FAO Food Price Index dips by 1.9 percent while new FAO forecasts point to lower global cereals output in 2022. The barometer for world food commodity prices declined for the fifth consecutive month in August, as quotations for most benchmark items dropped, according to a new report released today by the Food and Agriculture Organization of the United Nations (FAO). The closely watched FAO Food Price Index averaged 138.0 points in August, down 1.9 percent from July although remaining 7.9 percent above its value a year before. The Index tracks monthly changes in the international prices of a basket of commonly traded food commodities.
The FAO Food Price Index (FFPI) averaged 138.0 points in August 2022, down 2.7 points (1.9 percent) from July, registering its fifth consecutive monthly decline. Despite the latest drop, the index remained 10.1 points (7.9 percent) above its value a year ago. All the five sub-indices of the FFPI fell moderately in August, with monthly percentage declines ranging from 1.4 percent for cereals to 3.3 percent for vegetable oils.
The FAO Cereal Price Index averaged 145.2 points in August, down 2.0 points (1.4 percent) from July, but still 14.8 points (11.4 percent) above its August 2021 value. In August, international wheat prices fell by 5.1 percent, marking the third consecutive monthly decline, driven by improved production prospects, especially in Canada, the United States of America and the Russian Federation, and higher seasonal availability as harvests continued in the northern hemisphere as well as the resumption of exports from the Black Sea ports in Ukraine for the first time in over five months of interruption. Nevertheless, global wheat prices remained 10.6 percent above their values in August last year. International prices of coarse grains increased marginally (+0.2 percent) in August and averaged 12.4 percent above their values a year ago. World maize prices firmed slightly, up 1.5 percent, largely influenced by lower production prospects in the European Union and the United States of America due to hot, dry conditions, while the resumption of exports from Ukraine prevented prices from increasing further. By contrast, global barley and sorghum prices decreased by 3.8 percent and 3.4 percent, respectively. The FAO All Rice Price Index held steady in August, as slight declines in quotations of the most widely traded Indica varieties compensated for mild price gains in other rice market segments.
The FAO Vegetable Oil Price Index averaged 163.3 points in August, down 5.5 points (3.3 percent) month-on-month, pushing the index value slightly below its year-earlier level. The continued decline of the index was driven by lower world prices of palm, sunflower and rapeseed oils, which more than offset higher soyoil quotations. International palm oil prices fell for the fifth consecutive month in August, driven by increasing export availabilities from Indonesia, mainly thanks to lower export taxes, as well as seasonally rising outputs in Southeast Asia. In the meantime, world sunflower oil values declined on lingering subdued global import demand that coincided with the gradual resumption of shipments from Ukraine’s seaports. International quotations for rapeseed oil also dropped in August, due to prospects of ample supplies for the upcoming 2022/23 season. By contrast, world soyoil prices rebounded only moderately, mainly because of concerns over the impact of unfavourable weather conditions on soybean production in the United States of America.
Persistent drought conditions in northern hemisphere countries have prompted a significant cutback in FAO’s latest cereal production forecast for 2022. Pegged at 2 774 million tonnes, the 2022 global cereal production has been lowered by 17.2 million tonnes since the previous report released in July and is now anticipated to decline by 1.4 percent (38.9 million tonnes) year-on-year.
The bulk of this month’s downward revision concerns coarse grains, with global production forecast at 1 483 million tonnes, 17.9 million tonnes lower than expectations in July and 1.8 percent (26.8 million tonnes) down from 2021. Most of the anticipated decrease relates to maize production in the European Union, where exceptionally hot and dry weather conditions that have prevailed since late spring are estimated to push down yields by 16 percent compared to the previous five-year average. Similarly, prospects for maize production in the United States of America are downgraded moderately, largely owing to unfavourable weather in the Midwest that has curbed yield prospects. Precipitation deficits also had negative impacts on expected barley and sorghum yields in the European Union and the United States of America, which largely underpin cuts made to the global production forecasts for both cereals. These decreases more than offset upward revisions made to maize production forecasts, based on an upturn in yield expectations in Argentina and Ukraine, where production is still seen to decline by 38 percent year-on-year.
By contrast, the forecast for world wheat production in 2022 has been raised by 6.7 million tonnes this month and is now set to reach 777 million tonnes, down only fractionally from the 2021 output. The improved outlook is largely due to conducive weather conditions in Canada and the United States of America, boosting yield prospects and reinforcing expectations of production recoveries in 2022, and in the Russian Federation, where the wheat outturn is now likely to reach an all-time high as continued beneficial weather bolstered yield expectations of the spring crop. Recently released official estimates also point to a larger-than-previously expected output in China. Conversely, the continued rainfall shortages across much of the European Union had adverse impacts on wheat production, which has been trimmed moderately this month.
For rice, since July, FAO has lowered its global production forecast for 2022 by 6.0 million tonnes to 514.5 million tonnes (milled basis), which is 2.1 percent down from the 2021 all-time high but still an above-average crop. The revision primarily reflects the effects of an uneven rainfall distribution in southern Asia. This is particularly the case of India, but also of Bangladesh, where, however, sowing activities are still ongoing, providing room for initial setbacks to be recouped should growing conditions in the upcoming weeks prove more normal. Production was also reduced for Sri Lanka, based on official assessments of the impact of severe input shortages on the main-crop yields. Coupled with some downward adjustments to output prospects for the European Union, the United States of America and Viet Nam, these cuts overshadowed upward output revisions for Brazil and a few West African countries.
