Nations: Food import bill to fall, but poorest unlikely to benefit
Geneva, 10 May (Kanaga Raja) – The global food import bill is set to decline by 2.5 percent in 2019 to USD 1.472 trillion, the Food and Agriculture Organisation of the United Nations (FAO) has projected.
In its latest Food Outlook released on 9 May, FAO, however, said that poor cereal production prospects for the least-developed countries (LDCs), low-income food-deficit countries (LIFDCs) and those situated in sub-Saharan Africa (S SA) in 2019 are anticipated to instigate larger import volumes of these staples, and to curb the benefits of widely falling import bills of other products.
According to the FAO, the poorest and most vulnerable countries will not be the prime beneficiaries of the likely decline in the global food import bill in 2019, and that the lower costs would be enjoyed mostly by developed countries.
FAO also said that the lower unit costs of food imports indicate that more food could be purchased for the same amount of money, but that gain is cancelled out in almost all LIFDCs, whose currencies are weakening against the US dollar, the primary currency in international trade transactions.
According to FAO’s Food Outlook report, at USD 1.472 trillion, the provisional forecast for the global food import bill in 2019 points to a decline of 2.5 percent from the revised figure for 2018.
Nevertheless, at this level, the bill would remain elevated, being just USD 51 billion short of the 2014 record.
The forecast year-on-year decrease in the world food import bill is partly a reflection of a decline in international price quotations for many commodities, and it is more the result of a sizeable fall in freight rates, said FAO.
“Lower unit costs of importing food are likely to offset an expansion in global demand for many foodstuffs, implying that in 2019, more food can be purchased nominally for the same or lower cost.”
At the commodity level, the product bill that is expected to undergo the largest absolute decrease in 2019 is that for tropical beverages – coffee, tea and cocoa – and spices.
The nearly USD 11 billion year-on-year decline is on account of significantly lower price quotations in 2019 compared to last year, with international tea and coffee prices falling to multi-year lows.
Bills of products in the oilseed complex (vegetable oils and oilseeds) are also expected to fall substantially in 2019, by a combined USD 15 billion from last year, as a result of much lower quotations (a 13-year low in the case of international vegetable oil prices) and a slowdown in global demand for oil seeds.
Beverages, and fruits and vegetables, could also witness multi-billion-dollar falls in 2019, while more moderate declines are foreseen for livestock and fish products.
A recovery in sugar quotations, offset by a small contraction in import demand, looks set to leave the world sugar bill virtually unchanged.
Similarly, the aggregate cereal bill could match the level of 2018, in spite of a rebound in import demand from last year.
Trends in the food import bills of least-developed countries (LDCs), low-in come food-deficit countries (LIFDCs) and those situated in sub-Saharan Africa (S SA) are mixed, said FAO.
In the case of the LDCs, their aggregate food import bill appears set to remain virtually unchanged from last year, while a 3-percent fall is anticipated i n the bill of LIFDCs and a 4-percent rise is expected for SSA.
All three vulnerable country groups are expected to benefit significantly from much lower bills of vegetable oils – commodities that habitually rank second in terms of import dependency.
“However, poor cereal production prospects for all these countries in 2019 are anticipated to instigate larger import volumes of these staples, and to cur b the benefits of widely falling import bills of other products.”
Indeed, said FAO, the dependence on imported cereals is expected to spike in 2019, reaching as much as 35 percent of the entire food bill for LDCs and SSA.
FAO also reported that having reached a three-and-a-half-year low in February 2018, the US dollar has begun to rise relative to major currencies, with the nominal index climbing to a 2-year high of 92 points in April 2019.
With the US dollar being the primary currency used for international transactions, a strong (or weak) US dollar typically imparts a loss (or gain) to the domestic purchasing power of importing countries.
For instance, a strong US dollar raises serious concerns for LIFDCs, it pointed out.
From April 2018 to April 2019, almost all the major food importing LIFDCs, which purchase more than USD 1 billion worth of food annually, out of USD 78 billion for the LIFDCs as a group, saw their currencies fall against the US dollar in real terms, reversing the gains of generally lower international food prices.
