FAO global vegetable oil, cereal price indices rise sharply

Image: UFOP

Firm prices on the international markets for palm, soybean, rapeseed and sunflower oil drove up the FAO price index for vegetable oil. The cereal price index also increased strongly.

Both the FAO vegetable oil index and the cereal price index have risen sharply since mid-2020. The FAO’s vegetable oil price index illustrates the changes in international prices of the 10 most important vegetable oils in world trade. It reached 147 points in February 2021, which translates to a rise of around 6 percent month-on-month and is the highest level since April 2012. The index has nearly doubled since May 2020. The sharp rise was sparked by the continued strong prices for palm, soybean, rapeseed and sunflower oil. Palm oil prices increased the ninth month running in February, driven by concerns about declining stocks in major export countries.

Prices for soybean oil also continued to grow in the past month. Support came from slow soybean harvest operations in Brazil and the associated reduction in supply. Meanwhile, rapeseed and sunflower oil benefited from limited export supplies from the Black Sea region in the 2020-’21 season and modest production prospects in the EU for 2021. Prices were also driven by firm crude oil prices.

The FAO cereal price index is based on international export market prices for wheat, maize, barley, sorghum and rice. The February 2021 index averaged 126 points, which was up 1 percent month-on-month and up 30 percent over mid-2020. Feed grain prices showed the strongest growth, driven by the boom in demand in China. Wheat remained virtually unchanged in February, with January prices already having been up just less than 20 percent year-on-year due to keen buying interest. Demand for rice locally also exceeded supply.

The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) has welcomed the price trend in the vegetable oil and oilseed markets as a fundamentally positive and overdue development in view of the low-price phase of recent years.

The association has underlined that higher producer prices are necessary to compensate for the competitive disadvantage resulting from tighter regulations on the use of fertilizers and crop-protection products and that they are also needed as an economic incentive. The UFOP has emphasized that attractive producer prices also lead to an expansion in cultivation area and therefore safeguard feedstock supply to oil mills. It is critical of the fact that the share of imports has risen steadily over recent years, whereas the crop rotation potential in Germany and the EU has not been exploited. More specifically, the cultivation of rapeseed and the options for its use for food, fuel and feed are a perfect example of the short supply chains addressed in the “Farm to Fork” strategy. Also, the extensive sustainability certification is a unique benefit of rapeseed cultivation. The UFOP has stressed that in Germany, the entire rapeseed harvest is certified, recorded and marketed.