Photo Credit: CIMMYT

The FAO Food Price Index remained virtually unchanged in August, although cereal prices rose as a result of declining crop prospects. At 167.6 points, the Index is around 9 percent lower than its August 2017 levels.

The Cereal Price Index rose by 4 percent from July and by 10 percent from August 2017. Reduced production prospects in the EU and Russia drove wheat prices up by 8 percent month-to-month. Spillover from these higher wheat values, coupled with slower sales from Argentina and Brazil, also drove maize prices up slightly. Rice prices declined in August as rice-producing countries attempted to reduce stocks in anticipation of new harvests.

The Vegetable Oil Price Index fell in August by 1.5 percent. This decline was driven mainly by weakening demand for palm oil and good production prospects for both soy oil and sunflower oil.

The Meat Price Index remained virtually unchanged in August, while the Dairy Price Index fell by almost 3 percent. The Sugar Price Index also fell in August by 5.4 percent; this marks the lowest level in a decade.

The latest edition of the AMIS Market Monitor also cites shifting cereal crop prospects as a major trend in August. Parts of the EU and the Russian Federation have experienced periods of prolonged dryness and excessive heat in recent months, leading to a reduction in production forecasts for wheat. Maize and soybean production, on the other hand, is forecast up in August due to higher expected yields in the US for both crops and increased soybean planting in Brazil. Similarly, rice production for 2018 is expected to reach record levels.

Global fertilizer prices rose for the most part in August, with the exception of potash, which remained unchanged from July. Ammonia, Urea, and DAP prices all rose in the face of decreased production in various countries. Natural gas prices also increased due to higher-than-average temperatures in the Northern Hemisphere, which significantly increased demand for cooling.

The Market Monitor also reports that currency depreciation will be having a strong impact on food markets. Argentina, Brazil, and Russia have all experienced a significant depreciation of their currencies against the US dollar in 2018. As these emerging market countries are also all major exporters of agricultural commodities, these currency movements could prove destabilizing for global commodity markets. While higher interest rates and higher prices for energy and agricultural inputs could offset the impacts of currency depreciation in these markets, it remains to be seen how food market stability will respond.

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