The food price index rose in March due to a rise in price of cereals and dairy products, agronews.ua reported.
In March the average value of the index was at the level of 172.8 points, which is 1.1% higher than in February and 0.7% higher than its value in the previous year. Reduction of price proposals for sugar and for most types of vegetable oil was compensated by the increase in the cost of corn, wheat and most dairy products. The weighted trade index reflects the prices of international markets of the five major groups of food products.
According to the latest calculations by the FAO in the Results on the supply and demand for grain, the world's cereal production in 2017 rose to a record level - from 33 million tons in 2016 to 2,646 million tons in 2017. Despite this, according to preliminary calculations, the FAO expects that this year the world production of corn and wheat will fall.
Bread and milk
The FAO price index for cereals continues to grow, averaging 2.7 percent more than in February and 12.1 percent higher than in March 2017. Wheat prices rose on pessimistic expectations due to unfavorable weather conditions, namely the prolonged drought in the United States of America and cold rainy weather in some regions of Europe. The prices for corn were strengthened due to growth of demand in the world and negative forecasts for the harvest in Argentina.
The FAO dairy price index is 3.3 percent higher than in March, as high demand at the global level prompted a rise in prices for butter, cheese and whole milk powder.
The sugar price index of FAO fell by 3.4 percent, which is 27.5 percent lower than in March 2017, thanks to large export resources. The price index for vegetable oil slightly decreased due to the fall in prices for soybeans, rapeseed and sunflower oil, while palm oil prices strengthened, thanks to expectations that the European Union will resume import of biodiesel fuel using palm oil from Indonesia.
The meat price index of FAO has remained unchanged since February, due to a decrease in prices for beef, while prices for mutton and pork have increased because of high demand for imported products, especially in China.
Limited prospects for the development of cereal production
Prospects for world cereal production in 2018 are limited.
It is expected that the world wheat production will drop to 750 million tons, which is about 1% less than the last year's record level. The forecasts suggest that the US production will recover after the fall in 2017, while the production of China, India and the Russian Federation may decline after a record year.
It is assumed that the volume of production of forage grains will also decline from their record level in 2017, taking into account the bad weather in Argentina, the transition from corn cultivation to soybean production in Brazil, and the reduction of crop areas in South Africa.
According to the latest FAO forecasts, the world cereal reserves, at the time of the completion of the growing season in 2018, will be almost 748 million tons, which is almost 4% higher than last year's volumes and thereby sets a new record. This growth, mainly, was provoked by the growth of wheat production. Stocks of this size will, to a certain extent, mitigate the impact of the expected reduction in annual global production volumes.