Thursday, March 3, 2011

Report: World Food Prices February 2011

The FAO Food Price Index rose for the eighth consecutive month, up 2.2 percent from January and the highest (in both real and nominal terms) since January 1990, the inception date of the index. Except for sugar, prices of all other commodity groups monitored registered gains in February with dairy products and cereals climbing the most.

The FAO Dairy Price Index was up 4 percent from January, but well below its peak in November 2007. The FAO Oils/Fats Price Index stands at just below the peak recorded in June 2008. The FAO Meat Price Index was up 2 percent from January. On a good note, the high FAO Sugar Price Index headed downwards, but is still 16 percent higher than this time last year.

Again, since rice is the most important food to 50% of the world's populations, it remains at a relatively low price when compared to the previous years. Because of the laws of supply and demand, however, other crops may be chosen as dedicated acreage over rice this coming season, particularly here in the U.S. where some predict 25% of rice acres could be replaced by other crops. (The U.S. is the third or fourth largest rice exporter.)

We all know why the world price of maize is so high (policy/politics). The dangerously low stocks of corn contribute to higher wheat, rice, soy, meat, and dairy prices.

Of greatest concern and significance, currently, is the increasing price of wheat and the increasing price of crude oil for this coming year's food production and food prices. The FAO forecasts global wheat production to increase by around 3 percent in 2011. In the past two weeks, Brent crude is up 13% and New York crude is up 18%.

Export prices of rice were generally stable to lower in February, as export availabilities from recent harvests remained ample. Nonetheless, a strengthening of the Baht against the US dollar lifted prices of rice in Thailand, including the benchmark export price (Thai white rice 100% B), which gained 2 percent from January. However, at USD 554 per tonne, it was 4 percent below its level of February 2010 and 42 percent below the peak of May 2008.

International prices of wheat rose by 7 percent in February. The benchmark US wheat price (US No. 2 Hard Red winter) averaged USD 362 per tonne, 75 percent higher than a year earlier but still 25 percent below its peak in March 2008. Wheat markets came under downward pressure later in the month following some improvements in weather in China and reports of possible delays in purchases by some of the countries hit by the recent wave of political unrest.

Export prices of maize rose by 9 percent in February with the benchmark US maize price (US No2, Yellow) averaging USD 287 per tonne. Prices in February were 77 percent higher than a year earlier and slightly above the June 2008 peak. The increase reflects a large cut in the official forecast of inventories in the United States., amid strong domestic use and increased exports.

Kay McDonald

See FAO Report.