FAO Food Price Index Declines Slightly But Remains Above February 2019 Levels

The Cereal Price Index fell by 0.9 percent in February, a result of price declines for all major grains except rice. Amply supplied wheat markets and falling demand due to coronavirus fears spurred lower wheat prices; maize prices also declined thanks to falling demand from the feed sector. Rice prices, however, rose slightly due to tight supplies in the Americas and Vietnam and increased demand. The Vegetable Price Index plunged by 10.3 percent from January. This is the first decline in vegetable oil prices seen since July 2019. Falling palm oil prices had the biggest impact and were driven by higher expected output in some countries, lower demand in others, and fears about the overall global economy in the midst of the coronavirus outbreak. Soybean oil prices also dropped due to coronavirus fears, coupled with higher than expected supplies in the U.S. The Meat Price Index also fell by 2 percent in January after 11 months of consistent increases. The Sugar Price Index and Dairy Price Index both rose in February, by 4.5 and 4.6 percent, respectively. The latest AMIS Market Monitor also highlights the coronavirus pandemic’s potential to cause uncertainty and disruption in global markets, including agricultural markets. Despite these fears, however, the report presents positive news as well, including expected near-record global wheat production. In addition, analysis presented in the report’s editorial section suggests that the impacts of the coronavirus on food markets will mostly be local. Wheat utilization expectations for 2019-2020 were increased this month due to upward revisions from India and China (due to increased production) and Canada (due to reduced exports). Wheat trade expectations fell slightly but remain higher than trade seen in 2018-2019. Global wheat ending stocks are forecast up this month. Overall, AMIS forecasts 2020 global wheat production to reach 763 million tons. Global 2019 maize production forecasts increased in February due to increased reports from several producer countries. Maize utilization in 2019-2020 is expected to grow by almost one percent thanks to increased food use in Nigeria and industrial use in North America. Maize trade will also increase by 1.4 million tons. Global maize ending stocks are forecast up slightly in February, but they remain significantly below their opening levels. Global rice production forecasts remained generally stable in February, with increased prospects in India and South Korea balancing declines in prospects in Thailand. Rice utilization rates fell, but 2020 rice trade is still forecast to rise by 3.6 percent due to increased import demand from Africa. Overall global rice ending stocks are forecast up this month, putting them just below their record opening level. Soybeans are anticipated to see improved harvest prospects in Brazil and Argentina, leading to increased global production forecasts this month; however, soybean production for 2019-2020 is still expected to be about 5 percent lower than the previous year. Soybean utilization is also forecast up due to recovery in China’s hog industry and higher crush forecasts in Argentina, Brazil, and India. Soybean trade in 2019-2020 rose thanks to increased import demand from China for feed use and expected increases in shipments from the U.S. and Brazil. Global soybean ending stocks fell this month, supporting expectations of a decline in global stocks from the previous year. Forecasts for major energy markets varied in February. Natural gas prices fell again in February due to lower coal prices and warmer temperatures in the Northern Hemisphere. Urea and DAP pries also declined in the Black Sea and western European markets but increased in the U.S. Gulf markets due to increased domestic demand. Potash prices also fell despite reduced production in the Northern Hemisphere. Ammonia prices increased slightly due to short supplies in western Europe and increased global demand.