Farmers inspect rice seeds in Sierra Leone.
Photo courtesy of FAO.
ROME, ITALY —Even though global markets remain well supplied the Food and Agriculture Organization of the United Nations (FAO) Food Price Index rose in January, led by cereal and sugar.

The FAO Food Price Index averaged 173.8% in January, its highest value in almost two years, marking a 2.1% increase from its revised December value and 16.4% above its 2016 January level.

The FAO Cereal Price Index rose 3.4% from December to a six-month high, with wheat, maize and rice values all increasing. Wheat markets reacted to unfavorable weather conditions hampering this season's crops as well as reduced plantings in the United States, while higher maize prices mostly reflected strong demand and uncertain crop prospects across South America. International prices of rice also rose, in part due to India's ongoing state procurement program, reducing the quantities available for export.

Worldwide inventories of cereals are on course to reach an all-time record level by the end of the season in 2017, according to FAO's latest Cereal Supply and Demand Brief.

Latest figures put global cereal stocks at 681 million tonnes, up 1.5% from their December forecasted level and up 3% from the previous season. World wheat inventories would likely hit a new record of 245 million tonnes, marking an 8.3% annual increase. Coarse grain stocks are forecast to grow by 0.7% to reach their second-highest level on record, while rice stocks are set to decline slightly, although ending the season at a near-record 170 million tonnes.

The FAO also has raised its estimate of global cereal output in 2016 by 15 million tonnes, due primarily to larger-than-expected wheat harvests in Australia and Russia.

World cereal utilization as well as trade are also set to be significantly higher than earlier anticipated.

Looking further ahead, early production prospects for 2017 are mixed, according to the FAO. Low prices prompted farmers in North America to reduce acreage sowed to wheat, to their second-lowest level on record in the United States, while the opposite trend was seen in Russia.

For rice, excess rains over parts of Vietnam and inadequate rainfall in Sri Lanka likely will curb rice output. For other grains, generally positive conditions appear to be in place. Maize output in Southern African countries is poised to rebound to near-average levels, due to more plantings and better yields after last year's severely dry conditions. High local prices and conducive weather point to larger grain plantings in Argentina and Brazil.