FAO/GIEWS - Food Outlook No.4 - October 2001 p. 9

Export Prices

Small rise in prices for most cereals this season but the outlook remains uncertain amid political tensions and economic slowdown

As with prices for most other commodities, cereal prices remain mostly under downward pressure. International grain prices showed some signs of

recovery after the start of the current marketing season in July, but the economic and the political uncertainty triggered by the tragic events of September 11^th seems to have put a damper on any further price gains, at least in the short-term. In September, the US wheat No. 2 (HRW, fob) averaged US$127 per tonne, slightly up from the corresponding period last year. Wheat prices have remained above last year's levels so far this season, but as harvesting in wheat producing countries in the northern hemisphere receded and it became clear that large exports from a number of non-traditional exporting countries, such as India, could also make it to world markets, export prices weakened and the gap narrowed considerably.

In additions, spillover from troubled equity markets could also dampen the market sentiment should the current conditions continue for long. Recent price movements in the US wheat futures at the Chicago Board of Trade (CBOT) indicate a sliding trend in recent weeks. Wheat futures remain above the levels registered in the corresponding period last year but, by late September, the CBOT December wheat futures fell to US$84 per tonne, down US$5 per tonne from the beginning of the month.

Similar conditions confront the maize market, which in recent weeks also came under downward price pressure. By late September, the US maize export prices (US No.2 Yellow, fob) fell to US$90 per tonne, down from the previous month but still up US$6 per tonne since May and above last year. Although with the harvesting underway in many producing countries, prices could weaken during this time of the year, the expected sharp decline in production in the United States, the world's largest coarse grain producer, and a further cut in the estimates for this year's output in China are seen as supportive to prices.

On the other hand, while sales from China are expected to be much smaller than in the previous year, Brazil is seen to have ample maize surplus for exports, after this year's record harvest, and large shipments are also anticipated from Hungary. Overall, therefore, the price prospects remain somewhat uncertain, especially in view of contracting world trade and a possible economic slowdown, which could further exasperate demand for feed grains. In fact, December maize futures on CBOT have declined considerably in recent weeks, although remaining well above last year.

International rice prices rose somewhat in July and August, with the FAO Export Price Index rising to 91 points in July and August, up from 88 points in May and June. The firming reflected delays in the arrival of new crop rice supplies in Viet Nam and the announcement of new purchases from Indonesia and African countries. The price strength in August was dampened somewhat by a slide in prices for rice from the United States.

In September, the index fell back by 1 point to 90, mainly on account of low prices for rice from Myanmar, where the Government is conducting an aggressive price policy to boost exports, and of a further drop in the quotations of all rice qualities from the United States, which were negatively influenced by poor demand and by the release, in mid-September, of a

Cereal Export Prices *

Source: FAO, see Appendix Table A.6
* Prices refer to the monthly average.
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.

higher than expected production estimate for the country this season. By contrast, prices of most qualities of rice exported from Thailand rose in September, with the Thai 100 B quoted at US$176 per tonne, US$2 per tonne more than in August. The increase was particularly pronounced for both the low quality and parboiled rice, which were sustained by a strong demand by African countries, with the price of the Thai A1 Super moving up from US$143 per tonne in August to US$151 per tonne in September, a level unreached since March 2000, while the price of the Thai parboiled rice strengthened from US$209 per tonne in August to US$222 per tonne in September. The divergence of price movements in Thailand and the United States has made quotations for similar qualities in the two countries converge. The price differential on parboiled rice, for instance, narrowed from US$125 per tonne in August to only US$76 per tonne in September. Price prospects for the short term remain dull, especially since large supplies will reach the market this fall in Northern Hemisphere countries. However, an expected tightening of the market next year might pave the way for a price recovery.