United Nations: Global food import bill to fall to six-year low
Published in SUNS #8331 dated 12 October 2016

Geneva, 11 Oct (Kanaga Raja) -- The value of total food imports is forecast to decline by 11 percent in 2016 to US$1.17 trillion, the Food and Agriculture Organisation of the United Nations (FAO) has said.

In its latest Food Outlook, FAO said that this marks the largest annual fall in absolute terms in recent history, and to a level not witnessed since 2010.

At the product level, the import bills anticipated to undergo the largest absolute declines in 2016 are those for livestock products and cereal-based foodstuffs, which could fall by around US$27 billion, or 12 percent, and US$25 billion, or 16 percent, respectively.

Commodity import bills that could instead increase in 2016 include sugar (+US$10 billion), fish (+US$6 billion), fruit and vegetables (+US$5 billion), and vegetable oils (+US$3 billion).

In all of these cases, said FAO, international benchmark quotations are above the 2015 levels, and import volumes are set to exceed those of last year.

The FAO report however noted that the tendency at the world level for substantially lower import costs in 2016 does not necessarily extend to many of the economically vulnerable nations.

The food import bills of least-developed countries (LDCs), low-income food-deficit countries (LIFDCs) and those geographically situated in sub-Saharan Africa (SSA) are forecast to fall by less than the 11 percent global decline, with falls ranging between only 5 and 9 percent among the country groups.

"For all of these economically disadvantaged countries, higher import volumes of products in the oilseed complex, as well as of sugar and cereals, particularly maize, are seen to offset the gains to be made from lower import bills of other product groups."

In some cases, particularly for countries in SSA as well as LIFDCs, the larger maize purchases are in response to shortfalls in the domestic production of the staple.

"Despite the general decline of the US dollar-denominated food bills in 2016, a different picture emerges when denominated in local currencies, given the prevailing strength of the US dollar. Although having stabilized in recent months, the US dollar remains exceptionally strong, keeping the cost of food imports high from a local currency perspective and adding strain to scarce foreign exchange reserves from which the cost of importing is met."

According to the Food Outlook, FAO's biannual report on global food markets, from a global perspective, food markets are expected to remain "generally well balanced" in 2016/17 amid large export availabilities and relatively low and more stable international prices, especially for cereals.

A positive outlook for global cereal production in 2016, together with abundant stocks, points to a generally comfortable supply and demand balance in 2016/17, said FAO.

In 2016, world cereal production is set to increase by 1.5 percent, or 38 million tonnes, to hit a new record of 2,569 million tonnes, topping by at least 5.5 million tonnes the previous peak of 2014.

The current FAO forecast is 3.4 million tonnes higher than projected in September, with most of the upward revisions concerning wheat and rice.

World wheat production in 2016 is expected to exceed the 2015 record by 1.2 percent, underpinned by output increases in India, the Russian Federation and the United States.

Similarly, global rice production is forecast to grow by 1.3 percent, to an all-time high, driven by recoveries in Asia, as well as by gains in Africa and North America.

Global production of coarse grains is set to rebound by 1.8 percent from last year's reduced level, mostly reflecting prospects for record maize crops in the United States, Argentina and India.

Global cereal utilization in 2016/17 is projected to expand by 1.6 percent to 2,560 million tonnes, with feed usage, in particular, seen increasing by 2.7 percent in 2016/17, amid large supplies of maize and low quality wheat.

In spite of the projected year-on-year growth in total cereal utilization, the rise in world cereal production in 2016 would still result in an increase in the level of global cereal inventories.

According to the report, all would be in the form of wheat, as ending inventories of coarse grains and rice are anticipated to slide below their opening levels.

The international wheat market in 2016/17 is likely to witness another season of abundant supplies, amid expectations of record production and rising stocks, it said.

At 742.4 million tonnes, FAO's current forecast for global wheat production in 2016 is 1.2 percent above the 2015 all-time high, with increases in India, the Russian Federation and the United States accounting for most of the year-on-year growth.

The forecast for world wheat trade (including wheat flour in wheat equivalent) in 2016/17 (July/June) has been raised by 1.5 million tonnes since September, and now stands at 165 million tonnes, similar to the 2015/16 record.

On a regional basis, wheat imports in 2016/17 are predicted to remain close to the previous season's levels.

