A retreat in food prices accelerated last month, fuelled by the largest dip in grain values in nearly three years, the United Nations said, even as it lifted its cereal supply hopes on improved corn harvest prospects.

The UN food agency, the Food and Agriculture Organization, said that food prices fell in June by 2.3% month on month, the fastest pace of decline in more than two years.

The dip brought to three the run of month-on-month falls in prices, which hit a record high in March. That also represents the longest declining spree since early 2020.

The June drop was led by a 7.6% tumble in prices of edible oils, the biggest slide in a year, “driven by lower prices across palm, sunflower, soy and rapeseed oils”.

Palm oil prices declined “as seasonally rising output of major producing countries coincided with prospects of increasing export supplies from Indonesia amid large domestic inventories”.

‘Slower import demand’

Grain prices, meanwhile, slipped by 4.1%, their fastest drop since August 2019, reflecting a 5.7% tumble in wheat values on improving supply prospects.

The wheat price drop was “driven by seasonal availability from new harvests in the northern hemisphere, improved crop conditions in some major producers… and slower global import demand”, the FAO said.

Prices of corn fell by a more modest 3.5%, “stemming from seasonal availabilities in Argentina and Brazil, where maize [corn] harvests progressed quickly, and improved crop conditions in the US”.

‘Large maize plantings’

The comments came even as the FAO raised its own forecast for global grain stocks at the close of 2022-23, by 7.6m tonnes to 854.2m tonnes on an improved outlook for corn production.

“Prospects were bolstered this month by reports indicating large maize plantings in China and India.

“Furthermore, although still pointing to a likely 30-percent decline from the past five-year average, Ukraine’s maize production prospects were also lifted with official data indicating larger-than-previously anticipated maize sowings.”

The increased corn output prospects more than offset a small decline, of 500,000 tonnes to 770.3m tonnes, in expectations for this year’s world wheat harvest.

“The marginally diminished outlook results from cuts to production forecasts for the European Union, where persisting dryness has impaired yield prospects, and to a lesser degree for Argentina and Iraq,” while estimates for Australian and Canadian harvests were raised.

Exporter stocks

Nonetheless, world grains stocks were still seen shrinking year on year, by 5.0m tonnes to 854.2m tonnes, reflecting declines in both coarse grains and wheat inventories.

“At this level, the global cereal stock-to-use ratio,” a key pricing metric, “would fall from 30.7% in 2021-22 to 29.8% in 2022-23,” the FAO said.

Stocks held in exporting countries, which are particularly important for pricing, were seen at 20.1% of world use – up 0.3 points year on year, but down 0.3 points from last month’s figure on weakened expectations for inventories in top wheat-shipping countries.

The agency forecast for 2022-23 “likely drawdowns [of wheat stocks] in the European Union and India, in particular, as well as in Australia”.

The stocks-to-use ratio for wheat held by major wheat exporters was cut by 1.0 point from last month to 18.0%, although this would still represent an increase from the 17.5% expected as of the close of 2021-22.