Fueled by Vegetable Oil, FAO Price Index reaches its highest level in 18 months

The benchmark for world food commodity prices surged to its highest level in 18 months in October, led by a sharp increase in vegetable oil quotations, the Food and Agriculture Organization of the United Nations (FAO) reported Friday. The FAO Food Price Index, which tracks monthly changes in the international prices of a set of globally-traded food commodities, averaged 127.4 points in October, up 2.0 percent from September and 5.5 percent from its value a year ago. Nevertheless, the index remained 20.5 percent below its March 2022 peak.

The FAO Vegetable Oil Price Index spiked by 7.3 percent in October, hitting a two-year high as a result of rising quotations for palm, soy, sunflower and rapeseed oil, driven mainly by concerns about production.

Wheat and Maize prices up, Rice softens
The FAO Cereal Price Index increased by 0.9 percent in October, led by rising wheat and maize export prices. Global wheat prices were affected by unfavorable weather conditions in major northern hemisphere exporters as well as the re-introduction of an unofficial price floor in the Russian Federation and rising tensions in the Black Sea region. 

World maize prices rose as well, driven in part by strong domestic demand and transport challenges in Brazil due to low river levels. By contrast, the FAO All Rice Price Index declined by 5.6 percent in October, reflecting lower indica rice quotations driven by expectations of heightened competition among exporters following India’s removal of export restrictions on non-broken rice.

The FAO Sugar Price Index increased by 2.6 percent amid persistent concerns over the 2024/25 production outlook in Brazil following extended dry weather conditions. Rising international crude oil prices also contributed to the increase in sugar quotations by shifting more sugarcane toward ethanol production, while the weakening of the Brazilian real against the United States dollar limited the increase.

The FAO Dairy Price Index rose by 1.9 percent in October, averaging 21.4 percent above its level the same time last year. The increase was primarily driven by higher international cheese and butter prices, while quotations for milk powders declined.

Rice and wheat production to increase, maize output may decline
According to FAO’s new Cereal Supply and Demand Brief, also released Friday, global cereal production in 2024 is forecast to decline by around 0.4 percent from the previous year to 2848 million tonnes, the second-largest output on record.

World wheat production is expected to increase, buoyed by production upturns in Asia as a result of area expansions and conducive weather conditions, which more than offset large declines among key producers in Europe. Global coarse grain production is forecast to decline from its 2023 record level, mostly due to a sizeable crop in maize output because of adverse weather conditions. Meanwhile, world rice output in the 2024/25 season could reach a record high of 538.9 million tonnes, boosted by record-breaking plantings.

World cereal utilization is forecast to grow by 0.5 percent to 2 857 million tonnes in 2024/25, led by increasing food consumption of rice and wheat. Global cereal stocks are predicted to expand by 0.6 percent to 889 million tonnes, largely due to an expected expansion in rice inventories. This would result in a global cereal stocks-to-use ratio of 30.6 percent, near the five and ten-year average levels.

International trade in cereals is now forecast at 485 million tonnes, representing a 3.9 percent contraction from the 2023/24 level. Global trade of rice is forecast to increase, while that of wheat and coarse grains to decline.