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The FAO Food Price Index, which tracks monthly changes in the international prices of a set of globally-traded food commodities, averaged 120.7 points in August, slightly down from its revised July figure and 1.1 percent below its corresponding value in August 2023.
The FAO Cereal Price Index dropped by 0.5 percent from July, driven by lower global wheat export prices amid competitively priced Black Sea supplies and higher-than-expected production in Argentina and the United States of America. Meantime, world maize prices firmed slightly, reflecting the impact of heatwaves on yields in parts of Europe and North America, while the FAO All-Rice Price Index increased by 0.6 percent, as quotations for non-Indica varieties increased under the influence of seasonal tightness and currency appreciations of some exporting countries against the United States dollar.
The FAO Vegetable Oil Price Index rose by 0.8 percent from July to reach a 20-month high, as increases in international palm oil prices more than offset declining quotations for soy, sunflower and rapeseed oils.
The FAO Dairy Price Index also rose, increasing 2.2 percent in August. Whole milk powder increased, driven by a surge in import demand for spot supplies. International cheese prices also climbed due to higher global import demand, while international butter quotations reached an all-time high fueled by increased uncertainty over the adequacy of milk supplies in Western Europe.
The FAO Meat Price Index declined by 0.7 percent from July, with poultry, pig, and ovine meat prices all down amid lackluster import demand, even as world bovine meat prices increased slightly.
The FAO Sugar Price Index declined by 4.7 percent in August to reach its lowest level since October 2022. The drop was underpinned by an improved production outlook for the upcoming sugarcane harvests in India and Thailand, as well as lower international crude oil prices. However, concerns about the impact of fires on sugarcane fields in key growing areas of Brazil led to sharp sugar price increases in late August.
New Zealand lamb is a premium but niche product. Although the long-term outlook is positive, the current down cycle in New Zealand sheepmeat highlights the need for change to create more consistency in earnings along the supply chain.
The good news is that the 2023/24 season likely saw the bottom of the cycle. Based on both supply and demand dynamics, lamb price projections for 2025 and beyond show upside. If the industry takes a strategic approach, the medium- to longer-term upside could be greater from 2026.
RaboResearch believes three pathways could help lift earnings through the cycle: reassessing trade and diversifying export markets away from China, investing to boost the competitiveness of New Zealand sheepmeat, and focusing on increasing domestic consumption. But further steps will be needed to enhance returns in local and export markets, reduce costs along the supply chain, and improve the consistency of earnings through this and future cycles.
We see some welcome opportunities that will help ensure New Zealand’s sheepmeat supply chain emerges from the bottom of this cycle with improved earnings. A focus on differentiation and efficiencies may help smooth out future cycles and ensure consistently strong farmgate and export returns.
Global cereal output on par with 2023
FAO also trimmed its forecast for global cereal production in 2024, now pegging it at 2 851 million tonnes, almost on par with that of 2023.
The new Cereal Supply and Demand Brief, also issued on Friday, attributed its revisions to reduced harvest expectations for coarse grains, including maize, primarily due to hot and dry weather conditions in the European Union, Mexico and Ukraine. Meanwhile, FAO has raised its forecast for global wheat output in 2024 as well as that for rice, which is now projected to reach an all-time high of 537 million tonnes.
World cereal total utilization in 2024/25 is forecast to rise to 2 852 million tonnes, marking a 0.2 percent rise from 2023/24. Utilization of rice is predicted to reach a record high, driven by an expected accelerated growth in the food intake component.
World cereal stocks are forecast to expand by 1.2 percent at the end of the 2025 seasons, yielding a global cereal stocks-to-use ratio in 2024/25 at 30.7 percent.
International trade in total cereals is now pegged at 485.6 million tonnes, representing a 3.3 percent decline from 2023/24, led mostly by lower traded volumes in coarse grains.
More details are available here.
The Agricultural Market Information System (AMIS) also released its monthly Market Monitor. In addition to the established reporting, the current edition broadens the coverage of developments in the fertilizer markets and includes a new section on vegetable oils.
Over the past 10 seasons, the share of exports from the Americas has declined from 45% to 36%. Europe has experienced a similar decline, facing challenges such as more extreme weather, margin pressure, challenging regulations, and a stagnant European market. In contrast, China and India have become more significant in global trade, transitioning from net importers to net exporters.
In the coming years, orchard renovations with new proprietary varieties are anticipated in most countries, resulting in increased exports. We expect the shift toward new grape varieties to continue, contributing to a more environmentally and economically sustainable industry. But these new varieties come with several challenges, including branding and achieving a price premium, securing mutually beneficial license agreements for both breeders and growers, and selecting the appropriate variety to plant.
Prices for brent crude, the international benchmark, fell 4% on Tuesday to $68.99 a barrel, representing a significant break below the key $70 support level.Tuesday's decline in Brent oil follows last week's 8% decline in the commodity.A one-two punch of supply and demand issues has pressured oil's 10% year-to-date price decline, with demand concerns taking center stage in recent weeks.
A growth scare in early August and lingering concerns of a US recession, combined with the continued slowdown in China's economy, have hurt the demand outlook for oil.
In its monthly oil market report, OPEC cut its outlook for oil demand because of the deceleration in China's economy. It now expects daily demand for oil to grow by roughly 2 million barrels per day in 2024, 80,000 barrels per day lower than its prior forecast.
OPEC also cut its 2025 demand outlook for oil by 40,000 barrels per day to 1.7 million barrels.
Because of the lower demand expectations and slumping oil prices, OPEC delayed its plans to boost oil production through at least November, but the move probably won't have as much of an impact on the price of oil as it has in the past.
That's because the US is producing a record amount of oil, and it's showing no signs of slowing down.
America's oil production continues to grow, hitting 13 million barrels per day in August, according to data from YCharts. That's nearly double its oil production levels in 2014.
Senior market analyst David Morrison at Trade Nation said in an email that investors shouldn't expect a rebound in oil prices anytime soon.
"The fundamentals should continue to weigh on prices, as supply remains plentiful while the outlook for demand growth remains weak," Morrison said.
He added: "Recent experience suggests that crude oil can stay oversold for long periods of time, so this shouldn't imply that a bounce is coming."
Commodities September 15
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