FAO Food price Index Declines in October, But Volatility in Some Markets Remains

Food prices continued to decline, albeit more slowly, in October, according to the latest FAO Food Price Index. The Index was down 0.5 percent from September and 10.9 percent from October 2022.

The Cereal Price Index declined by 1 percent from September and nearly 18 percent from its October 2022 value. In response to higher supplies in the US and strong export competition, wheat prices fell by 1.9 percent, while rice prices fell by 2 percent due to slowing import demand. Maize prices rose marginally due to reduced supplies in Argentina, but this increase was limited by higher supplies in other regions.

The Vegetable Oil Index fell by 0.7 percent in October to reach 20.7 percent below its October 2022 value. Palm oil prices drove the slight decline in the overall Index, while soy, sunflower, and rapeseed oils all saw slightly higher prices. Strong demand from the biodiesel sector drove the increase in soy oil prices.

The Meat and Sugar Price Indices also both declined in October, by 0.6 percent and 2.2 percent, respectively. The Dairy Price Index rose by 2.2 percent.

The latest AMIS Market Monitor follows several noteworthy price trends. Maize and soybean price volatility has fallen below the historical average, following near-record highs reached at the start of the conflict in Ukraine. Rice prices have fallen in recent weeks as El Niño has had a smaller than expected impact on production, and several countries have begun to remove export bans and other distortionary policies. Wheat price volatility remains high, however, due to continued uncertainty regarding production and exports from Ukraine.

This month’s feature article in the Market Monitor provides a deeper look into the vegetable oil market. Since reaching a record high in mid-2022, vegetable oil prices have trended downward. A significant increase in demand from the biodiesel sector has resulted in falling export availabilities for soybean oil, but ramped-up production and processing in South America is expected to lead to ample surpluses in the region. The Monitor expects food use to continue to be the strongest factor driving vegetable oil use, but continued increases in industrial uses will also play a role in consumption.

Wheat production is expected to decline by 2.2 percent from 2022, while utilization is forecast to increase by 1.4 percent. Global wheat trade expectations for 2023-2024 rose slightly in October due to growing demand from the EU and increased exports from Turkey; however, overall trade is still expected to fall below 2022-2023 levels. Global wheat ending stock are now expected to be near opening levels.

Maize production forecasts still see an increase from 2022, with increased estimates from China offsetting lower production prospects in several other countries. Maize utilization expectations fell slightly in October but overall utilization is still expected to increase by almost 2 percent from the previous year. Trade is expected to fall slightly overall, while global maize ending stock forecasts rose slightly in October due to higher production in China. Global ending stocks are ow expected to be 8.1 percent above their opening level.

Rice production prospects rose slightly in October due to increased estimates for India. Rice utilization forecasts also increased last month due to adjusted Indian use estimates; however, overall use is still expected to remain at the 2022-2023 level. Rice trade expectations remained generally stable in October, with trade expected to maintain the low level seen in 2023. Global rice ending stock expectations rose slightly due to higher estimates for India and Indonesia.

Soybean production forecasts for 2023-2024 remained stable in October, with decreased estimates for India and the U.S. being balanced by increases in several other countries. Utilization forecasts also remained largely stable. Soybean trade forecasts increased slightly due to higher-than-expected exports from Brazil, which balanced lower forecasts for Argentina and the U.S. Global soybean ending stock forecasts rose slightly, with total stocks expected to be 12 percent higher than the previous year.

Natural gas prices rose in October, driven by supply disruptions in Europe. Ammonia prices also increased, although more slowly than the previous month due to increased production in Saudi Arabia and low demand from Southeast Asia. Urea prices fell in October, with ample supplies dampening markets. Potash prices either decreased or remained stable across major markets, while DAP prices increased slightly due to uncertainty about future exports from China and the impact of potential new subsidy levels in India.