Concerns over wheat supplies and prices, plus the impact of biofuels on vegetable oil markets: Latest FAO Food Price Index and AMIS Market Monitor released

The FAO Food Price Index rose by nearly 1 percent in May due to increased cereal and dairy prices. It remained 3.4 percent below its May 2023 levels and nearly 25 percent below the peak seen in March 2022.

The Cereal Price Index rose 6.3 percent from April but remained 8.2 percent below May 2023 levels. Wheat prices rose the most sharply in May due to possible poor production conditions in parts of Europe, North America, and the Black Sea region, as well as shipping infrastructure damage in the Black Sea region. Rising maize prices were driven by crop damage in South America and tightening supplies in Ukraine. Rice prices also rose, although less significantly, due to expected high sales.

The Vegetable Oil Price Index fell 2.4 percent from April but remained 7.7 percent above its May 2023 level. Palm oil prices fell due to seasonal output increases and slowing global demand. This decrease balanced out rising soy oil prices, which were driven up by increased biofuel demand. Sunflower and rapeseed oil prices also rose slightly in May.

The Dairy Price Index rose 1.8 percent from April, while the Meat and Sugar Price Indices fell by 0.2 percent and 7.5 percent, respectively.

The latest AMIS Market Monitor cites uncertainty regarding 2024-2025 global cereal production projections, stemming from planting delays and climate shocks in several key producing areas. Wheat supplies and prices are a particular concern, particularly for net-importing countries. The report also highlights the need for a more robust understanding of current and proposed biofuel policies and their implication for vegetable oil supply and demand.

May forecasts put global 2024 wheat production marginally below its 2023 level, while utilization forecasts are expected to fall by 0.8 percent due to reduced feed use. Global wheat trade for 2024-2025 is expected to fall by 1.2 percent due to lower import demand from China and the European Union and lower exports from Russia, Ukraine, and Türkiye. Global wheat ending stocks for 2025 are forecast to be 1.6 percent below their opening levels due to significant drawdown in the EU.

Maize production for 2024 is forecast to be 1.3 percent below it 2023 level, with decreased production in several regions outweighing larger expected harvests in Argentina and the EU. Maize utilization is projected to increase by 1.1 percent, driven by increased feed use in several regions. Maize trade is expected to decrease by almost 3 percent, while global maize ending stocks are forecast to be 3.5 percent their opening levels.

Rice production prospects increased slightly in May, with yields tentatively expected to reach a new high in 2024-2025. Utilization is also expected to increase by 1.2 percent based on growing food use. Rice trade forecasts remained stable in May, with trade expected to reach a four-year low due to reduced exports from several key regions. Global rice ending stocks are forecast to reach a record high.

Soybean production is also forecast to reach a record high in 2024-2025 due to expansion in cropland in several key regions. This production forecast hinges on favorable weather, however. Soybean utilization is also expected to rise in 2024-2025 based on strong demand for biofuels and feed. Trade is forecast to recover from the 2023-2024 season, and global soybean ending stocks could also reach record highs.

Fertilizer prices remained generally stable in May, with rising natural gas and ammonia prices in some regions balanced by overall adequate supplies. Urea prices declined slightly in May based on slowing import demand from India and increased production in the Arab Gulf; low exports from China due to strong domestic demand slowed this decline and could play an important role in global markets in the coming months, the report emphasizes. Phosphate prices also declined in May but are likely to increase in the coming weeks due to slow exports from Morocco and China and increased demand in Brazil and India. Potash prices remained stable.

Sara Gustafson is a freelance communications consultant.