European Commission announced “exceptional and temporary preventative measures” to allow some nations to limit the import of foodstuffs coming from Ukraine and ease logistical bottlenecks. The restrictions to free food circulation will apply to wheat, maize, rapeseed and sunflower seed and can be enforced in Bulgaria, Hungary, Poland, Romania and Slovakia, effective from May 2 until June 5, 2023.

World cereal utilization in 2022/23 is forecast at 2,780 million metric tons, and worldwide stocks by the close of the season stand at 855 million metric tons. Based on these latest forecasts, the 2022/23 global cereal stocks-to-use ratio would stand at 29.8%, down slightly from 30.8% during the previous 12 months. However, these levels still indicate a relatively comfortable supply globally, FAO underscores.

Edited by Elizabeth Green