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FAO Food Price Index rises sharply

07 December 20203 min reading

Global food commodity prices rose sharply in November to their highest level in nearly six years, according to a benchmark United Nations report.

The FAO Food Price Index (FFPI) averaged 105.0 points in November 2020, up 4.0 points from October and 6.4 points higher than its value a year ago. The November increase did not only mark the biggest month-on-month rise since July 2012, but it also resulted in the index reaching its highest level since December 2014.

All sub-indices of the FFPI registered gains in November, with the vegetable oil sub-index rising the most, followed by those of sugar, cereals, dairy and meat. The FAO Food Price Index tracks changes in the international prices of the most globally traded food commodities.

The FAO Cereal Price Index averaged 114.4 points in November, up 2.7 points (2.5 percent) from October and as much as 19.0 points (19.9 percent) higher than its November 2019 value. The latest increase marked the fifth consecutive monthly rise in the value of the index. Wheat export prices continued to edge upwards in November, largely on a tightening outlook for export supplies and reduced harvest prospects in Argentina.

Maize prices also rose further in November, supported by continued large maize purchases by China, amidst further cuts to this year’s production estimates in the United States of America and Ukraine, both major exporters. Among other coarse grains, firm demand continued to push up feed barley and sorghum prices.

By contrast, international rice prices held steady in November, as support provided by tight availabilities and currency movements in selected South East Asian exporters was offset by limited demand and harvest pressure in other major origins.

FAO LOWERS WORLD 2020 GRAIN OUTPUT FORECAST

FAO has further lowered its forecast for global grain production in 2020, which now stands at 2 742 million tonnes - still a record high and 1.3 percent above the previous year's outturn. The new forecasts released with FAO's Cereal Supply and Demand Brief point to world coarse grains production of 1 470 million tonnes, wheat production of 761.7 million tonnes, and rice output of 508.4 million tonnes.

Looking ahead, planting of the northern hemisphere's winter wheat crop is underway and remunerative prices are expected to increase sowings in several major producing countries. However, crop conditions in the United States of America are moderately poorer due to dry weather conditions, influenced by the prevailing La Niña weather phenomenon.

World cereal utilization in 2020/21 is now forecast to rise to 2 744 million tonnes, up 1.9 percent from 2019/20, led by expectations of increasing feed use of maize and sorghum in China as well as a rise in the production of maize-based ethanol in Brazil and the U.S.A.

Worldwide cereal stocks by the close of seasons in 2021 are predicted to decline to 866.4 million tonnes, translating into a global stock-to-use ratio of 30.7 percent - which FAO notes is a five-year low but still a relatively comfortable level.

World trade in cereals in 2020/21 is forecast to rise 3.4 percent from the previous year to 454.6 million tonnes, driven primarily by a faster than expected pace in maize sales by the U.S.A. and continued strong purchases from China.

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