Agency sees drop in wheat output after record 2016 harvest.
ROME, ITALY — Higher prices for wheat and maize helped drive the Food and Agriculture Organization of the United Nations (FAO) Food Price Index higher in February, marking the seventh consecutive month-over-month gain for the index.

The FAO Food Price Index averaged 175.5 points in February, its highest value in almost two years, up 0.5% from its revised January value and 17.2% above its value in February 2016.

The FAO Cereal Price Index averaged 150.6 points in February, up 2.5% from January.

“Wheat quotations gained 3% on stronger pace in trade activities, combined with logistical issues in the U.S. ports,” the FAO said. “The increase in maize values was less significant, but strong demand kept prices firm. International rice prices firmed for the third successive month, mostly reflecting currency movements and expectations of stronger Basmati sales.”

The FAO Vegetable Oil Price Index averaged 178.7 points in February, down 4% from January, marking the first month-on-month decline since October 2016.

“The drop in prices in February mainly reflects developments in the palm and soy oil markets,” the FAO said. “While prospective production increases in Southeast Asia and slowing global import demand put downward pressure on palm oil prices, soy quotations eased on account of higher crop forecasts in Brazil and Argentina as well as ample soy oil supplies in Argentina and the United States — following subdued demand from biodiesel producers.”

The FAO Meat Price Index rose 1.1%, while the FAO Sugar Price Index rose 0.6%.

The FAO also released its first forecast for global wheat production in 2017. The organization projected global wheat output at 744.5 million tonnes, which, if realized, would be down 1.8% from its record level in 2016.

“Farmers in North America reduced plantings in favor of higher-priced crops, while winter wheat prospects are robust in the Russian Federation, the E.U., China, India and Pakistan, according to the Cereal Supply and Demand Brief,” the FAO said. “Prospects for coarse grains production, mainly maize, are generally favorable in the Southern Hemisphere, where the crop is in its final development stage. Large increases are forecast for Argentina and Brazil, while wetter conditions in most of Southern Africa point to a significant recovery from last year's drought-reduced output, although an outbreak of armyworms could limit production gains in some countries of the sub-region.”

The global cereal supply and demand situation in 2016-17 is expected to remain “broadly comfortable” for the third consecutive season, the FAO said.

Total use of wheat for direct human consumption is expected to rise by 1.1% in the year ahead, while feed utilization to increase by as much as 6%, according to the FAO. Worldwide wheat inventories are anticipated to rise by 6.6%, or 15 million tonnes, to nearly 240 million tonnes, led by stock build-ups in Australia, China, Russia and the United States.