MARKET TRENDS FOR MAJOR FOOD COMMODITIES
The FAO report also provided detailed market assessments for 2019/20 for wheat, maize, barley, rice, fish, meat and meat products, dairy products, sugar and different types of vegetable oils.
It said that early prospects point to a likely rebound of 2.7 percent in global cereal production in 2019, following a decline registered in 2018.
Based on the conditions of crops already in the ground and on planting intentions for those still to be sown, and assuming normal weather for the remainder of the season, world cereal output is forecast to reach a new record level of 2,722 million tonnes (including rice in milled equivalent), 71 million tonnes higher than in 2018.
Among the major cereals, wheat, maize and barley would account for most of the rise in cereal production, with projected year-on-year increases of 5.0 per cent, 2.3 percent and 5.4 percent, respectively.
Global rice production is likely to remain close to the 2018 all-time high, said FAO.
Global food consumption of cereals is expected to increase, by at least 1.1 percent, due to the continued rise in world population.
Food consumption of rice and wheat, the two leading staples, is projected t o increase by 1.7 percent and 1.0 percent, respectively.
World trade in cereals in 2019/20 is forecast at 413 million tonnes, up just 0.5 percent (2.0 million tonnes) from the estimate for 2018/19, but still 1.9 percent (8 million tonnes) below the 2017/18 high.
Most of the anticipated decline is associated with a likely drop in maize trade; whereas trade prospects for most of the other cereals are positive, especially for wheat and rice.
Against a backdrop of overall comfortable supply and demand balances for nearly all cereals, their international prices are likely to remain under pressure , at least through the first half of the 2019/20 season.
Following some tightening in 2018/19, global wheat markets are expected to benefit from a likely significant rebound in supplies in the new season (20 19/20), on the back of anticipated production recoveries in many countries.
Total wheat output in 2019 is pegged at 767 million tonnes, up 5.0 percent from 2018 and, if confirmed, would mark a new record.
Most of the growth is expected to result from production increases in the European Union (EU), the Russian Federation and Australia.
The preliminary forecast for world trade in wheat (including wheat flour in wheat equivalent) in 2019/20 (July/June) stands at 173.5 million tonnes, some 1.6 percent higher than the 2018/19 level.
The rebound mainly stems from anticipated larger wheat purchases by several countries in Asia and North Africa.
The expected increase in wheat world import demand in 2019/20 is likely to be easily met by larger surpluses in major exporting countries, with the Russian Federation maintaining its position as the world’s leading exporter for the third consecutive season.
FAO said its first assessment of supply and demand prospects for coarse grains in 2019/20 points towards yet another comfortable season ahead.
World production of coarse grains in 2019 is forecast to increase by 2.4 percent from the reduced level in 2018, to reach 1,438 million tonnes, with much of the increase most likely stemming from higher production of maize and, to a lesser extent, barley.
The increase in maize output reflects expectations of a strong production recovery in Argentina and Brazil, while given the likelihood of increased plantings compared to last year, maize production in the United States of America could rebound to the second highest level on record.
World production of barley is also set to rise from the 2018 level, with most of the increase expected in Canada, the European Union (EU) and the Russian Federation.
Global trade in coarse grains in 2019/20 could decline by 1.4 percent, to n early 191 million tonnes, with expectations of reduced import demand for maize and sorghum.
The predicted contraction in maize trade – the first in nearly two decades, would be mainly on account of a sharp anticipated fall in imports by the EU, after record purchases in 2018/19.
Similarly, sorghum trade is seen to contract, primarily because of reduced import demand by the EU, while trade in barley is likely to benefit from stronger demand by Saudi Arabia but still remain similar to the 2018/19 level because of the anticipated smaller purchases by China.
Regarding exporters, reductions in overall sales of coarse grains from Canada, South Africa, the United States of America and Ukraine are likely to be largely offset by bigger shipments from Argentina, Brazil, the EU and the Russian Federation.
According to FAO, world rice production is tentatively forecast to amount to 516.8 million tonnes (milled basis) in 2019, virtually unchanged from the all-time high in 2018.
