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Prices Expected To Soften

April 2015

Grain prices are projected to decline almost 4% in 2015

Grain pricesGlobally, agriculture prices have been showing a downtrend. A cursory look at select commodities reveals that there is a general decline in food prices and the trend is likely to continue. Agricultural prices declined almost 5 percent in 2014 (before recovering marginally in 2015) based on good crop prospects. Some variation in agricultural prices is expected, however.

Grain prices are projected to decline almost 4 percent in 2015. Although prices of other food items will remain almost unchanged in 2015, some small declines in soft meat prices (e.g., chicken) will be offset by increases in beef. Most price risks in agriculture are on the downside.

Price Outlook


Global wheat production, according to the Food Outlook Report of FAO, last year is estimated at 718.5 million tonnes, a marginal increase from the 2013 record output. Large production gains are expected for the Russian Federation, as well as China and India, which will more than compensate for smaller crops in Australia, Canada and the United States. World wheat trade in 2014/15 (July/June) contracted to 150 million tonnes, 7.3 million tonnes (4.6 percent) below the record level of 2013/14. The reduction was mainly attributed to lower import demand in Asia and Africa, more than offsetting a rise in Europe. Despite a record crop, purchases of high quality wheat by the EU are likely to remain large. Total wheat utilization in 2014/15 is put at around 701 million tonnes, 1.7 percent higher than in 2013/14.

Given this season’s prospect for large supplies of feed quality wheat, usage by the livestock sector is likely to show a strong growth after two consecutive seasons of declines. Global wheat inventories are forecast to reach 192.4 million tonnes by the end of seasons in 2015, their highest level since 2003. Based on latest forecasts for stocks and utilization, the world wheat stock-to-use ratio increased from 25.2 percent in 2013/14 to 26.9 percent in 2014/15, while the ratio of major wheat exporters’ closing stocks to their total disappearance rose from 14.1 percent to 15.6 percent, reflecting this season’s ample supply situation. Against this background, international wheat prices have come under strong downward pressure in recent months. Wheat prices may experience a downtrend.


Prospects of a bumper rice production waned in the past few months, reflecting erratic weather conditions across all regions, and the production in 2014, is expected to fall marginally (by 0.4 percent) to 496.4 million tonnes. The major output shortfalls, in absolute terms, are expected in India, Indonesia, Nepal, Sri Lanka and Thailand. Taking advantage of the lower international prices and in anticipation of possible production setbacks, many countries have started buying rice actively from world markets during the course of 2014. This strong import demand, combined with large supplies in major exporting countries sustained a 7 percent increase in the volume of rice transactions in calendar 2014 to a record 39.7 million tonnes.

Going forward, world rice trade is expected to grow further in 2015, although by only 0.7 percent, to about 40 million tonnes. African countries are predicted to drive the expansion in world imports, while inflows to Asian countries may contract. Ample supplies in exporting countries are also expected to underpin trade in 2015.
Global rice utilization is forecast to hover around 500 million tonnes in 2014/15, 1.7 percent more than in 2013/14, sustaining a fractional increase in per capita consumption to 57.5 kg. With world production falling short of utilization, world rice inventories ending in 2015 are forecast to be trimmed for the first time in ten years. However, their volume is projected to remain huge, sufficient to cover more than a third of the 2015/16 projected rice consumption. Hence, the price may not trend upwards.


wheat salesFalling sugar outputs in Brazil, China and Pakistan in 2014/15 are likely to be offset by surplus production in India, the EU and the Russian Federation. World sugar consumption is set to grow in line with falling domestic sugar prices as well as improved economic performance in 2015. This positive economic prospect is supportive to sugar demand, as manufacturing and food preparation sectors, which account for the bulk of aggregate sugar consumption, are greatly influenced by the economic environment. Sugar consumption growth will be particularly pronounced in Asia and Africa.

Fall in international sugar prices would stimulate global import demand and boost world sugar trade in 2014/15. Exports from Brazil would remain unchanged, the world’s largest sugar producer and exporter, and Thailand would export surplus sugar. Sugar prices would remain range bound and any disruption in sugar supply would push the price northwards.


The FAO Meat Price Index reached an historic high in April 2014, and has continued to increase since then. While the price situation varies among the different types of meat, there is no sign of an overall decline in meat prices. At the international level, prices have remained high by historical standards for the past three years, with the FAO Meat Price Index generally hovering around 185 points. Since April 2014, the Index has registered upward movement, reaching 208 points in September 2014. Global meat trade is expected to expand at a moderate rate of 2.3 percent in 2014, to 31.6 million tonnes. The projected growth would be less than the average for recent years, due to a variety of factors, including production constraints in some of the principal exporting countries, animal health concerns and trade restrictions. Poultry remains the main product traded, representing 43 percent of the total meat, followed by bovine. The price of meat will be dearer in the near future.

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