World food commodity prices declined for the third month in a row in April, largely due to the negative impacts on international food markets arising from the COVID-19 pandemic, according to the UN Food and Agriculture Organisation (FAO). The FAO Food Price Index averaged 165.5 points in April, down 5.7 points (3.4%) from March. This is the lowest level since January 2019. The index, which measures monthly changes in international prices of a basket of food commodities (cereals, oilseeds, dairy products, meat and sugar), was published on May 7. All sub-indices of the Food Price Index registered significant declines in April – except the cereal price index which declined only marginally, as international prices of wheat and rice rose significantly while those of maize dropped sharply. The UN food agency said that international rice prices increased by 7.2% from March, mainly due to temporary export restrictions by Viet Nam, and wheat prices rose by 2.5%. Contrary to this, prices of coarse grains, including maize, fell by 10%, driven by reduced demand for its use for both animal feed and biofuel production.

The FAO Sugar Price Index reached a 13-year low, declining 14.6% from the previous month. The FAO experts attribute this to collapsing international crude oil prices which reduced demand for sugarcane to produce ethanol. The FAO Vegetable Oil Price Index dropped 5.2% in April, driven lower by falling palm, soy and rapeseed oil values. The FAO Dairy Price Index fell by 3.6%, “with butter and milk powder prices posting double-digit drops amid increased export availabilities, mounting inventories, weak import demand and diminished restaurant sales in the northern hemisphere,” FAO informed. The downward trend also affects the FAO Meat Price index, which declined 2.7%. “The COVID-19 pandemic is hitting both the demand and supply sides for meat, as restaurant closures and reduced household incomes lead to lower consumption and labour shortages on the processing side are impacting just-in-time production systems in major livestock producing countries,” said FAO Senior Economist Upali Galketi Aratchilage.

On Thursday, FAO also released its monthly “Cereal Supply and Demand Brief” with includes estimates for global cereal supply and demand in 2019. FAO’s estimate for 2019 world cereal production stands at around 2,720 million tonnes, up 65.3 million tonnes (2.5%) from the reduced 2018 level, mainly due to increases in wheat, maize, and barley outputs. The forecast for world cereal utilization for 2019/20 has been reduced by 24.7 million tonnes compared to the previous edition of the Brief, as a result of COVID-19 impacts on economic growth, energy markets, and, to a lesser extent, feed demand. The reduction is largely a result of the downward revision of maize utilization, mostly in the United States of America and China, reflecting a sudden slowdown in feed and industrial demand. The report points out that lower utilization rates will lead to higher world cereal stocks at the close of 2020 seasons. Stocks are projected at 884 million tonnes by the close of the 2020 seasons, slightly up from 870 million tonnes in 2018. (ab)