Global agri commodities’ prices declined to nearly six-year low in June 2015 due to bumper output of all products in value chain. 

Forecast for yet another year of better-than-expected production this year despite continuing apprehension over El Niño pulled commodities’ prices down.

Data compiled by the Food and Agricultural Organisation (FAO) of the United Nations, showed prices of global agri commodities fell by 0.9% in June.

Weighed in terms of index known as FAO’s Food Price Index(FPI), prices of agri commodities stood at 165.1 points, a decline of 21% from a year ago and at its lowest level since September 2009.

Price movements diverged across the various markets, with sugar and milk products incurring pronounced falls, while cereals and oils prices firmed somewhat. Meat prices were stable. Except for a lull in October 2014, the overall food price index has declined every month since April 2014.

“The decline in the FPI mainly came as a result of a drop of 6.6% in the price of sugar and of 4.1% in dairy products, which more than offset a rebound in palm oil and wheat quotations. Increasing worldwide demand for livestock feed, especially in Brazil, China and the United States, is supporting prices for coarse grains, including maize,” FAO said in a report on Thursday.

Average cereal prices reported, however, a recovery. The Cereal Price Index averaged 163.2 points in June, up 2.5 points (1.5%) from May, marking the first month-on-month rise since December 2014. Compared to June 2014, prices have fallen by as much as 33 points (17%).
 

All of last month’s price strength stemmed from wheat and coarse grain prices, which gained 2 percent each, while rice quotations remained under pressure. Although unfavourable weather in some regions provided support to prices, the rise was contained, amid abundant carryover stocks and generally good production prospects.

FAO’s latest study forecasts world cereal production at 2527 million tonnes, 1.1% or 27 million tonnes below the record production level in 2014 and and fractionally above expectations last month, as improved prospects for coarse grains were offset by a cut in the rice forecast.

At 2534 million tonnes, world cereal consumption is anticipated to grow by 1.2% (30 million tonnes) from the 2014-15 estimated level. More than half of this increase corresponds to coarse grains, the utilization of which is foreseen to rise by 1.4% to 1306 million tonnes, underpinned by a greater maize usage for feed, especially in Brazil, China and the United States.

Meanwhile, vegetable oil index averaged 156.2 points in June, up 2.1 points (or 1.3%) from May, but still 17% below its level in June last year. The rise was mainly driven by palm and soy oils. Palm oil quotations strengthened, underpinned by improved import demand (by China and India in particular) and continued concerns about dry weather related to El Niño in Southeast Asia.

By contrast, dairy and sugar price index reported a steep decline by 6.9 points (4.1%) and 12.4 point (6.6%) to 160.5 points and 176.8 points respectively in June.

Milk powders were the products most affected by the market weakness, although prices of butter and cheese also declined. The sharp decline in sugar was prompted by reports of higher than expected sugar production in India, the world’s largest sugar consumer, and Thailand.

Better than forecast output in Brazil, the world’s largest producer and exporter, helped by good harvesting conditions for most of the month of June also contributed to the general price decline.