"However, on the export side, an emerging feature is the anticipated emergence of the Russian Federation as the world largest wheat exporter, taking over from the EU which is expected to occupy a distanced second place, almost on par with the United States."

Total wheat utilization in 2016/17 is projected to reach 730.5 million tonnes, almost 15 million tonnes, or 2 percent, above the 2015/16 estimate.

At 498 million tonnes, food consumption would continue to account for the bulk of global wheat utilization. On the other hand, the use of wheat in animal rations is forecast to increase by 6.2 percent to 146 million tonnes, reflecting the ample availabilities of low quality wheat at competitive prices.

World wheat stocks are forecast to increase further in 2016/17 and reach 234 million tonnes, up 8.4 million tonnes from their already elevated opening levels and the highest level since 2001/02.

Against this background, said FAO, international wheat prices are likely to remain stable and relatively low during the 2016/17 season.

Although world production of coarse grains is set to increase in 2016, the overall supply and demand outlook for 2016/17 suggests a slight tightening of the market compared to the previous season. However, with large export availabilities and weak import demand prospects, international coarse grain prices could remain subdued.

World production of coarse grains in 2016 is forecast to rise by 1.8 percent from the reduced 2015 harvest.

Record maize outputs in the United States and Argentina, along with gains in a number of other major producing countries, are likely to boost world maize production in 2016, despite expected sharp declines in Brazil, China and South Africa.

World production of sorghum is also heading to an increase, with anticipated growth in Sudan and Mexico more than offsetting a reduction in the United States. By contrast, barley production is expected to fall below its 2015 level on smaller outputs in several countries, especially Morocco and Turkey.

Global utilization of coarse grains is anticipated to grow by 1.5 percent in 2016/17, driven largely by higher uptakes of coarse grains for animal feeding and industrial use.

The most significant expansion concerns maize, which could see much greater volumes fed to animals in the United States and China, supported by larger domestic supplies and more competitive prices than in the previous season.

"Relatively low prices are also likely to stimulate industrial uses, in particular of maize for the production of starch and biofuels."

FAO said the 2016 season is unfolding favourably in the Northern Hemisphere, with abundant monsoon rains over Asia more than compensating for El Nino-related setbacks that occurred along or south of the Equator.

As a result, forecasts of world rice production in 2016 have been upgraded to a record 497.8 million tonnes, up 6.3 million tonnes, or 1.3 percent, from the depressed outcome of 2015. If confirmed, this would mark the first year of global output growth since 2013.

Much of the expansion is forecast to stem from recoveries in Asia, although sizeable gains are also foreseen in Africa and the United States.

After a combination of tighter export availability and subdued import demand depressed 2016 deliveries, early prospects point to world rice trade stagnating at 43.8 million tonnes in 2017.

"On the import side, improved local harvests may enable countries in the Far East and Latin America and the Caribbean to reduce imports, with good crops and depreciated currencies also tempering import growth in Africa."

As for exports, an output recovery could help India boost its sales to international markets, primarily at the expense of lower deliveries by Thailand, consolidating India's position as the world's leading supplier of rice.

FAO said with expanding food use lifting total rice utilization over projected production in 2016, global rice reserves at the close of 2016/17 are anticipated to fall for the second successive season, reaching 169.6 million tonnes.

India and Thailand are predicted to lead the 0.7 percent stock draw-down, but the fall is expected to be mitigated by accumulations elsewhere, especially in China (Mainland).

After a tightening in market fundamentals in 2015/16, preliminary forecasts for the 2016/17 season point to a relatively balanced global supply and demand situation for both meals/cakes and oils/fats. In 2016/17, global oilseed production is forecast to recover fully from last season's fall, possibly climbing to a new record.

While the expansion would be led by soybeans, the other oilseeds are also anticipated to post sizeable gains, with the exception of rapeseed.

Soybean growth would be concentrated in the United States, where record-high yields are set to boost output. In South America, production might grow only moderately, as farmers are expected to reduce soybean plantings in favour of competing crops.

In China and India, production could expand, reversing the downward trend observed in recent years.

Growth in global palm oil output is forecast to resume, as palms in Southeast Asia begin to recover from the effects of adverse weather in 2015/16. Based on current forecasts, world output and consumption of oils and meals would reach record levels in 2016/17.

