FAO/GIEWS - Food Outlook No.1 - February 2000 p. 8

Previous PageTable Of ContentsNext Page

Export Prices

The near term outlook remains neutral but prices find short-term support

Recent weeks marked a slight upturn in international wheat prices following several months of downward slide. In December, limited commercial buying interest, combined with the seasonal harvesting pressure in the southern hemisphere, forced prices down to the lowest seen in over two decades. The start of the New Year and resumption of faster trade activity, especially stronger pace of export sales by Argentina, set off a more buoyant tone and a sharp market turnaround followed the USDA report (12th January), which pointed to a substantial and, to a large extent, unexpected change in the outlook of the US wheat balance; i.e. much higher domestic use and smaller ending stocks. By late January, US wheat No. 2 (HRW, fob) averaged US$111 per tonne, some US$6 per tonne above December, although still some US$15 per tonne below January 1999. The Argentine new crop averaged US$ 94 tonne (fob), up some US$13 per tonne on December values, but also US$18 per tonne below the corresponding period last year. Weak international demand for soft wheat combined with large supplies in several European countries outside the EC added to the downward pressure on EC export prices, which in December fell below US$90 per tonne (net of restitution) before rising in January.

Cereal Export Prices *

    2000 1999
Jan. Dec. Jan.
  (. . . . . US$/tonne . . . . .)
United States      
Wheat 1/ 111 105 126
Maize 93 89 98
Sorghum 91 85 96
Argentina 2/      
Wheat 94 81 112
Maize 93 90 93
Thailand 2/      
Rice white 3/ 244 240 307
Rice, broken 4/ 161 153 230

Wheat futures in the Chicago Board of Trade (CBOT) ended the fourth week in January above the lows reached in December. The soft red winter wheat May values have remained continuously under downward pressure this season and from October they were quoted at some US$10-18 per tonne below the previous year. However, the unfavourable growing conditions in the United States and the reported decline in the United States winter wheat area provided support to prices in recent weeks. According to the latest official estimates, the United States winter wheat seeded area, while down only slightly from the previous year, is 17 percent below the 1995/96 peak and the lowest since 1972.

Gradual but persistent renewed import demand in southern Asia, stemming from faster growth in poultry and pig meat production, has been supportive to international maize prices amid unfavourable weather concerns in Argentina and reports of a much lower United States stocks because of record feed usage. During the first half of the 1999/2000 season, the same fundamentals, which were influencing international wheat prices, were also in play on the maize market; namely, large United States stocks in the aftermath of yet another above-average crop and weak export demand. The United States maize export prices between July and December averaged around US$89 per tonne, US$6 per tonne below the comparable period in the previous season. However, starting in January, the United States prices began demonstrating a slow but more persistent recovery. The CBOT maize futures soared in January, following the release of unexpectedly low estimates for 1999 United States maize production and ending stocks as well as more favourable trade prospects. By late January, the nearby March maize future contracts were quoted at US$90 per tonne, or a gain of some US$10 per tonne over December.

To what extent the current small recovery in maize prices could be sustained over a longer term is difficult to assess at this stage. However, against a background of continuing ample United States inventories and large export availabilties in China, any possibility of supply tightness in the short-term is unlikely. In addition, latest reports of higher plantings in Argentina and possible increase also in the United States, could also diminish any near-term support for maize prices unless the improving economic conditions, especially in Asia, could fuel much faster rise in feed demand than is currently projected.

The downward pressure on international rice prices from most origins continued through November and December and the FAO Export Price Index for Rice (1982-84=100), which was on the decline during most of 1999, registered its lowest level in almost six years with a December average of 105 points, down from 107 points in November. The index averaged 114 points for 1999 as a whole, the lowest annual level since 1994. The weakness of prices in 1999 confirmed the imbalance between large availability of supply in exporting countries and depressed import demand, following a recovery of production in major rice markets. However, prices of a limited number of rice types from Thailand and Viet Nam experienced a slight upward movement from November through early January reflecting, in the case of Thailand, increased government intervention purchases and large sales to Indonesia and, in the case of Viet Nam, temporary shortages of exportable supplies caused by heavy rains that made local transportation, drying and milling difficult. Currently, prices are generally still subdued with the price index during January averaging 106 points, only one point up from the December average. The price for the high quality Thai 100B averaged US$244 per tonne during January, compared with an average of US$240 per tonne in December. This slight recovery is attributed to a recent 300 000 tonnes government-to-government sale from Thailand to the Islamic Republic of Iran. Prices for Thai fragrant rice are reported to be resilient, as lower milling yields than expected have constrained availability. Prices for the Thai lower quality rice grades have received some support lately from the animal feed processors who are taking advantage of the low prices to increase the use of rice in their feed rations. The price of Thai A1 Super averaged US$159 per tonne so far in January, up from US$153 per tonne in December.

The price of the United States No. 2/4 percent broken rice, which was on a steady decline throughout 1999, averaged US$283 per tonne in December, down by US$14 per tonne from November, as a record harvest in the United States coincided with depressed import demand from its traditional customers. The same negative factors continued to weigh on the prices in January and the average price for the United States No. 2/4 percent broken rice declined by a further US$11 per tonne to US$272 per tonne during the month. The combined effect of an increase in the Thai prices and a drop in the Unitd States prices has led to a sharp narrowing of the price differential between the high quality Thai 100B and the comparable United States No. 2/4 percent broken rice. The gap has contracted from US$88 per tonne in January 1999 to about US$30 per tonne during January 2000. If this trend continues, United States rice could soon start to compete with Thai rice in the high quality markets outside Latin America and the Caribbean.

The general weakness in rice prices is expected to continue in the next few weeks, barring any major shocks from the demand or supply sides. However, the progress of the rice crops in the southern hemisphere countries, where harvesting usually begins in late-February/beginning of March, and of secondary crops in the northern hemisphere will also start influencing the market.

Previous PageTop Of PageTable Of ContentsNext Page