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THIRD WORLD NETWORK INFORMATION SERVICE ON SUSTAINABLE AGRICULTURE

United Nations: Global food prices reach a six-month high
Published in SUNS #9185 dated 7 September 2020

Geneva, 4 Sep (Kanaga Raja) — The international prices of a basket of key agricultural food commodities rose for the third consecutive month in August, mainly driven by firmer prices and a weaker US dollar, the UN Food and Agriculture Organization (FAO) has said.

According to the FAO, its Food Price Index averaged 96.1 points in August 2020, up 1.8 points (2.0 percent) from July and 2.1 points (2.2 percent) higher than its level in the corresponding month last year.

The August value, the highest since February 2020, represented an increase for the third consecutive month, said FAO.

“While a weaker US dollar provided support to international prices of most agricultural commodities, in August the price increases were more pronounced for sugar and vegetable oils with cereal prices also firming, though more modestly,” it added.

The FAO Food Price Index is a trade-weighted index that tracks the monthly change in the international prices of a basket of key food commodities.

According to FAO, its Cereal Price Index averaged 98.7 points in August, up 1.8 points (1.9 percent) from July and 6.5 points (7.0 percent) above its value in the corresponding month last year.

Among the major cereals, sorghum, barley, maize, and rice prices rose the most, said FAO.

Sorghum prices increased significantly for the second consecutive month, up 8.7 percent from July and 33.4 percent above the level in August 2019, mostly driven by strong import demand from China.

Barley prices also picked up strength, increasing by 3.2 percent month-on-month, reflecting a faster pace in exports from Argentina to China, said FAO.

“Concerns over production prospects in the US following recent crop damages in Iowa pushed maize prices up by a further 2.2 percent in August.”

FAO also pointed to a rise in international rice prices, after two months of successive declines, underpinned by seasonally tight availabilities and increasing demand in Africa.

In wheat markets, export prices rose, albeit slightly, as lower production prospects in Europe and increased buying interest started to push up prices towards the end of the month, it said.

FAO’s Vegetable Oil Price Index averaged 98.7 points in August, gaining 5.5 points (5.9 percent) month-on-month and reaching its highest level since January 2020.

The third consecutive monthly rise mainly reflects firmer palm oil values and, to a lesser extent, higher soy, sunflower seed and rapeseed oil prices, said FAO.

“Increased international palm oil prices mainly reflect prospective production slowdowns in leading producing countries, which, combined with firm global import demand, are expected to result in reduced inventory levels”.

Meanwhile, soy oil values continued to rise amid better-than-anticipated uptake from the US bio-diesel industry, said FAO.

“Sunflower seed oil prices were supported by robust import demand, notably from China, while continued supply tightness underpinned the further rise in rapeseed oil values.”

According to FAO, its Dairy Price Index averaged 102.0 points in August, almost unchanged from July and up 1.7 points (1.7 percent) from the corresponding month last year.

FAO said quotations for both cheese and whole milk powder (WMP) fell due to reduced demand for spot supplies on expectations of ample export availabilities in Oceania in the new production season.

In contrast, price quotations for butter increased as a result of tightening export availabilities in Europe due to a rise in internal demand while the August hot spell reduced milk production, which was already in its seasonal decline.

FAO reported increased quotations for skim milk powder (SMP), driven by steady global import demand for medium-term deliveries and reduced milk production in Europe.

The FAO Meat Price Index averaged 93.2 points in August, almost unchanged from its July value and down 9.1 points (8.9 percent) from the corresponding month last year.

“In August, quotations for bovine and poultry meat declined, caused by a weaker pace of import purchases, notwithstanding reduced slaughter of animals and processing in key producing regions” said FAO.

Price quotations for ovine (lamb and mutton) meat also fell due to weak import demand amid an influx of new season lamb supplies in Oceania.

On the other hand, pig meat prices rose after four months of consecutive declines, as imports by China surged while global supplies tightened somewhat due to lighter slaughter weight, coupled with prolonged plant shutdowns in some producing regions, said FAO.

According to FAO, its Sugar Price Index averaged 81.1 points in August, up 5.1 points (6.7 percent) from July and 4.9 points (6.4 percent) higher than in August 2019.

The latest month-on-month increase reflected the prospects of a reduction in production due to un-favourable weather conditions in the EU as well as in Thailand, the world’s second largest sugar exporter, it said.

“Strong sugar import demand by China, driven by a sustained rise in domestic consumption, provided additional support to prices.”

However, expectations of a bumper sugar crop in India contained the extent of the price increase, said FAO.

CEREAL SUPPLIES TO REMAIN AMPLE IN 2020/21

In a separate Cereal Supply and Demand Brief, FAO has lowered its forecast for world cereal production in 2020 by 25.0 million tonnes (0.9 percent) compared to the previous forecast in July.

Notwithstanding this downturn in prospects, the expected global cereal output still stands at 2,765 million tonnes, an all-time high and 58 million tonnes above the 2019 out-turn, said FAO.

FAO explained that this month’s production cutback results from a reduction in the world coarse grains forecast, now pegged at 1,496 million tonnes, down 23.5 million tonnes from the previous report in July.

“The bulk of the decline relates to a 26.3 million tonne downward revision to the maize production forecast in the United States of America (USA), where plantings, albeit still up year-on-year, are lower than earlier expectations and recent storm damage in the Midwest caused crop losses and impaired yield prospects,” it said.

Overall, however, yields are still expected to recover from the previous year’s low level and the country’s output is forecast at 380 million tonnes, 10 percent higher than in 2019.

