FAO/GIEWS - Food Outlook No.5 - November 1999 p. 9

EXPORT PRICES

Large supplies continue to put downward pressure on cereal markets

In the international wheat market, prices have remained under downward pressure in recent weeks, mostly reflecting good harvest results in major producing countries. By the third week of October, US wheat No. 2 (HRW, fob) was quoted at US$112 per tonne, down US$2 per tonne from a month earlier and US$16 per tonne, or 17 percent, below the corresponding period in the previous year. Given the underlying supply and demand conditions, wheat prices in the coming months are not expected to change significantly, a prospect which is also confirmed by recent price developments in the futures contracts. By the third week of October, the nearby December wheat futures for soft red winter wheat at the Chicago Board of Trade (CBOT) was quoted at US$94 per tonne, down US$9 per tonne from the previous year. Similarly, next year's March and May wheat futures are also quoted below the corresponding period in 1999. While concern over possible disruption of trade with Pakistan, a major wheat importer from the United States, had some negative affect on prices, the faster pace of winter wheat planting in the United States also continued to weigh on prices in recent weeks.

LATEST CEREAL EXPORT PRICES *

The maize market also witnessed a further slide in prices, as latest production estimates point to better than anticipated harvests in a number of major producing countries, including the United States and China. By the third week of October, the US No 2 yellow maize export price was quoted at US$67 per tonne, down US$5 per tonne from August and as much as US$33 per tonne below the corresponding period last year. The continuing slow growth in feed use and abundant supplies in major exporting countries are expected to keep prices depressed in the coming months. In the CBOT futures market, US maize prices have continued to remain under pressure since September and by the third week of October the nearby December contract was quoted at some US$7 per tonne below the corresponding month in the previous year. As in the case for wheat, next year's March and May futures quotations remain below those of last year. While continued large sales from China would add pressure on US maize prices, a more significant negative factor is this year's good crop for the fourth year in succession and the expected rise in stocks.

International rice prices from most origins remained under downward pressure through September and October. The FAO Export Price Index for Rice (1982-84=100) averaged 109 points during the first three weeks of October, down from 112 points in September and 116 points in August, and the lowest level in five years. The weakening of rice prices is mostly due to the arrival on the market of new crop supplies, record harvests in some cases, combined with limited new import demand. Many of the major exporting and importing countries are currently harvesting their main-season crops and good harvests are reported in many cases. In addition, a weaker Thai baht and Indonesia's ban on low quality rice imports by the private sector are weighing on international rice prices.

The price for the high quality Thai 100B averaged US$218 per tonne during October, down from US$235 per tonne in September and US$249 per tonne in August. However, prices for fragrant and parboiled rice have been on the increase since April, sustained by steady demand from regular customers for that niche market. The change in Indonesia's import policy is having a big negative impact on prices of the lower quality grades from various origins, including Thailand, Viet Nam and China. For instance, the price of Thai 35 percent brokens averaged about US$183 per tonne during October compared to US$199 per tonne in September. Over the same period, the price of fully broken rice, Thai A1 Super, fell from US$187 to US$ 168 per tonne.

In the United States, the downward pressure on prices from the expectations of a record harvest was partly offset by increased sales, in recent weeks, of rice destined for shipment as food aid. Consequently, the decline in United States' prices was much less than in the other markets. The price of the United States No. 2/4 percent broken rice averaged US$308 per tonne in October, down by US$8 per tonne from September. As a result, the price differential between the high quality Thai 100B and the comparable United States No. 2/4 percent broken rice has widened in the last couple of months to US$90 per tonne in October, up from US$73 per tonne in August. The increased price gap renders the US rice less competitive in the high quality markets outside Latin America and the Caribbean.