FAO/GIEWS - Food Outlook, November 1997

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During the month of September and the first three weeks of October, international prices of most major cereals generally remained firm or strengthened. Since the beginning of October, international wheat prices have generally remained unchanged or exceeded their August/September values. By the third week, the U.S. wheat No. 2 (HRW, fob) price stood at U.S.$ 158 per ton, up about U.S.$ 8 per ton from September but some U.S.$ 22 per ton below the corresponding period a year ago. However, prices for new crop Argentine Trigo Pan were at around U.S.$ 150 per ton, up U.S.$ 7 per ton from the previous year. Canadian wheat prices have also remained mostly unchanged, whereas export prices for the Australian and the EC wheats have drifted slightly up in recent weeks. On the Chicago grains futures market, wheat prices have maintained their relatively strong values. The nearby December futures have been trading at mostly stable levels of around U.S.$ 134 per ton. While this year’s anticipated record production is likely to put pressure on wheat prices, weather reports and occasional spikes in maize and soybean prices have provided support to wheat futures, a development which could well continue into the second half of the season. Moreover, the traditional seasonal decline of wheat prices, which usually begins in January, is often associated with the arrival of supplies from two major exporters, Australia and Argentina, adding to global competition and putting pressure on international prices. However, this year’s production in both countries are likely to be smaller and, hence, the downward pressure on prices may also prove less pronounced.

1997  1996
October  Sept.  October
(. . . . . . U.S.$/ton . . . . . .) 
United States 
Wheat 1 158  150  180
Maize  123  112  131
Sorghum  117  109  118
Argentina 2/ 
Wheat  152  154  145
Maize  123  112  149
Thailand 2/ 
Rice white 3 277  288  330
Rice, broken 4 197  208  210

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

International maize prices have strengthened further since the previous report. By the third week of October, U.S. maize prices were quoted at around U.S.$ 123 per ton, representing a gain of over U.S.$ 11 per ton since September and almost U.S.$ 20 per ton since the beginning of the trading season in July. However, at this level, maize prices are about U.S.$ 8 per ton below the corresponding period in 1996. The gain in maize prices is partly explained by long term fundamentals in the maize market which point to strong import demand and concerns over the 1998 production prospects influenced by the adverse effects of El Niño. These factors have also contributed to the sustained strength in maize futures and a surge of the nearby December values on 13 October to a six-month high of U.S.$ 114.7 per ton.

International rice prices remained depressed since the previous report with the FAO Export Price Index (1982- 84=100) falling by four points from August to 121 during the first three weeks of October. The prices of both high and low quality rice from most origins declined under the pressure of new crop supplies from south Asian countries coming onto the market and limited demand for rice. Thai 100 B rice averaged U.S.$ 281 in the first three weeks of October, down U.S.$ 19 per ton from August and about U.S.$ 41 per ton less than a year ago. However, quotes for United States No. 2, 4 percent broken rice averaged U.S.$ 428 per ton during the same period, a slight increase from August and almost unchanged from a year ago. This is attributed to interest in United States rice that has been building in recent weeks, especially from Central and South American countries. The price premium enjoyed by this rice over the Thai 100 B continued to widen in September to U.S.$ 140 per ton from U.S.$ 100 per ton in July and an average of U.S.$ 72 per ton in 1996. This is partly attributed to a recent decline in Thai prices due to the devaluation of its currency.

Lower quality rice prices, from most origins, continued their downward slide in September and October. The price for Thai A 1 Super averaged U.S.$ 202 per ton during the first three weeks of October, down from U.S.$ 211 per ton in August and compared to U.S.$ 209 per ton a year ago.

In Viet Nam, export prices have eased a great deal from their levels at the beginning of September when the extent of flood damage was uncertain and transportation to export points was a problem. Viet Nam rice prices came under further downward pressure after indications that possible purchases of Vietnamese rice by the Philippines may not be as large as earlier expected. In Pakistan and India, prices declined following indications that the quantity of the new crop could be better than those of last year.

The FAO index of international rice prices is expected to stay depressed in the next few weeks due to pressure from new crop supplies. However, prices could get some support in the next few months as current indications point towards reduced area due to weather related problems in different countries in the southern hemisphere.

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