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World: Palm oil keeps global food price trend rising April, finds FAO

Global prices of key staple food commodities rose in April, marking its third consecutive monthly increase after four years of decline.

The FAO Food Price Index averaged 151.8 points in April, a 0.7% increase from March. That is about 10% below its level of a year ago and more than a third off its 2011 highs.

The gradual increase is far from even across the board.

April’s increase was driven by palm oil prices and, in a minor key, cereals, while sugar prices tapered down after a strong increase in March.

The FAO Food Price Index is a trade-weighted index tracking international market prices for five commodity groups: major cereals, vegetable oils, dairy, meat and sugar.

Its decline over the past year reflects ample food supplies, a slowing global economy and a stronger US dollar.

The FAO Vegetable Oil Price index rose 4.1%, due largely to a grim 2016 production outlook for palm oil coupled with a growing worldwide demand.

The FAO Cereal Price Index rose 1.5% on the month, due primarily to international maize quotations, themselves influenced by a weaker US dollar and spillover from the oilseeds complex.

However, rice prices declined marginally, while wheat markets posted limited gains amid expectations of large supplies in the new season for the crop.

The FAO Dairy Price Index dropped 2.2% as stocks of butter and cheese in major exporters continued to grow.

The FAO Meat Price Index rose 0.8%, pushed up by strengthening US demand for Australian beef.

The FAO Sugar Price index, meanwhile, dropped 1.7% in April after 17% increase the previous month.

While concerns about global sugar production remain, Brazil – by far the main exporter – has had its second-highest crop ever and the country’s use of sugarcane for ethanol is expected to decline.

Sugar and vegetable oils are the only sub-indexes currently at levels higher than those of April 2015.

Outlook for cereals output improves

FAO raised its forecast for world cereal production in 2016 slightly to nearly 2,526 million tons, virtually the same as in 2015 and potentially on course to be the second-largest global harvest ever, according to FAO’s Cereal Supply and Demand Brief, also released recently.

The larger figure results almost entirely from improved prospects for wheat production, as winter weather conditions have been favorable for prospective yields in the European Union, the Russian Federation and Ukraine.

At 717 million tons, the 2016 wheat output forecast remains 16 million tons short of last year’s record.

FAO’s new production forecast for global coarse grains – including barley, maize, millet, oats, rye and sorghum – stands at 1,314 million tons, about 1% below the 2015 output.

FAO left unchanged its worldwide rice production forecast at 495 million tons, about 1% higher than the previous year, although the full impact of the El Niño weather phenomenon will not be clear for a few more months.

World cereal utilization in the season ahead is expected to rise by only 1.1% due to slower growth in the use of cereals – especially wheat and barley – as livestock feed.

As a result, world cereal stocks are likely to drop by 3.3% or 21 million tons over the course of the new season.

Stocks are forecast to drop most in Brazil, Thailand, India, China, Morocco, the Islamic Republic of Iran, Argentina and South Africa, according to FAO.

World trade in cereals is expected to decline slightly – to 367 million tons – with sharp drops in China’s imports of barley and sorghum as well as EU imports of maize, more than offsetting soaring imports of maize by drought-stricken countries in southern Africa.

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