Global agri prices at 6-yr low in June

Dairy, sugar prices fall sharply, despite El Niño fears; cereal output better than earlier expectations this year: FAO

Global agricultural commodities’ prices declined to a six-year low last month, with bumper output of all products in the value chain.

Data compiled by the Food and Agricultural Organization (FAO) of the United Nations showed prices of global agri commodities fell by 0.9 per cent in June. Weighed in terms of the FAO’s Food Price Index (FPI), prices of agri commodities stood at 165.1 points, a decline of 21 per cent from a year before and its lowest level since September 2009.

Price movements diverged across markets, with sugar and milk products incurring pronounced falls, while cereals and oils firmed somewhat. Meat prices were stable. Except for a lull in October 2014, the overall food price index has declined every month since April 2014.

“The decline in the FPI mainly came as a result of a drop of 6.6 per cent in the price of sugar and of 4.1 per cent in dairy products, which more than offset a rebound in palm oil and wheat quotations. Increasing worldwide demand for livestock feed, especially in Brazil, China and the United States, is supporting prices for coarse grains, including maize,” FAO said in a report on Thursday.

Average cereal prices, however, reported a recovery. The Cereal Price Index averaged 163.2 points in June, up 2.5 points (1.5 per cent) from May, the first month-on-month rise since December 2014. Compared to June 2014, prices have fallen as much as 33 points (17 per cent). All of last month’s price strength stemmed from wheat and coarse grain prices, which gained two per cent each, while rice quotations remained under pressure. Although unfavourable weather in some regions provided support to prices, the rise was contained, amid abundant carryover stocks and generally good production prospects.

Latest study forecasts world cereal production at 2,527 million tonnes, 1.1 per cent or 27 mt below the record level in 2014 and and fractionally above expectations last month, as improved prospects for coarse grains were offset by a cut in the rice forecast.

At 2,534 mt, world cereal consumption is anticipated to grow by 1.2 per cent (30 mt) from the 2014-15 estimated level. More than half of this increase corresponds to coarse grains, the utilisation of which is foreseen to rise by 1.4 per cent to 1,306 mt, underpinned by a greater maize usage for feed, especially in Brazil, China and the US.

Meanwhile, the vegetable oil index averaged 156.2 points in June, up 2.1 points (or 1.3 per cent) from May but still 17 per cent below its level in June last year. The rise was mainly driven by palm and soy oils. Palm oil quotations strengthened, underpinned by improved import demand (by China and India in particular) and continued concerns about dry weather related to an El Niño effect (an adverse weather condition) in Southeast Asia.

By contrast, the dairy and sugar price indexes reported a steep decline by 6.9 points (4.1 per cent) and 12.4 points (6.6 per cent) to 160.5 and 176.8, respectively, in June.

Milk powders were the products most affected by the market weakness, although prices of butter and cheese also declined. The sharp decline in sugar was prompted by reports of higher than expected production in India, the world’s largest sugar consumer, and Thailand. Better than forecast output in Brazil, the world’s largest producer and exporter, helped by good harvesting conditions for most of the month of June, contributed to the general price decline.