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 (FFPI) continued to rise for the fifth consecutive month, averaging 172.4 points in May 2019, up 1.2% (2.1 points) from April but still 1.9% below its level in the corresponding month last year. While prices for sugar and oils fell, the other sub-indices registered increases in May, led again by strong month-on-month firming of prices of dairy products followed by cereals.
The FAO Cereal Price Index averaged 162.3 points in May, up 1.4% (2.2 points) from April. However, at this level, the index remained some 6% below its May 2018 value. The small month-on-month increase was entirely driven by a sudden surge in maize quotations in response to diminishing production prospects in the United States. By contrast, wheat price quotations were generally lower in May in view of good global supply prospects and adequate export availabilities. FAOs rice price index held steady for the third successive month, as a mild increase in aromatic quotations was offset by slight price declines in most other rice market segments.
FAO’s latest forecast for world cereal production in 2019 points to an increase of 1.2 percent from 2018, to 2 685 million tonnes. However, the year-on-year expansion is now much less significant than earlier predicted, as global maize production is now seen to fall in 2019, largely because of sharp downward revisions since the previous report concerning maize production prospects in the United States. Due to prolonged excessive wet conditions resulting in major delays in crop plantings, this year’s maize production in the United States is now pegged at 330 million tonnes, down 45 million tonnes from FAO’s first production forecast published in May and almost 10 percent (36 million tonnes) short of last year’s level. The recent USDA crop progress report pointed to a sharply reduced planted area of only 58 percent of planting intentions as of 26 May, well below the 5-year average level of 90 percent and the slowest pace ever recorded.
Most of the expected rebound in global cereal production in 2019 is attributed to expected expansions in wheat and barley production, with year-on-year increases of 5.3 percent and 5.8 percent, respectively. Total rice production is likely to remain close to last year’s record level as expectations of area-driven expansions in Asia could offset foreseen contractions in most other regions, triggered by inclement weather and prospects of reduced profit margins.
Based on the new estimates for production and utilization, world cereal stocks could decline by as much as 3 percent in the new season, hitting a four-year low of 830 million tonnes. And world trade in cereals is forecast to rise to 414 million tonnes, up 1.4 percent 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.