Grains blight otherwise stable food price index

By Jess Halliday

- Last updated on GMT

Related tags Food price index Cereal Wheat Fao

April saw sharp rises in grain prices due to exchange rates and oil prices, with the future curve to be determined by how much production increases and ability to replenish reserves.

According to the latest data from the FAO’s Food Price Index, cereals were the bleak spot for April, and falling prices for dairy, rice and sugar acted as a counterweight to provide overall stability. Other food commodities, such as meat and oils, remained firm.

The FAO Cereal Price Index averaged 265 points, up 5.5 percent from March and 71 percent from April 2010.

Maize prices were particularly influential, rising 11 percent. "Among all the cereals, maize is the most worrisome,"​ said grain analyst Abdolreza Abbassian.

"This year we would need above-average, if not record, yields in the United States for the maize situation to improve but maize plantings so far have been delayed considerably due to cool and wet conditions on the ground."

Wheat increased four percent in April 2011 as a result of unfavourable weather and planting delays, but the FAO said that large export supplies kept rice prices under downward pressure. But weather-permitting world wheat production is expected to increase by 3.5 percent this year, and rice by three percent.

"A sliding dollar and increased oil prices are contributing to high food commodity prices, particularly grains," said​ David Hallam Director of FAO's Trade and Market Division.

"With demand continuing strong, prospects for a return to more normal prices hinge largely on how much production will increase in 2011 and how much grain reserves are replenished in the new season."

Critical weather

Maize aside, the FAO is eyeing a good production outlook for cereals as long as the weather holds out, due to more plantings in response to higher prices.

However Abbassian was cautious due to disappointment in 2010.

"Production prospects for 2010 were extremely favourable at this time last year but unfavourable weather conditions between July and October changed that outlook drastically.”

Stock levels do not look so rosy, either.
World cereal stocks for the crop seasons ending in 2011 are forecast to decline to their lowest level since 2008, mostly due to depleting coarse grain inventories. Global wheat inventories are forecast to decrease too, but the wheat stock-to-use ratio will remain relatively comfortable, while rice inventories are even expected to rise.”

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