“Production forecasts were also lowered in the European Union (EU) and Ukraine, due to adverse weather that diminished yield prospects, and in Indonesia, where the historical production estimates as well as the 2020 forecast were revised downwards in line with recently released official statistics.”

According to FAO, these reductions more than offset upward revisions to the maize production forecasts in Argentina and Brazil, with both countries expecting record-high harvests.

FAO said it has trimmed its forecast for global barley production in 2020 by 1.2 million tonnes, driven by lower yield prospects in the EU, and now stands at 154.2 million tonnes.

On the other hand, world sorghum production is now expected to reach nearly 60 million tonnes, 6 percent higher than the previous year, following increased forecasts for India, Mexico and the USA.

“Global wheat production has been reduced by 1.4 million tonnes since July, which puts this year’s output at 760.1 million tonnes, marginally below the good out-turn of 2019.”

FAO attributed the recent decrease mostly to cuts to production forecasts in Argentina, the EU and the USA by 1.3 million, 4.0 million, and 1.1 million tonnes, respectively, which outweighed upward revisions for Brazil, Canada, the Russian Federation, and Ukraine.

“Small area-based increases to July forecasts of rice production in Colombia, the Philippines and the USA compensated for more downbeat expectations of output in the Lao People’s Democratic Republic and Viet Nam.”

As a result, global rice production in 2020 is still projected at an all-time high of 509 million tonnes (milled basis), up 1.7 percent from the 2019 reduced level, said FAO.

FAO increased its forecast for world cereal utilization in 2020/21 by 11.0 million tonnes since July, now amounting to 2,746 million tonnes, up 63.1 million tonnes (2.4 percent) from the 2019/20 level.

“The projected growth and upward revision this month mostly reflect a foreseen increase in total utilization of coarse grains, revised up by 8.4 million tonnes since July and now surpassing the 2019/20 level by 51.5 million tonnes (3.6 percent).”

An anticipated increase in feed use of coarse grains, especially maize, up 31.4 million tonnes (3.8 percent) from 2019/20 levels, is the biggest driver of the expected annual growth, it said.

However, the recovery of industrial use from last year’s slump, now seen increasing by 16.4 million tonnes (4.2 percent), as ethanol demand regains ground, also contributes to the anticipated expansion.

FAO has also lifted its forecast for total wheat utilization in 2020/21 since July, albeit marginally (by 2.0 million tonnes), to 756 million tonnes, representing an increase of 3.0 million tonnes from the 2019/20 level.

“Higher food consumption is the main driver behind this increase, while the feed demand for wheat is likely to remain suppressed and its industrial use to stagnate,” it said.

FAO has pegged world rice utilization in 2020/21 at 511 million tonnes, up 600,000 tonnes from July expectations and 1.7 percent above the 2019/20 level.

According to FAO, its forecast for world cereal stocks by the close of the 2021 seasons has been cut by 33.4 million tonnes since July, dropping to 895.5 million tonnes, but still up 14.6 million tonnes (1.7 percent) above their opening levels and representing an all-time high.

“The bulk of the downward adjustment to global stocks is the result of an expected 24.0 million tonne reduction in maize inventories in the USA, triggered by reduced production prospects since the previous report in July.”

This cut in maize stocks lowers the forecast for total global coarse grain stocks to 432.1 million tonnes, down 30.9 million tonnes since July but still 10.8 million tonnes (2.6 percent) above their opening levels.

Despite a slight downward revision (by 1.6 million tonnes), global wheat inventories at the close of 2021 seasons are also still predicted to increase by 5.7 million tonnes (2.0 percent) above their opening levels and reach 282.2 million tonnes, the second highest on record.

However, most of the forecast increase stems from an expected 11.0 million tonne rise in China’s wheat inventories from the previous season, said FAO.

On the other hand, following a 1.0 million tonne downgrade since July, world rice stocks are now seen falling 1.0 percent below their opening levels to 181 million tonnes, which is still the third highest volume on record.

“This latest revision primarily reflects lower anticipated reserves in importers, particularly China, which is also envisaged to account for much of the forecast annual stock draw-down,” said FAO.

Conversely, 2020/21 carry-outs in the major rice exporters were raised further and are now predicted to reach a seven-year high.

FAO has forecast world trade in cereals in 2020/21 at 441.4 million tonnes, up 7.1 million tonnes from the July forecast and 6.3 million tonnes (1.6 percent) above the 2019/20 level.

It raised the forecast for world wheat trade in 2020/21 (July/June) to 181.5 million tonnes, up 2.9 million tonnes from July and marginally (0.3 percent) above the 2019/20 record level.

The more robust wheat import demand in 2020/21 will likely be met by larger shipments from Australia and the Russian Federation, offsetting an anticipated cut in exports by the EU, it said.

FAO also lifted its forecast for world trade in coarse grains in 2020/21 (July/June) since the previous report in July, by 3.9 million tonnes.

It now points to a likely trade expansion of nearly 4.0 million tonnes (1.9 percent) from the 2019/20 level and marking a new record.

“Higher world trade of maize than earlier anticipated is responsible for most of this month’s upward adjustment, reflecting strong import demand, especially in Asia, amid large supplies in major exporters,” said FAO.

Despite a 400,000 tonne downward revision from July, ample exportable supplies and rekindling demand in Africa are expected to sustain a 6 percent annual expansion in international rice trade in (calendar) 2021 to 47 million tonnes, it added. +

 


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