FAO food price index drops sharply on cereal production

by World Grain Staff
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ROME, ITALY — Global food prices have dropped sharply in May due to generally favorable supplies, growing global economic uncertainties and a strengthening of the U.S. dollar, the United Nation’s Food and Agriculture Organization (FAO) said on June 7.

The FAO Food Price Index, measuring the monthly change in international prices of a basket of food commodities, fell by 4% in May. It averaged 204 points and was 9 points down from April. This was the lowest level since September 2011 and about 14% below its peak in February 2011.

"Crop prices have come down sharply from their peak level but they remain still high and vulnerable due to risks related to weather conditions in the critical growing months ahead," said FAO's grain analyst Abdolreza Abbassian.   

FAO at the same time raised the forecast for world cereal production by 48.5 million tonnes since May, mainly on the expectation of a bumper maize crop in the U.S.

FAO's latest forecast for world cereal production in 2012 stands at a record level of 2.419 billion tonnes, up 3.2% from the 2011 record.

The bulk of the increase is expected to originate mainly from maize in the U.S. amid an early start of the planting season and prevailing favorable growing conditions. As a result, the global coarse grain production is forecast at 1.248 billion tonnes, a huge 85 million tonnes increase from the previous year.

However, with planting still to be completed and much of the crop at very early stages of development, the final outcome will depend greatly on weather conditions in the coming months.

With the main northern hemisphere rice crops now in the ground in several countries, the forecast of global rice production in 2012 is firmer and points to a 2.2% increase from 2011, to some 490 million tonnes, mostly reflecting larger plantings in Asia.

For wheat, latest indications point to a contraction of about 3% in production in 2012, to 680 million tonnes, still well above the average of the past five years.

The global cereal utilization is forecast to expand by at least 2% in 2012-13, to 2.376 billion tonnes, with feed utilization growing by 3.8%, while food consumption is expected to increase by just over 1%, largely keeping pace with world population growth.

At the current forecast level, world cereal production would exceed the anticipated utilization in 2012-13 (which has been revised up since last month by 19 million tonnes or 1%) and lead to a significant replenishment of world cereal stocks, up 36 million tonnes, or 7%, from the previous season.

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