The UN's Food and Agriculture Organization's (FAO) Food Price Index fell to a seven-year low in January, slipping 1.9% from the the previous month as all prices for the commodities it tracks declined. The Food Price Index averaged 150.4 points in January, down 16% from a year earlier and registering its lowest level since April 2009.
"The main factors underlying the lingering decline in basic food commodity prices are the generally ample agricultural supply conditions, a slowing global economy, and the strengthening of the U.S. dollar," notes the FAO.
Weather patterns associated with El Niño are sending mixed signals about the early prospects for cereal crops in 2016, especially in the Southern Hemisphere, according to FAO's updated supply and demand brief. The agency raised its 2015 global cereal production estimate by 3.9 MMT to 2.531 MMT due to "mostly reflects positive output revisions for wheat, mainly in Canada and Russia."
Meanwhile, FAO trimmed its consumption forecast, resulting in an uptick in global cereal stocks that are set to end the 2016 seasons at 642 MMT. "That level implies a steady and comfortable global cereal stock-to-use ratio of around 25%," it says. "However, the inventory buildup varies geographically and depending on the crop. Notable increases in wheat inventories are forecast for the U.S., EU and China whereas some reductions are likely in Canada, India and the Islamic Republic of Iran.""