Bumper harvests, Covid-19 hit pressures global cereals prices: FAO

The approaching harvest of bumper new crops and the negative economic impact of Covid-19 on demand dragged world food and cereals prices lower in May, the United Nations' Food and Agriculture Organization (FAO) said in its monthly price report on Thursday.

The FAO Cereal Price Index dropped 1% in May to 162.2 and was virtually unchanged year-on-year as wheat prices tumbled 2% on the back of expectations of another year of record global production.

“[Wheat prices fell] as expectations point to ample global supplies also in the new season while trade activities have slowed down with harvesting seasons underway, or approaching, in the northern hemisphere,” FAO said.

Corn prices continue to suffer from low demand from the feed and biofuels sector as US corn prices fell for four consecutive months and were 16% down year-on-year in May.

“Weak demand from feed and biofuel sectors, amidst abundant export supplies, continued to pressure international maize prices,” the report said.

The FAO Vegetable Oil Price Index dropped another 2.8% over the month to 128.1 points, the lowest level in ten months as the impact of Covid-19 and excess supply continue to affect palm oil prices.

The move mainly reflected “protracted, subdued global import demand (tied to the coronavirus pandemic and depressed mineral oil prices) and higher than expected production and inventory levels in major exporting countries,” FAO said.

However, prices for rapeseed and sunflower oils increased, thanks to markedly tighter supplies in the EU and the Black Sea region.

Overall the FAO Food Price Index fell 1.9% in May to 162.5 points, the lowest number since December 2018.