It said amid climatic uncertainties associated with the ongoing El Nino phenomenon and prospects of another decline in China’s production, early expectations point to output growth decelerating in Asia.
By contrast, with the exception of Europe, all other regions appear to be heading towards smaller harvests, as poor producer margins and less ideal growing conditions are anticipated to curtail plantings.
After stabilizing at a fresh peak in 2018, international trade in rice is forecast to contract by 3.1 percent in 2019 to 46.8 million tonnes, due to waning import demand from Bangladesh and Indonesia, as well as from China, Nepal, Sri Lanka and various West African countries.
Against a backdrop of ample global exportable availabilities and intensifying competition for markets, a supply shortfall could cause Thailand to shoulder much of the expected trade fall.
However, smaller crop harvests are also expected to undermine exports by Australia, Argentina, Brazil, Egypt and Uruguay, while Cambodia, China, India, the United States of America and Viet Nam are anticipated to export more.
Trade in 2020, although tentative, is projected to rebound by 4.5 percent, said FAO.
In 2018/19, growth in global oilseed production is set to resume, with soybeans accounting for much of the expected increase, led by a strong production rebound in Argentina and a bumper crop in the United States of America.
While higher soybean output would facilitate a rise in global meal production, growth in protein meal demand is forecast to come to a halt in 2018/19 – largely due to a decline in China’s soy-meal uptake following the outbreak of Afric an Swine Fever (ASF).
“Tied to the unexpected contraction in China’s domestic demand, as well as continued repercussions of the United States of America-China trade tension s, global trade in soybeans is expected to contract, while soybean/soy-meal inventories are poised to rise sharply, notably in the United States of America,” said FAO.
With global meal stocks heading towards unprecedented levels, international meals/cakes prices have continued trending downward, it added.
For oils/fats, subdued expansion in palm oil output due to continued production challenges in Southeast Asia is weighing on global production growth in 2018/19.
By contrast, consumption growth could accelerate compared with last season, underpinned by attractive prices and more dynamic demand from the bio-diesel industry.
Nonetheless, global production is anticipated to exceed demand, likely resulting in a fresh rise in international oils/fats reserves.
Accordingly, international oils/fats prices have continued to linger at multi-year low levels, said FAO.
Overall, given the current season’s massive carry-over stocks, the market for oilseeds and their derived products should continue to be characterized by a comfortable supply and demand situation in 2019/20 – barring unusual weather events and major policy changes, notably with regard to trade policies.
FAO has forecast world sugar production to decline in 2018/19 (October/September), but to remain above total consumption, with the anticipated surplus likely to be smaller than last year’s record level.
Expected decreases in sugar output in Brazil, the European Union (EU) and Thailand will likely be offset by expansions in China, Mexico, Australia an d Egypt.
On the demand side, world sugar consumption is set to rise, reflecting predicted increases in several developing countries, prompted by lower domestic sugar prices.
Sugar consumption growth is expected to be particularly marked in Africa, Asia and Central America and the Caribbean.
Sufficient domestic supplies in traditional importing countries should lead to a contraction in global import demand relative to the last marketing season, said FAO, adding that the implementation of import restriction measures in some major markets could also limit global import demand.
Exports are set to fall for Brazil, the world’s largest sugar exporter, but to rise for Thailand, the second largest sugar exporter, prompted by abundant sugar stocks.
A key feature in the current season is India maintaining its status as the world’s largest sugar producer for the second consecutive season, surpassing Brazil.
FAO has forecast global meat production to hover around 337 million tonnes in 2019 – slightly lower than in 2018.
If confirmed, the 0.2 percent anticipated decline would represent the first output fall since 1996, marking a reversal shift from the slow but stable growth trend witnessed over the past two decades, it said.
Despite a likely sharp fall in pig meat output, largely as a result of the African Swine Fever (ASF), especially in China, 2019 global meat production is only expected to drop slightly, as current prospects point to a solid worldwide expansion for poultry meat production and a steady progress in bovine and ovine (lamb and mutton) meat outputs.
As a result of ASF, which is likely to depress pig meat output in China by at least 10 percent, the country’s overall meat sector may record a 5 percent (4.3 million tonnes) contraction in 2019.
