International prices of all major cereals, except those for rice, have weakened considerably since the previous report (Tables A6-A8). While the improved global supply prospects are mainly responsible for the fall in wheat prices in recent months, the impact of the financial crisis in Asia has affected international maize prices. By contrast, rice prices are being supported by strong import demand, especially from Indonesia and the Philippines due to lower domestic production.
 

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.
3/ 100% second grade, f.o.b. Bangkok.
4/ A1 super, f.o.b. Bangkok.

International wheat prices have weakened significantly in recent months. Since October 1997, wheat export prices have fallen by some US$12-25 per tonne, depending on the origin. By the end of January 1998, the US wheat No. 2 (HRW, fob) price stood at US$145 per tonne, US$8 per tonne down from October and US$35 per tonne, or 19 percent, less than a year ago. The continuing downward pressure on US wheat prices reflected the slow pace of export sales from the United States mainly because of this year’s more abundant global supply situation and larger sales by other exporters. Towards mid-January, US wheat prices recovered some of their earlier losses following the official release of the planting estimates that pointed to an unexpectedly low winter wheat seeding. However, prices remained under pressure due to a generally improved supply situation, languishing import demand and a strong US dollar. On the Chicago’s grain future market, March and May wheat futures have dropped sharply in recent weeks, and with an improved crop outlook in the southern hemisphere, further declines can not be ruled out. By late January, the soft red winter wheat CBOT May futures were quoted at US$128 per tonne, down US$3 per tonne from the corresponding period last year and about US$11 per tonne lower than quoted in October 1997 for May 1998.

International maize prices have also decreased in recent weeks, mainly due to a contraction in demand, particularly in several countries in Asia. By late January, US maize prices were quoted at around US$116 per tonne, about US$2 per tonne lower than in October and also around US$6 per tonne less than a year ago. A much higher than expected estimate for the forthcoming maize crop in Argentina depressed Argentinian maize export prices even further, to US$107 per tonne, US$15 per tonne less than in October 1997. Price developments in the futures market have followed the general declining pattern seen in the cash market as March and May maize values have lost at least US$5 per tonne since October.

Currently, maize prices remain under downward pressure despite a recent report from the United States which showed a very large increase in domestic feed use and smaller stocks. Several factors, previously unforeseen, are contributing to the downward pressure on prices. The most important factor is the economic crisis in Asia where the on-going difficulties facing several of the world’s largest maize importing countries have already resulted in lower maize purchases. Secondly, the adverse impact of El Niño on production appears to be less significant than previously feared. Thirdly, a larger proportion of this year’s record wheat crop is likely to be used for feed purposes due to the abundance of lower quality wheat, thus reducing the demand for maize. Finally, the US export prices have also been affected by strong competition from recent maize sales from China, as well as from eastern Europe.

The FAO Export Price Index for rice (1982-84=100), which reached 133 in February 1997, fell to 118 in November before recovering to 123 in January 1998. International prices of both high and low quality rice had been on a steady decline since July 1997 when the Thai baht was devalued against the United States dollar. They started to rise in December of 1997 and continued through most of January 1998 despite a further devaluations of the Thai baht over the period. The recovery in prices is largely attributed to the strong import demand prompted by tight supplies in major rice importing countries of Asia, especially Indonesia and the Philippines, which has more than offset the impact of the weak Thai baht. In particular, the prolonged drought, to a large degree attributed to the El Niño weather phenomenon, reduced Indonesia’s 1997 paddy output by over 2 million tonnes from the previous year and also delayed planting of the 1998 main-season crop.

By late January quotes for Thai 100 B rose to US$310 per tonne, up US$40 per tonne since October 1997, but still about US$58 per tonne less than a year ago. The Thai prices have strengthened mostly due to Indonesia’s continued interest in rice purchase in recent weeks. In the United States, US No. 2, 4 percent broken rice was quoted at US$429 per tonne during January, unchanged from its value of October. In Viet Nam, export prices also rose through January as most exporters were seeking supplies to cover their heavy commitments. In Pakistan, export prices were further supported by unseasonal rains interrupting deliveries and affecting the supply of high quality rice.