FAO cereal, vegetable oil price indices display contrasting trends

The Food and Agriculture Organization cereal price index continued to climb and hit a new record high in May while the vegetable oil price index declined, although it still remained well above the previous year’s level.

The FAO vegetable oil price index decreased 8.3 points or 3.5 percent to, on average, 229.3 points in May, but was still clearly above its year-earlier level.

The decline was mainly caused by falling prices for palm, sunflower, soybean and rapeseed oil. Such falling prices, in turn, were partly due to the end of the Indonesian ban on exports of refined palm oil.

Other reasons included the drop in world market sunflower oil prices from a record-high level and reduced asking prices for soybean and rapeseed oil in response to waning demand.

In the case of palm oil, prices were driven up by the persistent labor bottlenecks in Malaysia and the associated limited supply of palm oil.

The FAO cereal price index reached an average of 173.4 points in May, which was up 2.2 percent month-on-month. This means that the gap over the previous year amounted to a spectacular 30 percent.

The rise was sparked by the increase in international prices for wheat after India announced an export ban and also concerns about export and harvest conditions in several leading wheat-exporting countries, especially lower production prospects in Ukraine due to the war.

Prices for maize declined month-on-month based on slightly improved seeding conditions in the U.S., larger seasonal supply in Argentina and the imminent start of Brazil’s main maize harvest.

International sorghum prices also decreased, whereas prices for barley picked up based on strong wheat markets and concerns about harvesting conditions in the EU.

International rice prices increased for the fifth successive month in May.