International trade in oils/fats is forecast to grow at a faster pace than last season, fuelled by the anticipated recovery in palm oil production in Indonesia and Malaysia. The outlook is less buoyant for world meal trade, which could face slowing growth, mainly reflecting subdued import demand by China.

World meat production is anticipated to stagnate in 2016, rising by a meagre 0.2 percent to 319.8 million tonnes.

While output is expected to rise particularly in the United States, the EU, Brazil, India, Mexico, Canada and the Russian Federation, a down-turn in meat production - especially in China, but also in Australia - would weigh on the overall trend. Excluding the last two countries, aggregate meat production of the rest of the world would rise by 1.4 percent.

Global meat trade is forecast to recover in 2016, rising by 4.4 percent to 31.1 million tonnes, representing a return to trend, after a fall in 2015.

Based on current expectations, trade in pigmeat is expected to increase by 10.8 percent, poultry meat by 4.4 percent and bovine meat by 0.3 percent, while ovine meat (lamb and mutton) may decrease by 2.8 percent.

Increased meat imports are expected particularly in China, but also in Japan, South Africa, Chile, the Republic of Korea, Mexico, the EU, Iraq, the Philippines, Viet Nam, the United Arab Emirates and the Russian Federation.

By contrast, growth in domestic production may result in reduced imports by the United States and Canada, with Angola also anticipated to buy less.

The expansion in world exports is projected to be led by Brazil and the EU, followed by the United States and Canada, with sales also rising for Belarus, Thailand, the Russian Federation, Paraguay, Mexico and Ukraine.

Meanwhile, exports by Australia, China, Turkey, South Africa, New Zealand, Argentina and India are likely to be curtailed.

World milk production is forecast to grow by 1.1 percent to 817 million tonnes in 2016, with output set to expand in Asia and North and Central America, but to stagnate in Europe and Africa and decline in Oceania and South America.

"The removal of some excess export supplies in the EU and anticipation of tighter milk availabilities during the second half of the year caused international dairy prices to rebound between May and September," said FAO.

Trade in dairy products in 2016 is projected to be almost unchanged, remaining at 72 million tonnes of milk equivalent. This stands in marked contrast to an average annual rate of increase of 6 percent for period 2009-2014.

In 2015, a drop in shipments to China and the embargo by the Russian Federation on imports from specific countries impinged on international dairy product trade. For 2016, purchases by China and, to a lesser extent, the Russian Federation are projected to recover somewhat, with growth also foreseen for Brazil, the United States and Mexico.

However, this is forecast to be largely counterbalanced by substantial reductions in imports by Venezuela and Algeria, and also by the United Arab Emirates, Nigeria, Singapore, Malaysia, Vietnam and Thailand.

Overall, said FAO, international trade flows in cheese and butter are anticipated to expand, while shipments of milk powders may fall.

"Among exporters, the EU, New Zealand, Belarus and Uruguay are forecast to increase their sales. However, this is likely to be almost matched by a fall in shipments from the United States, Brazil and Argentina, while exports by Australia and Switzerland could be unchanged."

After falling for much of 2015, international fish prices have given signs of a recovery in the first five months of 2016, while still remaining below their 2015 levels.

The report said the recent price strength, which extended to all the major species except for shrimps, generally reflected a tightening of supplies in some major exporting countries, combined with a stronger import demand.

Global fish production is forecast to grow by 1.8 percent to 174.1 million tonnes in 2016, boosted by a 5 percent expansion of aquaculture to 81.4 million tonnes, confirming the sector as the main engine for fishery growth, which compensated for a 1 percent contraction in wild fish output to 92.7 million tonnes.

"Consumer demand for fish remains strong, with more people worldwide appreciating the health benefits of regular fish consumption."

Direct human consumption, which accounts for more than 85 percent of all fish uses, is projected to grow by 2.3 percent to 152.8 million tonnes in 2016. This would result in a slight increase in per capita fish intake, from 20.3 kg in 2015 to 20.5 kg in 2016.

Although several exporters are likely to face supply constraints associated with El Nino, diseases and fishing quotas, the value of international fish trade may increase by 4 percent in 2016, recouping part of the losses registered in 2015, said the report. +