The benchmark index of international food commodity prices declined for the 12th consecutive month, down 2.1% in March, driven by declines in world price quotes for cereals and vegetable oils, the Food and Agriculture Organization of the United Nations (FAO) disclosed.

In its Cereal Supply and Demand Brief, released the same day, the FAO raised its estimate for world cereal production in 2023 to 2.777 billion tonnes, now down only 1.2% from the previous year.

The FAO Food Price Index, which tracks monthly changes in the international prices of commonly traded food commodities, averaged 126.9 points in March 2023, down 2.1% from the previous month and 20.5% below its peak level of March 2022. A mix of ample supplies, subdued import demand and the extension of the Black Sea Grain Initiative contributed to the drop.

Máximo Torero, chief economist at the FAO noted that while prices dropped at the global level, they are still very high and continue to increase in domestic markets, posing additional challenges to food security.

“This is particularly so in net food importing developing countries, with the situation aggravated by the depreciation of their currencies against the USA dollar or the Euro and mounting debt burden.”
Máximo Torero

The FAO Cereal Price Index declined 5.6% from February, with international wheat prices falling by 7.1%, pushed down by strong output in Australia, improved crop conditions in the European Union, high supplies from the Russian Federation and ongoing exports from Ukraine from its Black Sea ports.

World maize prices fell by 4.6%, due partly to expectations of a record harvest in Brazil, while those of rice eased by 3.2% amid ongoing or imminent harvests in major exporting countries, including India, Vietnam and Thailand.

The FAO Vegetable Oil Price Index averaged 3% lower than the previous month and 48% below its March 2022 level, as ample world supplies and subdued global import demand pushed down soy, rapeseed and sunflower oil quotations. That more than offset higher palm oil prices, which rose due to lower output levels in Southeast Asia due to floodings and temporary export restrictions imposed by Indonesia.

Cereal Supply and Demand Brief

In FAO’s outlook on crop production, utilization, trade and stocks, the agency raised its forecast for world wheat production in 2023, now pegged at 786 million tonnes, which would be 1.3 % below the 2022 level but still the second largest outturn on record. Near-record sown areas are expected in Asia, while dry conditions are impacting North Africa and southern Europe.

In the Southern Hemisphere, the sown area and production prospects for maize in Brazil are expected at an all-time high, underpinned by robust export demand. Yield prospects are also good in South Africa, which may record its second-largest harvest in 2023. By contrast, prolonged dry conditions have adversely affected maize crops in Argentina.

World rice production in 2022-23 is now pegged at 516 million tonnes, 1.6% below the record reached in 2021-22 but still an above-average harvest.

The FAO’s updated forecast for world cereal consumption in 2022-23 now stands at 2.779 billion tonnes, down 0.7% from 2021-22. World cereal stocks by the close of the 2022-2023 seasons are expected to decline by 0.3% from their opening levels to 850 million tonnes. The world cereal stocks-to-use ratio likely will dip from 30.7% in 2021-22 to 29.7%, still considered an overall comfortable global level.

World trade in cereals for 2022-23 is predicted to contract by 2.7% from the 2021/22 level to 469 million tonnes. The decline mostly reflects expectations of reduced trade of coarse grains, while global wheat trade is anticipated to increase. International trade in rice in 2023 is forecast to decline by 5.2% below the 2022 record-high level.