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ANALYSIS

Food prices rise in May, pushed up by rising cheese and maize prices
Monday, 10 June, 2019, 16 : 00 PM [IST]
Rome
Global food prices rose for the fifth consecutive month in May, pushed up by rising prices of cheese and maize due to adverse weather conditions.

The FAO Food Price Index, which tracks monthly changes in the international prices of commonly-traded food commodities, averaged 172.4 points in May, up 1.2 per cent from the previous month, while still 1.9 per cent below its level in May 2018.

The FAO Dairy Price Index rose 5.2 per cent from April, nearing a five-year high. The upswing, centred on cheese prices, reflected robust global import demand amid tight export availabilities from drought-ridden Oceania.

The FAO Cereal Price Index rose 1.4 per cent, entirely driven by a sudden surge in maize price quotations in response to diminishing production prospects in the United States of America, where planting of the crop is off to the slowest pace ever recorded due to widespread flooding and rain. Wheat prices generally dipped, while those of rice held broadly steady.

The FAO Sugar Price Index declined 3.2 per cent for the month, as prospects of increased output in India, the world’s largest producer, outweighed a reported 17 per cent annual drop in production in Brazil. Weaker international energy prices, which reduce the demand for sugarcane to produce biofuels, also negatively affected sugar prices.

The FAO Vegetable Oil Price Index declined 1.1 per cent as palm oil values declined on account of large inventory levels in leading exporting countries. Prices of soy, sunflower and rapeseed oils increased modestly.

The FAO Meat Price Index was up marginally in May, as pig meat price quotations continued to rise amid strong import demand from East Asia, where the African swine fever has decimated production. Bovine meat prices eased from their April highs, reflecting elevated global export supplies.

Dim outlook for maize
FAO's latest forecast for world cereal production in 2019 - available in the Cereal Supply and Demand Brief, also published today - points to an increase of 1.2 per cent from the previous year to reach 2,685 million tonne, a sharp downward revision from the forecast made in May when global cereal production was predicted to expand by 2.7 per cent.

The year-on-year increase in global cereal production reflects expansions of wheat and barley production, while global rice output is likely to remain close to last year's record level. The worldwide maize output, however, is now seen to fall, with US production expected to shrink by 10 per cent from the previous year amid a much reduced pace of plantings due to unfavourable weather conditions.

World cereal utilisation in the year ahead is now forecast to reach 2,707 million tonne, somewhat down from the May forecast but still one per cent higher than in 2018/19. Global rice utilisation is predicted to reach 518 milllion tonne, a 1.4 per cent annual increase, while that of wheat is expected to grow 1.2 per cent, reaching 755 million tonne.

Based on the new estimates for production and utilisation, world cereal stocks could decline by as much as three per cent in the new season, hitting a four-year low of 830 million tonne. The anticipated decline would result in the global cereal stock-to-use ration dipping below 30 per cent, which, nonetheless, still points to a relatively comfortable supply level.

World trade in cereals is forecast to rise to 414 million tonne, up 1.4 per cent from the estimated level for the previous year, led by a strong rebound in wheat trade driven by a stronger import demand by several countries in Africa and Asia, combined with expectations of large export availabilities in the Black Sea region and the European Union (EU).
 
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