06 Apr 2018 --- The Food and Agriculture Organization’s (FAO) food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat and sugar, averaged 172.8 points last month, up 1.1 percent from February. World food prices rose in March from the month before, driven by increases in grains and dairy costs, according to the FAO.

From a year earlier, food prices on international markets rose 0.7 percent in March, FAO said. “Declines in price quotations for sugar and most vegetable oils were more than offset by increases for maize, wheat and most dairy products,” FAO said in a statement.

In March, the Index averaged 172.8 points, 1.1 percent higher than in February and 0.7 percent above its value a year earlier. Declines in price quotations for sugar and most vegetable oils were more than offset by increases for maize, wheat and most dairy products. The trade-weighted price index tracks international market prices for five major food commodity groups.

Worldwide cereal production hit a record level in 2017, up 33 million tons from 2016, to nearly 2,646 million tons, according to FAO's latest estimate in the Cereal Supply and Demand Brief, also released today. However, FAO's anticipates this year's world maize and wheat production to decline based on early forecasts.

Bread and butter
The FAO Cereal Price Index continued on its upward path, averaging 2.7 percent higher than in February and 12.1 percent above its March 2017 value. Wheat prices rose mostly on weather worries, including prolonged dryness in the United States of America and cold, wet conditions in parts of Europe.

Maize prices turned even firmer, driven by a combination of robust world demand and deteriorating crop prospects in Argentina.

The FAO Dairy Price Index was 3.3 percent higher in March, as strong global demand pushed up butter, cheese and whole milk powder prices.

The FAO Sugar Price Index declined 3.4 percent and stood at 27.5 percent below its March 2017 value, owing to large export availabilities.

The FAO Vegetable Oil Price Index declined modestly due to price drops for soy, rape and sunflower oils, while palm oil prices firmed up, buoyed by expectations the European Union will resume imports of palm oil-based biodiesel from Indonesia.

The FAO Meat Price Index was mostly unchanged from February, as bovine meat prices eased and those for bovine and pig meat rose on the back of strong import demand, primarily by China.

Restrained prospects for cereal production
The prospects for global cereal production in 2018 are more restrained.

Worldwide wheat output is expected to drop to 750 million tons, about one percent below its near-record level of the previous year. Forecasts suggest that US output may rebound from its 2017 decline, while production in China, India and the Russian Federation may fall after a record year.

Coarse grain output is also expected to decline from the 2017 record, amid bad weather in Argentina, a shift from maize to soybean cultivation in Brazil, and a price-induced reduction in plantings in South Africa.

FAO's latest forecast for world cereal stocks at the close of crop seasons ending in 2018 stands at nearly 748 million tons, almost 4 percent higher than a year earlier and hitting a record level, with the increase led by wheat. This large carryover would go some way to mitigate the effect of the projected decline in this year's global production.