Food commodity markets are becoming more balanced and less price volatile than in recent years thanks to improved supplies and a recovery in global inventories of cereals, according to FAO's Food Outlook report published on Thursday.

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David Hallam, Director of FAO's Trade and Markets Division, said, "The prices for most basic food commodities have declined over the past few months. This relates to production increases and the expectation that in the current season, we will have more abundant supplies, more export availabilities and higher stocks."

The sharp increase in 2013 cereal production mostly stems from a recovery of maize crops in the United States and record wheat harvests in CIS countries (of former Soviet Republics) following drought in 2012 which affected production. World rice production in 2013 is expected to grow only modestly.

Cereal stocks

Global stocks, ending in 2014, are also anticipated to increase, by 13 percent, to 564 million tonnes, with coarse grains alone up by 30 percent, mostly in the United States. Wheat and rice stocks are also projected to rise, by 7 percent and 3 percent respectively.

The expansion in world cereal stocks would result in the global cereal stocks-to-use ratio reaching 23 percent, well above the historical low of 18.4 percent in 2007/08, when scarce availability and rocketing prices helped spark civil unrest in a number of countries.

Food prices rise slightly

However, in November's Food Price Index, FAO revealed that world food prices had risen slightly in October, after having dropped off in previous months. The FAO Food Price Index (which measures the cost of a range of staple foods around the world) showed world food prices were on average 1.3 percent higher last month than in September. Even so, October prices remained 5.3 percent lower than last year.

The price increase recorded in October was primarily driven by a surge in sugar prices, although prices of the other foodstuffs also increased. Only meat prices remained unchanged over the month.

Despite rises in sugar prices, World sugar production is forecast to increase slightly in 2013/14. Increases will be concentrated in Brazil, already the world's largest sugar producer and exporter. Prices rose 7 percent in October, due to harvest delays caused by unfavourable weather condition in central Brazil.

Vegetable oil prices rose 2 percent in October, though soy prices continued to fall, dropping way below the elevated levels seen last year.  According to FAO, World oilcrop production could climb to an all-time high in 2013/14, supported by record soybean crops in South America. Global output of oilseed products are also set to match world utilization for the second consecutive year, although a sizeable surplus is possible in the case of meals/cakes.

World meat production is anticipated to grow by 1.4 percent in 2013. Prices have remained at historically high levels since the beginning of 2011. There is no sign of overall price decreases, despite reduced feed costs. Standing in contrast to trends seen in the UK, sheep and cattle meat prices moved higher, whilst pig and poultry dropped off around the world.

Though overall cereal prices were 22 percent below their 2012 levels, a one percent increase was still observed last month, in spite of the prospected record production this year. Maize prices continued to move lower in response to record production. However, wheat prices strengthened, supported by firm import demand and deteriorating prospects for production in Argentina and the Back Sea region.