After falling to seasonally low levels during late June and early July, wheat prices have risen significantly in the past few weeks (Table A.6), due mainly to strong domestic demand factors boosting purchases by several countries, particularly in Asia and northern Africa. By the fourth week in August, the U.S. wheat No. 2 (HRW, fob) price stood at U.S.$ 154 per ton; wheat prices from most origins showed a gain of at least U.S.$ 15 per ton compared to early July, although they remained substantially below the corresponding period last year. Looking further ahead, based on the current evaluation of the market and developments in the futures market, a mixed picture emerges. In the short-term, wheat prices could continue on their traditional seasonal upward path through January 1998 with some occasional spikes not to be excluded. It is more difficult to predict the outlook for the second half of the season. While normally prices could be expected to slide between January and June, price movements in the past two seasons diverged substantially from seasonal expectations as buyers have become more sensitive to the longer-term supply situation and opted for taking early positions. The supply situation next year could prove delicately balanced given that wheat stocks are expected to remain at low levels and the size of next year’s crops, particularly in the southern hemisphere, may be increasingly influenced by the El Niño phenomenon. Under this scenario, it may be more realistic to expect prices to remain strong, but also volatile, during the second half of the season.

LATEST CEREAL EXPORT PRICES *

	1997		1996
	August	May	August
	(. . . . . . U.S.$/ton . . . . . .)
United States
Wheat 1/	154	162	192
Maize	115	116	190
Sorghum	112	115	149
Argentina 2/
Wheat	155	183	169
Maize	112	112	169
Thailand 2/
Rice white 3/	300	345	344
Rice, broken 4/	211	218	210

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.

International maize prices have generally strengthened and remained firm in recent weeks. By late August, maize prices stood at around U.S.$ 115 per ton, representing a gain of at least U.S.$ 10 per ton from a month earlier, mainly as a result of less favourable supply prospects but still some U.S.$ 75 per ton below last year. Deterioration of the global maize crop outlook, particularly in the United States, has continued to put upward pressure on prices, especially in light of very small availabilities of the old crop. Prices have also been supported by the continued dryness affecting crop conditions in China. The impact of ongoing crop concerns has been even more pronounced in the futures market (Table A.8). CBOT maize futures surged to 3-1/2-month highs on August 21 and December futures rose to U.S.$ 109 per ton, some U.S.$ 13 per ton above the December values quoted in June. Maize prices have moved very much according to their past seasonal pattern and, despite recent increases, have been generally on a downward trend since March 1997. Nevertheless, as in the case for wheat, negative climatic changes resulting from El Niño could put some upward pressure on prices especially towards the end of the season.

International rice prices were volatile during the months of June and July but ended the period mostly unchanged. The volatility reflected reports about weather related problems in Asia and in the United States and their potential impact on rice yields. The FAO Export Price Index for Rice (1982-84=100) averaged 130 points during June and July, a couple of points higher than its May average but 9 points lower than the corresponding period last year. However, prices eased a great deal during August and some prices set new lows since the beginning of the year. In Thailand, dollar prices fell to their lowest level in 1997 mainly in response to the devaluation of the Baht, the local currency. In addition, an improvement in weather conditions at the beginning of August led to expectations of a better crop, thereby putting further downward pressure on prices. The price for Thai 100B averaged U.S.$ 300 per ton during August, down from an average of U.S.$ 337 per ton in July and compared to U.S.$ 347 per ton at this time last year. In the US, export quotations also declined considerably during July and August as the harvest, expected to be favourable, drew closer. The price of US long grain (No. 2, 4 percent) averaged U.S.$ 425 per ton during August, down from its July average of U.S.$ 447 per ton. By contrast, rice prices in Vietnam were supported by a number of factors, including the uncertainty about the size of the summer-autumn crop, a heavy export commitment for the month of August and the negative impact of the floods on the rice yields and on transportation facilities to export points.