Commodity prices continue to rise but could be tempered by good production forecasts: FAO and AMIS

The FAO Food Price Index continued to rise in March for the tenth consecutive month. The Index increased 2.1 percent from February, bringing it to its highest value seen since June 2014. The rise was led by increased prices for vegetable oils, meat, and dairy. Cereal prices declined in March.

The Cereal Price Index was down 1.7 in March. While this decline marked the end of an eight-month increase, cereal prices remain 26.5 percent above their March 2020 levels. Wheat prices fell the most last month (2.4 percent) due to favorable 2021 production prospects but also remain substantially higher than the previous year (19.5 percent). Declines in maize prices were tempered by strong import demand from China. Rice prices also declined slightly in March after three consecutive month of increases due to recent favorable harvests and slowing demand from several major importing countries.

The Vegetable Oil Index, on the other hand, rose by 8 percent in March to reach its highest point since June 2011. Palm oil prices rose for the tenth straight month due to concerns over tightening inventories and recovering import demand. Soyoil prices also spiked in March, driven by anticipated strong demand from the biodiesel sector. Rapseed and sunflowerseed oil prices also rose based on tightening supplies from several producers.

The Dairy and Meat Price Indices both rose in March (3.9 and 2.3 percent, respectively), while the Sugar Price Index fell by 4 percent.

The latest edition of the AMIS Market Monitor forecasts favorable production for major commodities and suggests that this could lead to less market volatility and help curb rising prices in the coming months.

AMIS continues to forecast record wheat production in 2020, driven mostly by bumper crops in Australia and India and strong increases in production in Russia. Wheat utilization forecasts increased significantly in March due to higher feed use in China. Global wheat trade for 2020-2021 is expected to grow 2 percent from the previous year due to larger than expected purchases by China and Nigeria. Total global wheat ending stocks are expected up from the previous year as well, despite dropping slightly from the previous month’s expectations.

Maize production for 2020 is forecast up this month due to adjustments in India’s output. Maize utilization is expected to grow by 1.9 percent from 2019-2021 due to higher feed and industrial use in several regions. Global maize trade expectations declined slightly from March, but trade is still expected to expand by 6.9 percent from the previous year. Total global maize ending stocks are expected to decline from their opening levels.

Forecasts for 2020 rice production rose slightly in March due to improved harvest prospects in Thailand. Rice utilization for 2020-2021 is expected to reach a record high due to both food and non-food uses. Total trade expectations did not change much month-to-month, but trade is still expected to increase from the previous year. Total global rice ending stocks are forecast to stay even with their opening levels, as reduced inventories in Bangladesh are balanced by increased stocks in several other countries.

Soybean production for 2020-2021 is expected to grow by almost 7 percent from the previous year despite a slight downward adjustment in March. Soybean utilization forecasts remained the same from February. Total soybean trade is expected down slightly from February based on lower than expected purchases from several countries in Asia. Total global soybean ending stocks for 2020-2021 are expected to fall to an eight-year low.