Global food prices continue rising in October

Global food prices continued rising for the fifth consecutive month in October, led by cereals, sugar, dairy, and vegetable oils, according to a new report from the Food and Agriculture Organization of the United Nations.

The FAO Food Price Index, which tracks international prices of the most traded food commodities, averaged 100.9 points in October 2020, up 3.1 per cent from September and 6.0 per cent above its value in October 2019.

The FAO Cereal Price Index climbed 7.2 per cent from the previous month and 16.5 per cent above its value in October 2019.

The surge was mainly driven by wheat prices amid shrinking export availabilities, poor growing conditions in Argentina, and continued dry weather affecting winter wheat sowings in Europe, North America, and the Black Sea region.

Maize, feed barley and sorghum prices also remained under upward pressure in October, while those of rice subsided.

The FAO Vegetable Oil Price Index gained 1.8 per cent during the month, posting a nine-month high, led by firmer palm and soy oil prices.

By contrast, rapeseed oil prices declined moderately amid increased uncertainty regarding demand in the European Union (EU) following the recent deterioration of the COVID-19 situation across the region.

The FAO Dairy Price Index rose 2.2 per cent from September, with cheese rising the most, followed by skim milk powder, whole milk powder, and butter. Price increases in October reflected market tightening for near-term deliveries, underpinned by robust import demand from Asian and Middle Eastern markets.

The FAO Sugar Price Index increased 7.6 per cent from September ­- a move largely influenced by the prospects of a lower sugar output in both Brazil and India - the two largest sugar-producing countries in the world.

The FAO Meat Price Index, by contrast, declined 0.5 per cent from September, marking the ninth monthly decline since January, driven by a drop in pig meat prices reflecting in part the continued influence of the import restrictions imposed by China on Germany.

Bovine and poultry meat prices also fell, while prices of ovine meat rose on steady internal demand and low export supplies.
Despite downward revisions, cereal output still expected to reach an all-time high.

In its latest Cereal Supply and Demand Brief, also published today, FAO reduced the world's 2020 cereal production for a second consecutive month, by nearly 13 million tonnes, largely on expectations of diminished world coarse grains production. However, global cereal output is still forecast at a record 2 750 million tonnes, surpassing the 2019 output by 1.6 per cent.

The reduction in the world coarse grains production forecast reflects lower expectations for the maize output in the European Union and Ukraine, where continued adverse weather has further reduced yield prospects.

The global wheat production forecast for 2020 is also trimmed slightly this month, on lower output expectations in Ukraine and Argentina due to the impact of dry weather.

Prospects for the 2021 winter wheat crop, which is already being sown in the northern hemisphere, are generally strong, reflecting the expectations of increased plantings in response to higher prices in several main producing countries, notably in the EU.

FAO slightly raised its estimate of world total cereal utilization in 2020/21 to 2 745 million tonnes, which would represent a 1.9 per cent increase from the 2019/20 level, mostly driven by upward revisions for wheat consumption in the EU.
 
Cuts in world production forecast this month for maize, wheat and rice, amidst a faster pace in exports in response to strong global import demand, are seen to result in lower inventories, especially among the major exporters.

FAO has lowered its forecast for world cereal inventories by the end of seasons in 2021 by 13.6 million tonnes since October to 876 million tonnes, now falling below the 2017/18 record. The resulting global cereal stock-to-use ratio in 2020/21 stands at 31.1 per cent, still highlighting relatively comfortable global supply prospects in the new season.