World food prices declined in February for the first time in four months due to a sharp drop in the export prices of vegetable oils, partly driven by fears that the coronavirus (COVID-19) outbreak will slow global demand.
The U.N. Food & Agriculture Organization's (FAO) Food Price Index, which tracks monthly changes in the international prices of commonly traded food commodities, averaged 180.5 points in February, down 1.0% from the previous month but still 8.1% higher than a year earlier.
The FAO Vegetable Oil Index declined 10.3% from January, with international palm oil prices falling by even more on account of higher-than-expected output in Malaysia, a temporary drop in India's import demand and concerns over the spread of COVID-19.
The FAO Cereal Price Index declined 0.9% in February. Wheat prices were lower, which FAO said reflected well-supplied markets. Maize prices, on the other hand, retreated as demand from the livestock feed sector dipped amid expectations of a weakening global economy. International rice prices rose, buoyed by strong demand from buyers in the Far East and East Africa.
The FAO Meat Price Index averaged 178.6 points in February, down 2% from January, marking the second month of decline following 11 months of moderate increases. At this level, FAO said the index value was 15.9 points (9.8%) above the corresponding month last year.
“In February, international prices of ovine meat fell the most, followed by bovine meat, primarily due to reduced imports by China, reflecting delays in cargo handling in ports, which, in turn, led to stock build up in major exporting countries,” FAO reported. “Drought-induced slaughter in New Zealand also weighed on international quotations for ovine meat.”
Further, FAO said current import demand for pig meat eased from its earlier highs, but some supply tightness in Europe has caused prices to rise marginally. Poultry meat prices have come under slight downward pressure due to reduced purchases by Asia.
The FAO Dairy Price Index rose 4.6%, led by surging price quotations for cheese. According to FAO, price quotations for cheese surged in February by as much as 20 points (10.6%), underpinned by the tightening of export supplies from New Zealand with the seasonal milk production decline and further accentuated by reduced export availabilities from Australia due to less-than-average milk output in the 2019-20 season. Milk powders, by contrast, dipped as logistical bottlenecks slowed purchases by China, the world's largest milk powder importer.
The FAO Sugar Price Index rose 4.5% amid prospects of reduced production in India as well as in Thailand, combined with a strong global import demand.
World cereal production estimates revised upward
FAO also issued a new "Cereal Supply & Demand Brief" in which the agency raised its estimates for 2019 world cereal production to 2.719 billion metric tons due to higher maize output in West Africa and Ukraine.
The brief offers a preliminary forecast of 763 million mt for 2020 worldwide wheat production — very close to the near-record level of 2019 — and indicates that coarse grain output in 2020 will likely be strong in Argentina, Brazil and South Africa.
World cereal utilization in the 2019-20 cycle is now projected to reach a record level of 2.721 billion mt, driven by higher food, feed and industrial usage.
FAO raised its forecast for world cereal stocks at the close of the 2020 seasons to nearly 866 million mt, resulting in the global cereal stocks-to-usage ratio staying at a comfortable level of 30.9%.
FAO also forecasts world trade in cereals to rise 2.3% to 420 million mt in 2019-20, the second-highest level on record, with wheat shipments accounting for more than half of the expected increase.