FAO/GIEWS - Food Outlook No.4, September1998

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Favourable crop prospects combined with stagnant import demand continued to put downward pressure on wheat and coarse grains prices in recent months. International wheat prices have fallen by nearly 30 percent from the previous year to their lowest levels since the early 1990s. By late August, the price of U.S. wheat No. 2 (HRW, fob) was US$110 per tonne, down US$17 per tonne from May and US$44 per tonne less than a year ago. Similarly, the Argentine Trigo Pan export price fell to US$112 per tonne, around US$11 per tonne less than in May and US$43 tonne lower than a year ago. In the futures market, the favourable supply outlook in major exporting, as well as several importing countries, especially in North Africa and in Asia, continued to weigh on the Chicago Board of Trade (CBOT) soft red winter futures. Additional downward pressure on the wheat futures was generated by the financial difficulties, particularly in Asia and most recently also in the Russian Federation. Since late July the nearby September contracts slipped to their lowest levels in seven years and, by late August, the December contracts were quoted at US$96 per tonne, some US$47 per tonne, or 33 percent, below the corresponding period in 1997.

Export prices of nearly all major coarse grains have also weakened considerably in recent weeks. By late August, the US maize export price fell to a 10-year low of nearly US$84 per tonne. At this level, US maize prices were US$19 per tonne lower than in May and US$31 per tonne, or 27 percent, below August 1997. Similarly, barley and sorghum export prices have also weakened substantially compared to the previous year. Several factors are behind the ongoing slide in coarse grain prices, namely the relatively large maize and barley stocks carried over from the previous season, particularly in the EC and the United States; favourable weather conditions leading to bumper crops, especially in the major exporting countries; large supplies of more competitively priced, low quality wheat which could be used for feed; and weak import demand, partly fuelled by the continuing financial difficulties facing several countries in Asia. Correspondingly, in the CBOT futures markets, maize prices have continued to decline. In August, the nearby September futures plunged to their lowest value in 10 years while December futures also continued to slide and, by late August, were quoted at US$81 per tonne, some US$26 per tonne below the value of the December 1997 contract quoted in August 1997.


1998 1997

August May August

(. . . . . . US$/tonne . . . . . .)
United States

Wheat 1/ 110 127 154
Maize 84 103 115
Sorghum 86 100 112
Argentina 2/

Wheat 112 123 155
Maize 99 103 112
Thailand 2/

Rice white 3/ 332 342 273
Rice, broken 4/ 234 194 202

SOURCE: FAO, see Appendix Table A.9
* Prices refer 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.

By contrast, international rice prices from most origins remained firm through July and August. As a result, the FAO Export Price Index for Rice (1982-84=100), which has been on the rise since it hit a low of 119 points in November of last year, averaged 131 points in August and July, up from 130 points in June. The increase in prices is attributable to concerns about the availability of exportable supplies, particularly in light of large purchases by several countries, including Indonesia, the Philippines and Brazil. Also, the relative strengthening of the Thai baht against the United States dollar and floods in several Asian countries are contributing to the upward pressure on prices expressed in US dollars.

In Thailand, the July prices for high quality rice rose to their highest levels since the devaluation of the Thai baht in July 1997. Price quotes for Thai 100B averaged US$340 per tonne in July, up by US$3 per tonne from the June average and also US$3 per tonne above the July 1997 price. However, the August price for Thai 100B declined a little as the demand shifted to the lower quality broken rice. Prices of fully broken rice (Thai A1 Super) increased by US$14 per tonne from their July average to US$230 per tonne in August, the highest in about 18 months. In the United States, most prices rose in June but fell back in July and August largely due to less than expected import demand during those months, especially from traditional customers in Latin America. Quotes for United States No. 2/4 percent broken rice averaged US$392 per tonne in August, down from US$410 per tonne in July and US$428 per tonne in June and compared to US$447 per tonne in July 1997. Export prices from India and Pakistan have remained firm due to increased demand and limited availabilities for export in these countries. New crop supplies in India and Pakistan are expected to be available around the October-November period. In Viet Nam, supplies continue to be tight and talks of a potential deal with Indonesia have supported prices. In the next few weeks, rice export prices are expected to be influenced by the Asian floods as details emerge on the extent of damage to rice in the countries affected.

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