World food prices fell slightly in the last month but are still higher than those of a year ago, reports the Food and Agriculture Organisation (FAO) of the United Nations. A fall in cereal values was offset by a rise in vegetable oil prices, and a hardening in meat and dairy product values.

The FAO Food Price Index tracks monthly changes in the international prices of commonly traded food commodities. The index averaged 169.8 in August 2019, down 1.1% on July’s figure but 1.1% higher than in August 2018.

By commodity, the FAO Cereal Price Index fell by 6.4% in August from the previous month, no surprise to anyone following the cereals futures markets. Corn values are at season lows due to large stocks and a better than expected potential 2019 harvest in the US. Wheat prices are also under pressure with large harvests in most major producing regions of the world, especially Western Europe, Russia and the Black Sea area. However, rice values have strengthened in line with the stage of the season plus weather concerns over the Thai crop.

The FAO Sugar Price Index was 4% lower in August, with a weaker Brazilian currency adding to larger exports from India and Mexico.

Vegetable oils at 11 month high

A 5.9% increase in the FAO Vegetable Oil Index to an 11-month high in August reflected rising import demand for palm oil in many importing countries, allied to unfavourable weather in the major palm growing regions of Indonesia. Soy oil prices were also higher as supplies were affected by lower than expected North American crush volumes.

A small 0.5% rise in the August FAO Meat Price Index adds to the cumulative 12.3% increase since January, driven by rising international pigmeat prices. China is importing greater quantities to compensate for the loss of domestic pigmeat production as a result of the African swine fever epidemic there, and its control measures.

The FAO Dairy Price Index reversed the last two monthly falls to increase 0.5% in August, buoyed by increasing cheese, skim milk and whole milk powder values.

The organisation forecasts a world cereals trade of some 415 million tonnes in 2019/20, with higher traded volumes of wheat and rice offsetting reduced corn and sorghum shipments.

World cereal output up 2.1%

The FAO estimates 2019 world cereals production at 2.71 billion tonnes, 22 million tonnes higher than July’s figure and 2.1% up on the year. Global 2019/20 cereal consumption is predicted at 2.715bn tonnes, a new record figure.

“Stronger harvest prospects point to world cereal stocks reaching 847m tonnes by the close of seasons in 2020, which would be 16m tonnes below the opening levels,” noted the FAO. “Maize inventories are expected to accumulate sharply in the US, while China’s wheat stocks are currently set to expand by 7.9% to an all-time high.