FAO food prices record eleventh consecutive downward slide in February

By Business AM

The benchmark index of international food commodity prices declined in February for the eleventh consecutive month, averaging 129.8 points in the month, a marginal 0.6 percent drop from January 2023, but 18.7 percent down from its peak in March 2022,according to the Food and Agriculture Organization of the United Nations (FAO).

The decline in the FAO food price index, which monitors monthly changes in the international prices of a basket of commonly-traded food commodities, reflected drops in the prices of vegetable oils and dairy products that more than offset a steep rise in sugar prices.

The FAO vegetable oil Price Index was down 3.2 per cent from January, with the world prices of palm, soy, sunflower seed and rapeseed oils all lower.

Similarly, the FAO Dairy Price Index fell 2.7 per cent in February, with butter and skim milk powder international quotations registering the steepest decline.

Meanwhile,the FAO Cereal Price Index remained virtually unchanged from January. International wheat prices rose marginally during the month, as concerns over dry conditions in the U.S and strong demand for supplies from Australia were largely countered by a strong competition among exporters.

International rice prices were down 1.0 percent due to a slowdown in trading activities in most major Asian exporters, whose currencies also depreciated against the U.S dollar.

The FAO Meat Price Index also remained almost unchanged from January. However, world poultry prices continued to decline amid abundant export supplies, despite the avian influenza outbreaks in several leading producer countries. On the other hand, international pig meat prices rose, mostly due to concerns over tighter export availability in Europe.

By contrast, the FAO Sugar Price Index rose 6.9 per cent from January to its highest level in six years, due largely to a downward revision to the 2022/23 production forecast in India, as well as lower international crude oil prices and ethanol prices in Brazil.

Global cereal stocks to see strong performance in 2023

The FAO, in its latest Cereal Supply and Demand Brief,predicted a global outturn of 784 million tonnes, which would be the second highest on record, though down from the previous year. Strong outputs are also expected in North America, as farmers increase acreage in response to high grain prices.

In southern hemisphere countries, the production outlook for coarse grain crops in 2023 is generally favourable, and total maize plantings in Brazil are foreseen to reach a record level.

FAO has also revised upwards its projection for world cereal production in 2022 to 2.774 million tonnes, still 1.3 percent lower than in 2021.

Global cereal utilization in 2022/23 is forecast at 2 780 million tonnes, representing a 0.6-percent decline from the previous season, largely due to an anticipated contraction in the utilization of all major coarse grains.

FAO forecasts global cereal stocks ending in 2023 to decline by 1.2 percent from their opening levels, down to 844 million tonnes, as drawdowns in coarse grain and to a lesser extent rice stocks are foreseen to outweigh an expected build-up in wheat inventories. Based on the new forecasts, the world cereal stocks-to-use ratio is expected to stand at 29.5 percent, while world trade in cereals is predicted to contract by 1.8 percent to 473 million tonnes.