FAO said that the arrival and rapid spread of ASF in China, home to half of the world’s pig herd, will have a noticeable effect on world markets both for meat and animal feed.
While the exact impacts are still to be determined, said FAO, the disease could cause a near 20 percent decline in China’s hog inventories.
The sharp contraction is supported by indirect evidence, suggesting a large local contraction in the pigmeat processing industry as well as in pig feed production and sales, said FAO.
Elsewhere, said FAO, meat output is predicted to expand in the United States of America, Brazil, Mexico, India, the European Union (EU) and the Russian Federation, while a small production decline is anticipated in Australia.
World trade in meat and meat products is forecast to surpass 35 million tonnes in 2019, up 4.8 percent from last year.
Much of the expansion is projected to stem from an expected increase of 19-20 percent in overall meat imports by China, which could reach 26 percent for pig, 23 percent for poultry and 15 percent for bovine meat.
Japan, Mexico, the Philippines, Viet Nam and the Russian Federation are also expected to step up their meat purchases, while Saudi Arabia, Angola, Cuba and the Republic of Korea may import less.
The expected expansion in world import demand is forecast to be met largely by increased exports from Brazil, the EU, the United States of America, Thailand, India and Argentina, while limited supplies may depress meat foreign sales by Australia, New Zealand, China and Uruguay.
FAO has forecast world milk production to expand by 1.9 percent (16 million tonnes) to 859 million tonnes in 2019.
All major regions are anticipated to see growth, albeit at slower rates than last year.
India, Pakistan, the European Union (EU), the United States of America, New Zealand and Brazil are expected to be the principal contributors to the global expansion, whereas significant contractions are foreseen for Australia, China, Argentina and Ukraine.
FAO said unusually warm and dry weather conditions continue to affect milk production in Australia, while there is concern in Europe about a repetition, this summer, of the abnormally high temperatures and drought conditions that prevailed in 2018.
While the presence of an El Nino weather pattern has been confirmed in South America, its impact has so far been mild.
A restructuring of the dairy sector, mainly in China, Argentina and the Russian Federation, is fostering a retreat of smallholders. This, together with rising feed costs, may result in an overall production decline in China this year.
Moreover, said FAO, uncertainties arising from the China-United States of America trade dispute, and delays in ratification of the Mexico-United States of America-Canada Agreement, are making it difficult for farmers and processor s to make production decisions, and for traders to identify alternative market options.
According to FAO, global fish production in 2019 is expected to reach 177.8 million tonnes, which is around the same level as in 2018, while demand growth is positive but slowing.
Total capture fisheries production is expected to decline by around 3.4 per cent in 2019, as anchoveta production will decrease after exceptionally good production in 2018, and catches will be low for some other key wild- caught species, including cod, mackerel, other small pelagics and octopus.
For aquaculture, said FAO, continued growth of around 4 percent is forecast for 2019, but overall the supply picture remains mixed.
The market balance is tight for some important farmed species such as salmon and bivalves, but in other markets, such as shrimp, seabass and seabream, plentiful supply is pushing prices down.
Global trade of fish and fish products in 2017 and 2018 was buoyed by high prices and good demand worldwide, but these previously positive conditions have worsened somewhat in 2019.
“The negative effects of the United States of America-China trade disputes will persist throughout 2019, with the additional threat of an escalation in transatlantic trade tensions between the United States of America and the EU,” said FAO.
Compounding these uncertainties are further Brexit delays and slower overall global economic growth which will make 2019 a more challenging year for the seafood industry, it cautioned.
Multiple major seafood exporters, particularly in Asia, are expected to see decreases in exports following positive performances in 2018.
China, the world’s leading seafood exporter, will feel the impact of trade tensions and demand headwinds.
On the import side, Japan, the EU and the United States of America have all seen declines in the total value of seafood imports so far in 2019, while import growth in developing countries is set to slow, but remain positive.
Overall, demand is still expected to be strong enough to support prices at a relatively elevated level, given that catches remain low for several highly traded wild-caught species, said FAO.