FAO’s forecast for 2022/23 world cereal utilization has been lowered by 5.1 million tonnes since July to 2 792 million tonnes, representing a marginal decline of 0.1 percent (2.8 million tonnes) from the 2021/22 level. Making up the bulk of this month’s downward revision, the 2022/23 utilization forecast for coarse grains has been lowered by 6.6 million tonnes since July, mostly reflecting lower-than-earlier anticipated feed use of barley (in particular in the European Union, Morocco and Saudi Arabia) and sorghum (especially in China and the United States of America). With this downward revision, utilization of coarse grains in 2022/23 is now forecast to decline by 0.2 percent (2.7 million tonnes) from the 2021/22 level, mostly underpinned by expectations of lower feed use, especially in the United States of America, Morocco, Mexico and the European Union, stemming from anticipated year-on-year production falls.
By contrast, a higher wheat production outlook has lifted the 2022/23 wheat utilization forecast by 2.2 million tonnes since July and is now seen remaining near the 2021/22 level of 773 million tonnes, with an anticipated annual food consumption growth balancing an expected contraction in the feed use. Following an 800 000 tonne downward revision, FAO now anticipates world rice utilization in 2022/23 to remain largely steady year-on-year at an all-time high of 522.2 million tonnes, as lingering strong demand for food could offset likely cuts in other end uses of rice, in particular for animal feed.
Stemming from this month’s downward revision to the 2022 world cereal production, the forecast for world cereal stocks by the close of the 2023 seasons has also been cut by 9.3 million tonnes since July, dropping to 845 million tonnes, down 2.1 percent (18.5 million tonnes) from their opening levels. As a result, the world cereal stocks-to-use ratio is expected to fall slightly from 30.9 percent in 2021/22 to 29.5 percent in 2022/23, the lowest level since 2013/14 but still relatively high from a historical perspective. The downward adjustment to global cereal stocks is largely the result of lower maize inventories foreseen in the European Union, triggered by reduced production prospects since the previous report in July. Following this month’s 8.3-million-tonne downward revision, global coarse grain stocks are forecast to contract by 4.0 percent (14.7 million tonnes) below their opening levels, down to 355 million tonnes, with inventory drawdowns forecast for maize, barley and sorghum of 3.3 percent, 7.7 percent and 10.4 percent, respectively. Forecast at 299 million tonnes, nearly unchanged since July, global wheat inventories at the close of the 2023 season are predicted to rise marginally (0.7 percent or 2.0 million tonnes) above their opening levels. However, most of the anticipated year-on-year increase is concentrated in China and the Russian Federation, and to a lesser extent in Canada and Ukraine. By contrast, sizeable drawdowns are anticipated in the European Union and India, with smaller declines foreseen in Australia, the United States of America and several countries in Asia, the Near East and North Africa. FAO’s forecast of world rice stocks at the close of the 2022/23 marketing years is now pegged at 190.9 million tonnes, down 2.9 percent (5.8 million tonnes) from a revised 2021/22 all-time high and 800 000 tonnes less than anticipated in July. Although the major rice exporters account for most of this downward revision and expected year-on-year contraction, aggregate reserves of rice held by the group are still seen at their second highest level on record, at 54.0 million tonnes, thanks to sizeable anticipated 2022 harvests and ample opening inventories, especially in India.
World trade in cereals in 2022/23 is forecast at 469.6 million tonnes, up 2.0 million tonnes since the July report but still 1.9 percent below the 2021/22 level. At 191.3 million tonnes, the forecast for world wheat trade in 2022/23 (July/June) remains nearly unchanged since July and still points to a 1.8-percent decline from the 2021/22 (July/June) level. Greater wheat export prospects for Canada and the Russian Federation, boosted by higher production forecasts, are balanced by lower expected shipments from the European Union, as a result of lower production prospects, and India, where the country’s efforts to control rising domestic prices through wheat export restrictions are seen tempering exports. Although Ukraine resumed grain shipments from its Black Sea ports in August as part of the Black Sea Grain Initiative, so far mostly maize has been shipped, keeping FAO’s forecast of wheat exports by Ukraine unchanged at 10.0 million tonnes. However, increased maize production expectations in Ukraine lifted FAO’s forecast for Ukrainian maize exports in 2022/23 by 2.0 million tonnes to 17.0 million tonnes. Larger-than-earlier-expected maize shipments are also seen for Argentina and Brazil, on account of near-record and record harvest levels, respectively. These revisions, along with bigger maize purchases forecast for the European Union to compensate for the foreseen lower production, result in a 3.4-million-tonne upward revision to FAO’s forecast for global maize trade in 2022/23 (July/June), which is now on par with the 2021/22 estimated level of 181 million tonnes. Nonetheless, world trade in coarse grains in 2022/23 (July/June) is forecast to fall by 2.6 percent from 2021/22, to 223 million tonnes, as a result of expected declines in the global trade of barley and sorghum. In the case of barley, the decline is mostly due to foreseen reduction in demand from China and Turkey, and smaller shipments from Australia and Ukraine, whereas in the case of sorghum, the decline stems almost exclusively from expectations of tighter export availabilities in the United States of America and smaller imports by China. International trade in rice is seen reaching 54.4 million tonnes in 2022 (January/December) and 55.0 million tonnes in 2023. India is predicted to remain the largest rice exporter in the world, shipping over 20.0 million tonnes annually.