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ANALYSIS

Food prices dip due to sharp fall in export prices of vegetable oils
Friday, 06 March, 2020, 15 : 00 PM [IST]
Rome
World food prices declined in February for the first time in four months due to a sharp fall in the export prices of vegetable oils, partly driven by fears that the coronavirus (COVID-19) outbreak will slow the global demand.

The FAO Food Price Index, which tracks monthly changes in the international prices of commonly-traded food commodities, averaged 180.5 points in February, down one per cent from the previous month, but still 8.1 per cent higher than a year earlier.

The FAO Vegetable Oil Index declined 10.3 per cent from January, with international palm oil prices falling by even more on account of higher-than-expected output in Malaysia, a temporary drop in India's import demand and concerns over the spread of COVID-19.

The FAO Cereal Price Index declined 0.9 per cent in February. Wheat prices were lower, reflecting well-supplied markets, while maize prices retreated as demand from the livestock feed sector dipped amid expectations of a weakening global economy. By contrast, international rice prices rose, buoyed by strong demand from Far-Eastern and East African buyers.

The FAO Meat Price Index was down by two per cent from January, influenced by reduced imports by China impacted by delays in cargo handling in ports. Drought-induced slaughter in New Zealand exerted further pressure on bovine meat price quotations, while poultry meat prices were affected by lower imports by Asia.

The FAO Dairy Price Index rose 4.6 per cent, led by surging price quotations for cheese, partly linked to reduced milk output in Australia. Milk powders, by contrast, dipped as logistical bottlenecks slowed purchases by China, the world’s largest milk powder importer.

The FAO Sugar Price Index rose 4.5 per cent amid prospects of lower production in India as well as in Thailand, combined with a strong global import demand.

World cereal production estimates revised upwards
FAO also issued a new cereal supply and demand brief, raising its estimates for 2019 world cereal production to 2,719 million tonne due to higher maize outputs in West Africa and Ukraine.

The brief offered a preliminary forecast of 763 million tonne for 2020 worldwide wheat production - very close to the near-record level of 2019 - and indicated that coarse grain output in 2020 will likely be strong in Argentina, Brazil and South Africa.

World cereal utilisation in the 2019/20 cycle is now forecast to reach a record level of 2,721 million tonne, driven by higher food, feed and industrial usages.

FAO raised its forecast for world cereal stocks at the close of the 2020 seasons to nearly 866 million tonne, resulting in the global cereals stock-to-use ratio staying at a comfortable level of 30.9 per cent.

FAO also forecasts world trade in cereals to rise by 2.3 per cent to 420 million tonne in 2019/20, the second-highest level on record, with wheat shipments accounting for more than half of the expected increase.
 
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