The outlook for global cereal supply in the 2013/14 marketing season remains generally favourable despite reduced forecasts for world cereal production and closing stocks, made in the UN Food and Agriculture Organisation's quarterly crop prospects report.

image expired

Despite this downward adjustment, world cereal production is still expected to surpass the 2012 level by nearly 8 percent. Cereal production is predicted to reach 2,489 million tonnes this year, though adverse weather in South America led FAO to shave 3 million tonnes off its September estimates.

Meanwhile, the FAO Food Price Index dropped for the fifth month in a row in September, driven by another marked fall in cereal prices. Prices of other staples – dairy, meat, sugar, oils – also measures by the food price index, rose slightly.

The Index measures the monthly change in the international prices of a basket of 55 food commodities. In September, the FPI averaged 1 percent below its August value and 5.4 percent lower than the beginning of the year.

Food prices shot up dramatically in Summer 2012, mostly due to grain rallies sparked by crop concerns in the United States. Severe drought in the States, the world's largest maize producer, combined with adverse weather impacts in other bread basket regions around the world to cause panic in commodity markets.

However, on Wednesday, Washington DC-based research organisation the Worldwatch institute announced that, as illustrated by rapid and enduring increases seen last year, food commodity prices continue to rise year-on-year around the world, against the trend, up until 2012.

Overall, commodity prices dropped by 6 percent in 2012. Worldwatch said the pattern represents "a marked change from the dizzying growth during the 'commodities supercycle' of 2002-12," when prices surged an average of 9.5 percent a year, or 150 percent over the 10-year period, but that decade-long price increases have continued in three categories (food, energy and precious metals).

According to Mark Konold, author of a recent Worldwatch report on the global commodities market, the International Monetary Fund sees maize as the most vulnerable of crops to price shocks because stocks of the grain remain low as its use is increasing dramatically, most notably for biofuels. Although industry groups deny that bofuels created from agricultural crops are having an effect on food prices, environmentalists maintain that indirect land use change is having a marked effect on the environment and access to food for the world's poor.

Konold said "Strong demand put upward pressure on [maize] prices and on the price of other commodities displaced by the expanded area devoted to [maize] production."

The FAO forecast for 2014 world cereal stocks has been revised downward by almost 2 percent since September, to 559 million tonnes. Stocks still remain 12 percent (62 million tonnes) above their opening level and at their highest level since 2001/02. International trade in cereals in 2013/14 is forecast to reach 312.4 million tonnes, 1.6 percent (4.8 million tonnes) higher than in 2012/13 and slightly above the level expected in September. Trade in 2013/14 is expected to benefit from larger export availabilities of coarse grains in particular.