Global food prices rose in May at their fastest monthly rate in more than a decade, even as world cereal production is on course to reach a new record high, according to the Food and Agriculture Organization of the United Nations (FAO).

The FAO Food Price Index averaged 127.1 points in May 2021, 4.8% higher than in April. This is also 39.7% higher than in May 2020.

A surge in the international prices of vegetable oils, sugar and cereals led the increase in the index. The FAO Food Price Index tracks monthly changes in the international prices of commonly-traded food commodities. Meanwhile, this is the highest value since September 2011 and only 7.6% below its all-time peak in nominal terms.

The FAO Cereal Price Index increased 6.0% from its value in April. This is led by international maize prices, which averaged 89.9% above their year-earlier value. However, maize prices started to retreat at the end of May. This is mostly due to improved production prospects in the United States of America.

Also, International wheat prices showed a late-month decline but averaged 6.8% higher in May than in April. On the other hand, international rice quotations remain relatively stable.

Other Food Price Indices

Furthermore, the FAO Vegetable Oil Price Index also increased by 7.8% in May, mainly reflecting rising palm, soy and rapeseed oil quotations. Palm oil prices rose due to slow production growth in Southeast Asian countries. On the other hand, prospects of robust global demand, especially from the biodiesel sector, drove soyoil prices higher.

The FAO Sugar Price Index increased by 6.8 % from April, due largely to harvest delays. There were also concerns over reduced crop yields in Brazil, the world’s largest sugar exporter. But, large export volumes from India contributed to easing the price surge.

Similarly, the FAO Meat Price Index increased by 2.2% from April, with quotations for all meat types rising. This is due to a faster pace of import purchases by China. Also, rising internal demand for poultry and pig meats in the leading producing regions contributed to the rise.

Additionally, the FAO Dairy Price Index rose by 1.8% in May 2021, averaging 28% above its level of one year ago. Some of the driving forces were the solid import demand for skim and whole milk powders. Nevertheless, butter prices declined for the first time in almost a year on increased export supplies from New Zealand.

Record cereal output expected in 2021

Meanwhile, a new Cereal Supply and Demand Brief, also released, offered FAO’s first forecast for world cereal production in 2021. It is now pegged at nearly 2, 821 million tonnes, a new record and a 1.9 percentage point increase from 2020. The forecast leans against an expected 3.7% annual growth in maize output.

Furthermore, World cereal utilization in 2021/22 is predicted to expand by 1.7% to 2, 826 million tonnes. Total cereal food consumption is forecast to rise in tandem with world population. Besides, the FAO is also anticipating a rise in the use of wheat for animal feed.

Based on those forecasts, world cereal stocks at the close of crop seasons in 2021/22 are anticipated to increase by 0.3% to 811 million tonnes. The expected modest rise would end three consecutive years of decline. Nevertheless, the global stocks-to-use ratio is forecast to decline further to 28.1%.

FAO’s first forecast for world trade in cereals in the new season indicates an increase of only 0.3% from the high level estimated for 2020/21. Even though trade is expected to expand by as much as 6.3% to a peak level of 468 million tonnes.