Grain processing facility in Ukraine
Grain processing facility in Ukraine.
Photo courtesy of FAO.
ROME, ITALY — International agricultural food commodity prices fell in June for the first time in 2018, as trade tensions affected markets even with global production prospects down.

The FAO Food Price Index averaged 173.7 points in June, down 1.3% from its level in May.

According to the FAO, the decline was driven primarily by lower benchmark price quotations for wheat, maize and vegetable oils, including those made from soybeans.

The FAO Food Price Index is a measure of the monthly change in international prices of a basket of food commodities.

The FAO Cereal Price Index averaged 166.2 points in June, down 6.4 points, or 3.7%, from May but still nearly 8% higher than its level in the corresponding period last year.

The decline in June was driven by relatively sharp falls in maize and wheat quotations, while rice prices rose. Despite overall worsening production prospects, wheat and maize prices fell in June, following similar trends observed across most commodities arising from heightened trade tensions.

“By contrast, international rice prices increased, as supply tightness underpinned higher quotations of Japonica and fragrant rice, outweighing declines in Indica prices,” the FAO said.

The FAO Vegetable Oil Price Index declined 3% from May to reach a 29-month low. Palm, soybean and sunflower oil prices all declined.

“Heightened trade tensions between the United States of America and its trading partners, particularly China, weighed particularly hard on the U.S. origin export prices, led by soybeans, with the strength of the dollar exerting further downward pressure,” the FAO said.

The FAO also updated its forecast for world cereal output this year, now pegged at 2.586 billion tonnes, which is 64.5 million tonnes, or 2.4%, less than the record production of 2017.

The new forecast issued in the FAO’s Cereal Supply and Demand Brief, is 24 million tonnes less than projected by the FAO last month, largely reflecting lower output prospects for wheat in the European Union and for wheat and coarse grains in the Russian Federation and Ukraine.

World cereal utilization is forecast to rise to 2.641 million tonnes in 2018-19.

“As utilization is foreseen to outpace new production, global cereal stocks accumulated over the past five seasons will have to be drawn down, by around 7% from their season-opening levels,” the FAO said. “This should result in the world stocks-to-use ratio for cereals dropping to 27.7%, representing the first decrease in four years — down from 30.6% — although still well above the record low of 20.4% registered in the 2007-08 season.”

The inventory drawdown is expected to be largest for maize, while rice stocks may increase for the third year in a row.

World trade in cereals also is expected to remain generally robust in 2018-19, close to near-record level of 2017-18.