The FAO Food Price Index fell for the fourth consecutive month in August, reaching its lowest level since June 2012. The index, which measures monthly changes in the international prices of a basket of food commodities, averaged 201.8 points for August 2013. This represents a 4-point (1.9%) decline from July and an 11-point (5.1%) slide from year-ago. The decline was driven by "continued falls in the international prices of cereals and oils, as dairy, meat and sugar prices rose slightly."
Declines for Cereal and Oil Prices
The FAO Cereal Price Index fell 16.4 points from month-ago to 210.9 points in August. This is down 49.4 points, or 19% from year-ago.
The steep decline reflects expectations for a strong growth in world cereal production this year and, especially, a sharp recovery in maize supplies.
The FAO Oils/Fats Price Index averaged 185.5 points in August, 5.7 points (or 3.0%) below the July value and the third consecutive monthly decline.
Dairy, Meat and Sugar Prices Rise
The FAO Dairy Price Index averaged 239.1 points in August, 2.8 points (1.2%) more than in July and 37% above its level in August last year. Prices increased last month for all the dairy products that make up the index, except butter, as export supplies remain limited in major trading countries.
The FAO Meat Price Index averaged 175.0 points in August, an increase of 2.2 points (1.3%). This increase can largely be attributed to stronger pork prices, which were up 4.5%. A strengthening euro relative tot he U.S. dollar helped to sustain pork prices.
The FAO Sugar Price Index averaged 241.7 points in August, which was up 2.7 points (1.1%) from last month. This limited rebound was largely due to estimates showing that Brazil was using more sugarcane for ethanol production at the expense of sugar.
Major Rebound in U.S. Corn Production Expected
FAO says the sharp increase in global coarse grain production is expected in 2013 thanks to a rebound in corn production to 983 MMT, most of which will originate from the U.S. FAO forecasts U.S. corn production at 343 MMT, up 25% from last year's drought stricken crop.
Global cereal utilization for the 2013-14 marketing year is expected to rise 3.2% from the previous marketing year to 2.413 billion MT. This is down slightly from FAO's previous estimate.
FAO raised its forecast for world cereal stocks at the end of 2014 slightly to 569 MMT, again due to expectations for higher corn inventories. "The revised forecast puts world cereal stocks 13% (65.5 MMT) above their low opening levels and at their highest since 2001-02," FAO details.
Based on the current projections of overall demand, the increase in stocks would drive up the global stock-to-use ratio to 23.3%, the highest since 2002/03.
The next update will be released Oct. 3, 2013.