FAO Food Price Index experienced a slight decline following recent highs

In May, the FAO Food Price Index declined by 0.6 percent from the previous month, driven by the drop in vegetable oils, sugar and dairy prices, while meat and cereal prices rose. The Index is still 22.8 percent above May 2021 levels.

The Cereal Price Index rose 2.2 percent from April and 29.7 percent from May 2021. Wheat prices rose 5.6 percent in May and 56.2 percent above May 2021 levels due to India’s export ban in addition to the reduced production due to the ongoing conflict in Ukraine. Maize prices declined by 3.0 percent due to the improvements in crop production in the United States, seasonal supply in Argentina, and onset of harvest in Brazil. Rice prices continue to rise, with a 2.6 percent increase for Indica varieties.

The Vegetable Oil Price Index dropped 3.5 percent from the previous month due to the impact of declining palm, sunflower, soy, and rapeseed oil prices. Palm oil prices are expected to slightly weaken in May from Indonesia’s removal of the export ban on palm oil. Accumulation of stocks in Ukraine have contributed to the drop in sunflower oil prices despite record highs. Soybean and rapeseed oil prices also experienced a decline as import demand slowed due to high costs in the previous months.

The Dairy Price Index and Sugar Price Index declined 3.5 percent and 1.1 percent from April. Unlike sugar and dairy prices, the Meat Price Index rose by 0.5 percent, creating a new high due to supply and demand dynamics in poultry, bovine and pig meat markets.

The latest AMIS Market Monitor also reported declines in production and trade of several commodities as extreme weather, Covid-19 and the conflict in Ukraine continue to affect the agricultural market. According to the latest report, factors like Covid-19 and the ongoing conflict in Ukraine have led to prices that exceed the 2008-2011 crisis. Concerns involving trade restrictions, food inflation, and food insecurity have grown. The food situation is anticipated to worsen as the ongoing conflict in Ukraine continues and could “turn a food access crisis into a crisis in availability.”

For the first time in four years, wheat production is predicted to decline in 2022. Production dropped 0.8 percent from 2021, driven by expected low production in Australia, India, Morocco, and Ukraine. Wheat utilization is forecasted to fall 0.4 percent from 2021-2022 due to a drop in feed use. Wheat trade is also set to decline with lower production and exports from Ukraine, Argentina, Australia, and India. Global wheat stocks are anticipated to rise slightly above opening levels due to increases in China, Russia, and Ukraine which counteract drawdowns.

Maize production is anticipated to drop by 1.6 percent from 2021 due to lower production in Ukraine and the United States. Maize utilization is also expected to be reduced by 0.4 percent as feed use declines. Maize trade is forecasted to fall, driven by a drop in exports from Ukraine, Argentina, and the US as well as reduced purchases from importers. Global maize ending stock is predicted to decline 1.1 percent from opening level as stocks fall at the regional level.

Rice production is predicted to be slightly less than 2021 with abundant harvest in Asia and larger crop sizes in Africa and Australia nearly compensating shortfalls in other regions. Rice utilization is expected to be slightly below 2021-2022 levels, driven by increased food intake amid declines in non-food use. Rice trade is forecasted to remain expanding, despite slower import demand from the Far East. Global rice ending stocks are currently at their second highest as growth in China and India counteract drawdowns.

Soybean production could increase to a record high in 2022-2023 due to higher productivity levels in Argentina, Brazil and Paraguay and area expansions in China and the United States. Soybean utilization is also expected to recover from 2021-2022. Soybean trade is predicted to recover due to China’s import recovery and South American exporters’ gains in market shares. Global soybean ending stock is forecasted to recover from multi-year lows, however, global stocks-to-use ratio are anticipated to remain below the 5-year average.

Lexie Goldman is a Borlaug-Ruan intern with IFPRI's Markets, Trade, and Institutions Division (MTID).