Amidst uncertainty in global commodity prices, export restrictions to be kept at bay

At a press briefing today from New York, journalists heard from Máximo Torero, FAO Chief Economist, who spoke on the Food Price Index update for May and its implications for world food commodity markets ahead.

World food commodity prices saw a modest decline in May, says the latest update of the FAO Food Price Index. While this is the second consecutive month seeing a slight decline in the global barometer of prices of commonly-trade food commodities, wheat and poultry prices, however, continue to climb.

Connecting virtually from Rome to brief journalists at a press briefing organized by the Office of the Spokesperson of the UN Secretary-General, FAO Chief Economist Máximo Torero briefed on the latest commodity price trends and prospects. He outlined the world food situation, and he presented the latest findings and policy implications for price fluctuations across key food commodities, including wheat prices, which are only 11 percent below the record-high levels reached in March 2008. 

The FAO Food Price Index averaged 157.4 points in May 2022, down 0.6 percent from April, but still 22.8 percent higher than in May 2021. 

FAO also released revised global cereal output and consumption prospects, both of which are expected to decline in 2022 according to the latest Cereal Supply and Demand Brief, which includes a revised forecast for global wheat production. 

Export restrictions only accentuate global uncertainty and price hikes 

World food commodity prices reached their highest levels last March, surpassing February's already record-breaking levels. The war in Ukraine and the disruptions to production and trade that have come with it are, to a large extent, driving the shocks to global markets for staple grains and vegetable oils.

Against this backdrop, Torero outlined how the removal of export restrictions since stand to bring much needed predictability to markets. 

“Export restrictions create market uncertainty and can result in price spikes and increased price volatility, the decrease in oilseeds prices shows how important it is when they are removed and let exports flow smoothly,” Torero said, adding that "there is a problem of food access because food prices have increased."

Global markets continue feeling the brunt of the war in Ukraine

Today’s briefing also discussed the continued impact of the war in Ukraine on global food and agriculture input markets, on the heels of previous iterations of the Food Price Index, which have found that the war has largely driven food price levels to record highs. 

With both the Russian Federation and Ukraine providing nearly one-third of the world’s wheat exports, the ongoing war in Ukraine and the associated disruptions to production, markets, and ports have reduced production prospects. Together with wheat export bans in other exporting countries and concerns over crop conditions in others, market conditions have driven wheat prices up by 56.2 percent from a year earlier. 

Worth noting, however, is the fact that adverse weather, high energy prices and transportation costs, high fertilizer prices, and strong international demand were already driving global prices in a general upward direction before the outset of the war in Ukraine.

About the FAO Food Price Index 

The FAO Food Price Index is a measure of the monthly change in international prices of a basket of food commodities. It consists of the average of five commodity group price indices weighted by the average export shares of each of the groups over 2014-2016. 

Related links

• Watch the press briefing recording.
• Read more about the FAO Food Prince Index here, access the full updates for the individual cereal, sugar, vegetable oil, meat, and dairy price indexes here, and follow latest related updates from the Agricultural Market Information Systems (AMIS).
• Access FAO's latest analysis on the war in Ukraine and its impact on global food security outlooks and markets.
• Make sure to watch the recent interview with FAO Chief Economist, Máximo Torero, on the war in Ukraine and global food markets, and follow him on Twitter @MaximoTorero for latest news!