FAO/GIEWS - Food Outlook 97/01

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International wheat prices remained firm in December 1996 and January 1997, although they were generally lower than in November 1996. By late January, U.S. wheat No. 2 was traded at U.S.$ 180 per ton, down U.S. $ 7 per ton from November and U.S.$ 37 per ton below the same period a year ago. However, the decline in U.S. wheat prices in the current season has been less pronounced than that for wheat from other origins. This is mainly because of a relatively tight domestic supply situation in the United States as a result of low stocks and strong domestic demand. As of January 1997, some 80 to 90 percent of the anticipated 24 million tons exportable supplies from the United States have already been sold or committed. Following bumper crops in nearly all other major exporting countries, wheat prices from these origins have fallen more sharply. For instance, Argentine wheat was quoted below U.S.$ 150 per ton in January 1997, over U.S.$ 70 per ton below the corresponding period a year earlier and as much as U.S.$ 150 per ton or, 50 percent, below the peak in April 1996. Overall, there have been two opposite factors influencing price developments since the start of the season. On the one hand, there was concerns over the low level of wheat stocks, especially in the United States, which provided support to wheat prices. On the other hand, prospects for ample export supplies in Argentina and Australia have contributed to greater competition among the major exporters and exerted downward pressure on wheat prices.


1997 1996

Jan. Oct. Jan.

(. . . . . . U.S.$/ton . . . . . .)
United States

Wheat 1/ 180 180 208
Maize 119 126 156
Sorghum 112 115 154
Argentina 2/

Wheat 143 138 220
Maize 106 138 158
Thailand 2/

Rice white 3/ 368 330 380
Rice, broken 4/ 224 210 260

SOURCE: FAO, see Appendix Table A.9
* Prices relate to the fourth week of the month.
1/ No. 2 Hard Winter (Ordinary Protein).
2/ Indicative traded prices. Prices refer to third weeh of the month.
3/ 100% second grade, f.o.b. Bangkok.
4/ A1 super, f.o.b. Bangkok.

Looking at the futures market, price developments in recent weeks have demonstrated the market’s sensitivity to the prospects for the 1997 crops. In December, a temporary hike in March Chicago (CBOT) futures to the highest levels since October was mainly caused by concern about the conditions of North America’s winter wheat crop, and delays in the harvest in Argentina. However, by the start of the fourth week in December, wheat prices began to decline, following signs of an improvement in the weather outlook in both the United States and Argentina. In January 1997, the release of the latest official US figures pointing to a drop of about 7 percent in winter wheat planting from last year to their lowest level in 20 years lead to strong rallies in Chicago prices, providing support to both March and May futures.

After a sharp fall since late August 1996, international maize prices seem to have stabilised. By late January 1997, following a confirmation of above-average harvests in most regions, export prices for maize (U.S. No. 2 yellow) fell to around U.S.$ 119 per ton, some U.S.$ 80 per ton less than in July and nearly U.S.$ 37 per ton below the corresponding period of the previous year. Maize futures changed little between November until mid-January, when the strengthening of soybean prices provided support also to maize values and March futures began to climb gradually to $108 per ton, some $ 5 per ton higher than in earlier weeks. Nevertheless, international maize prices could come under downward pressure later in the season due to keener competition among major exporters combined with declining wheat prices and larger availabilities of low quality wheat which could substitute for maize in feed rations.

International rice prices which had declined almost steadily since July of the previous year recovered at the start of 1997 because of the higher prices of rice from Thailand. The FAO Export Price Index for Rice (1982-84=100) averaged 132 points, 3 points up from December but still some 11 points below the corresponding January level in 1996.

Heavy rains which delayed the main harvests in Thailand, have resulted in a temporarily tighter export market. Thai 100B was quoted at U.S.$ 368 per ton, a rise of U.S.$ 18 from its December level while Thai A1 Super rose by U.S.$ 8 to U.S.$ 224 per ton. By contrast, export prices of rice from other origins either held largely steady, as in the United States, or fell. The export price for Pakistan rice declined with its 15-20 percent brokens quoted at U.S.$ 213 per ton compared to U.S.$ 225 in the previous month. India's export prices for rice fell and by end January, Indian 25 percent brokens were U.S.$ 15 down from the previous month. Similarly, export prices from Viet Nam eased.

The divergence in price movements of rice from different origins is expected to influence exporters’ future competitiveness and export performance. U.S. rice which had been very costly in autumn, with the September prices of U.S. long grain No.2 ,4 percent brokens, averaging over U.S.$ 100 per ton more than Thai 100B, was quoted only about U.S.$ 66 per ton more by end January.

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