FAO reports spike in food prices as vegetable oils soar

Source: ©Oleksandr Boiko via 123RF

The FAO Food Price Index, which tracks monthly changes in the international prices of a set of globally traded food commodities, averaged 127.5 points in November, up 5.7% from a year ago while still 20.4% below its March 2022 peak.

The vegetable oil price index increased by 7.5% in November from October, marking its second large increase in two months and 32% higher than its year-earlier level.

Global palm oil prices climbed further amid concerns about lower-than-expected output due to excessive rainfall in Southeast Asia.

World soy oil prices rose on global import demand, while rapeseed and sunflower oil quotations increased as tightening global supply prospects affected their respective markets.

The dairy price index maintained its upward trajectory in November, increasing by 0.6% from October, driven by rebounding global import demand for whole milk powder. Butter prices reached a new record level amid strong demand and tight inventories in Western Europe, while cheese prices rose due to limited export availabilities.

The other sub-indexes posted declines in November. The cereal price index dropped by 2.7%, down 8.0% below a year earlier. Global wheat prices declined due to weaker international import demand and increased supplies from the ongoing harvests in the Southern Hemisphere.

World maize prices remained stable as strong domestic demand in Brazil and Mexico’s demand for supplies from the United States of America were offset by favourable weather in South America, reduced demand for Ukrainian supplies and seasonal pressure from the ongoing U.S. harvest.

The all-rice price index declined by 4.0% in November, driven by increased market competition, harvest pressures and currency fluctuations.

The sugar price index declined by 2.4% from October, impacted by the start of the crushing season in India and Thailand and eased concerns over next year’s sugarcane crop prospects in Brazil, where recent rains have improved soil moisture.

The meat price index decreased by 0.8% in November, due mainly to lower quotations for pig meat in the European Union, reflecting abundant supplies and persistently subdued global and domestic demand.

World ovine and poultry meat prices fell slightly, while international bovine meat quotations remained stable, with higher Brazilian export prices offset by lower Australian prices.

Cereal stocks-to-use ratio set to decline

According to FAO’s new Cereal Supply and Demand Brief, also released on Friday, global cereal production in 2024 is forecast to decline by around 0.6% from the previous year to 2,841 million tonnes, a downward revision from October, yet still the second-largest output on record.

Global wheat output for 2024 is expected to be on par with 2023, at 789 million tonnes, while maize output is forecast to decline by 1.9% from the previous year to 1,271 million tonnes, due to lower-than-expected yields in the European Union and the United States of America. FAO’s forecast for world rice production in 2024/25 has changed slightly, pointing to a 0.8% annual increase to a record high of 538.8 million tonnes.

For 2025, softer wheat prices may discourage area expansions of the winter wheat crop underway in the northern hemisphere. Below-normal rainfall in key wheat-growing regions in the Russian Federation has led to low soil moisture levels, affecting planting operations.

By contrast, favourable soil moisture and government support policies, along with remunerative prices, should spur expanded plantings in China and India.

Coarse grain crops are being planted in the southern hemisphere. Early indications suggest a contraction in maize sowings in Argentina due to dry conditions and the risk of stunt disease transmitted by leafhoppers.

In Brazil, early planting intentions, encouraged by a return of rainfall, point to the same maize area for the 2025 crop. In South Africa, preliminary expectations point to an increase in white maize sowings, driven by record prices, offsetting a contraction in the yellow maize area.

World cereal utilisation is forecast to grow by 0.6% to 2 859 million tonnes in 2024/25, led by anticipated increases in food consumption of rice and wheat.

A significant revision from October now forecasts that global cereal stocks will decline by 0.7% from their opening levels, resulting in a global cereal stock-to-use ratio of 30.1% for 2024/25, down from 30.8% in the previous year but still indicating “a comfortable supply level” globally.

International trade in cereals in 2024/25 is now forecast at 484 million tonnes, down 4.6% from the previous year. Global wheat and maize trade volumes are expected to decline, while rice trade is predicted to increase.

The Agricultural Market Information System (AMIS), hosted at FAO, also released its monthly Market Monitor. In addition to the regular analysis, the report featured a reflection on agricultural commodity markets in 2024 and discusses uncertainties that could affect global commodity markets in 2025.