Good News From Coronavirus Outbreak, Pushes Down World Food Prices

The rampaging coronavirus outbreak is not all bad news. News of the outbreak in China helped in no small measure to push the Food and Agriculture Organisation (FAO) Food Price Index down.

The cherry news came as higher maize outputs in West Africa and Ukraine affected cereal supply and demand. Its estimates for 2019 world production is expected to hit 2 719 million tonnes.

FAO forecasts world trade in cereals to rise by 2.3 percent to 420 million tonnes in 2019/20, the second-highest level on record, with wheat shipments accounting for more than half of the expected increase.

Interestingly, world food prices declined in February for the first time in four months due to a sharp fall in the export prices of vegetable oils, partly driven by fears that the coronavirus (COVID-19) outbreak will slow global demand.

The 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 percent from the previous month but still 8.1 percent higher than a year earlier.

The FAO Vegetable Oil Index declined 10.3 percent 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 percent in February. Wheat prices were lower, reflecting well-supplied markets, while maize prices retreated as demand from the livestock feed sector dipped amid expectations of a weakening global economy.

By contrast, international rice prices rose, buoyed by strong demand from Far Eastern and East African buyers.

The FAO Meat Price Index was down by 2.0 percent from January, influenced by reduced imports by China impacted by delays in cargo handling in ports.

Drought-induced slaughter in New Zealand exerted further pressure on ovine meat price quotations, while poultry meat prices were affected by lower imports by Asia.

The FAO Dairy Price Index rose 4.6 percent, led by surging price quotations for cheese, partly linked to reduced milk output in Australia. 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 percent amid prospects of lower production in India as well as in Thailand, combined with a strong global import demand.

There is a preliminary forecast of 763 million tonnes 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 forecast to reach a record level of 2 721 million tonnes, driven by higher food, feed, and industrial usages.

FAO raised its forecast for world cereal stocks at the close of the 2020 seasons to nearly 866 million tonnes, resulting in the global cereals stocks-to-use ratio staying at a comfortable level of 30.9 percent.


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