On 3 June 2021, the Food and Agriculture Organization of the United Nations (FAO) reported the fastest monthly rise in food prices despite world cereal production likely to reach a new high this crop year. The FAO Food Price Index averaged 127.1 points in May, 4.8% higher than in April and 39.7% higher than in May 2020.
A surge in the international prices of vegetable oils, sugar, and cereals led to an increase in the index, which tracks monthly changes in the global prices of commonly-traded food commodities to its highest value since September 2011 and only 7.6% below its all-time peak – in nominal terms.
The cereal price index increased 6.0% from April, led by international maize prices, which averaged 89.9% above their year-earlier value. However, maize prices started to retreat at the end of May, mainly on the improved production forecast in the United States. International wheat prices also showed a late-month decline but averaged 6.8% higher in May than in April, while international rice quotations held steady.
The vegetable oil price index gained 7.8% in May, mainly reflecting rising palm, soy, and rapeseed oil quotations. Palm oil prices rose due to slow production growth in Southeast Asian countries, while the prospect of robust global demand, especially from the biodiesel sector, drove soya oil prices higher.
Indian sugar exports ease price surge
The sugar price index increased by 6.8% from April, primarily due to harvest delays and concerns over reduced crop yields in Brazil, the world’s largest sugar exporter. However, large export volumes from India contributed to easing the surge in global sugar prices.
The meat price index went up by 2.2% from April, with quotes for all meat types rising due to China’s accelerated imports and increasing internal demand for poultry and pig meats in the leading producing regions.
The dairy price index rose by 1.8% in the month, averaging 28% above its level one year ago. The increase was led by solid import demand for skim and whole milk powders, while butter prices declined for the first time in almost a year on increased export supplies from New Zealand.
Record cereal output expected
A new Cereal Supply and Demand Brief also released on the same day, offered FAO’s first forecast for world cereal production in 2021 – now pegged at nearly 2.821 billion tons, a new record and a 1.9% increase from 2020 – primarily led by a forecast of increased maize production by 3.7% this year.
World cereal utilization in 2021-22 is forecast to expand by 1.7% to 2.826 billion tons. As a result, total cereal food consumption is forecast to rise together with the world population, although increased wheat is being used increasingly for animal food.
World trade in cereal food price to rise by 6.3%
Based on these forecasts, world cereal stocks at the close of the 2020-21 crop seasons are forecast to increase marginally by 0.3% to 811 million tons. While the slight expected food price rise would end three consecutive years of decline of global stocks, the stocks-to-use ratio is forecast to decline further to 28.1%.
FAO’s first forecast for world trade in cereals in the new season indicates an increase of only 0.3% from the high level estimated for 2020-21. However, in the new season, the world trade in cereals is forecast to expand by as much as 6.3% to a peak level of 468 million tons.