The day’s commodities focus understandably has been on the big oil sell-off, but earlier today the Food and Agriculture Organization also released its April tally for world food prices.
The short story: Grains, and maize in particular, were up big as bad weather has depressed stocks; but sugar and dairy were down considerably while oils/fats and meats were mostly unchanged.
The longer version:
» The FAO Food Price Index (FFPI) averaged 232 points in April 2011, virtually unchanged from the revised March estimate, 36 percent above April 2010, but 2 percent below its peak in February 2011. A sharp increase in international grain prices in April more than offset declines in dairy, sugar, and rice, while oils and meat prices were mostly unchanged.
» The FAO Cereal Price Index averaged 265 points, up 5.5 percent (14 points) from March and 71 percent from April 2010. Unfavourable weather and planting delays resulted in international prices of grains to rebound after a decline in March, with wheat and maize prices gaining 4 percent and 11 percent respectively. However, large export supplies kept rice prices under downward pressure.
» The FAO Oils/Fats Price Index, which had fallen by 7 percent in March, was nearly unchanged in April. The stabilization of prices stems primarily from a strong recovery in production and rising inventories of palm oil in Southeast Asia. Meanwhile, soybean oil prices remained unchanged as concerns about plantings in the United States were compensated by reports of ample harvests in South America.
» The FAO Sugar Price Index averaged nearly 348 points, down 7 percent (or 25 points) from March and 17 percent below its January record. The recent decline was prompted by prospects of increased market availability, as the new crushing season begins in Brazil, and larger than anticipated production in Thailand.
» The FAO Dairy Price Index averaged 229 points, down 2.4 percent from March. A good start of the northern hemisphere season has put prices under downward pressure, after seven months of moderate but unrelenting growth.
» The FAO Meat Price Index remained stable (compared to a revised estimate of 172 points in March) at a record level of nearly 173 points, overtaking the 10-year peak of 170.4 points in August 2008. The recent rise in the index reflects a surge in beef and sheep meat prices. …
“Although the early outlook for cereal production in 2011 is good, weather in the coming months will be critical,” said FAO grain analyst Abdolreza Abbassian. “Production prospects for 2010 were extremely favourable at this time last year but unfavourable weather conditions between July and October changed that outlook drastically.
“Among all the cereals, maize is the most worrisome,” Abbassian noted. ”This year we would need above-average, if not record, yields in the United States for the maize situation to improve but maize plantings so far have been delayed considerably due to cool and wet conditions on the ground.”
We have little to add here, so we’ll turn elsewhere for a broader take on food prices.
Michael Roberts of Green, Greed, and Grains recently posted an intriguing (and disturbing) hypothesis — it might not just be the weather and related supply shortfall that’s responsible for the past year’s elevated prices, but something rather more troubling:
In 2009 all four of the majors saw yield declines, something that hasn’t happened since 1974. 2010 couldn’t have been much better and was probably worse, given how bad things were in the U.S, the world’s largest producer and exporter (worldwide data for 2010 isn’t available yet).
One question came up about planted area diluting yields through expansion onto marginal lands. There might be some of that. But I think it’s mainly a combination of weather and slowing technological progress in breeding. Cutbacks on basic science research do have consequences. And so does climate change, even if it hasn’t affected the US, yet.
If these lower yields do indeed reflect the start of a secular decline in productivity that can’t match demand growth, the timing obviously couldn’t be worse.
Related links:
Inflation indices – and bond markets – wheat themselves – FT Alphaville
Table du jour: orld food price menu – FT Alphaville