WORLD NETWORK INFORMATION SERVICE ON SUSTAINABLE AGRICULTURE
Geneva, 6 Nov (Kanaga Raja) – The international prices of a basket of key agricultural food commodities rose for the fifth consecutive month in October, mainly driven by firmer prices for cereals, sugar, dairy and vegetable oils, the UN Food and Agriculture Organization (FAO) has said.
According to the FAO, its Food Price Index (FFPI) averaged 100.9 points in October 2020, up 3.0 points (3.1 percent) from September and 5.7 points (6.0 percent) higher than its value a year ago.
“The October value, the highest since January 2020, represented the fifth consecutive monthly increase,” it said.
Much firmer prices of sugar, dairy, cereals and vegetable oils were behind the latest rise in the FFPI, while the meat sub-index fell slightly for the second consecutive month, FAO 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 the FAO, its Cereal Price Index averaged 111.6 points in October, up 7.5 points (7.2 percent) from September and as much as 15.8 points (16.5 percent) above its value in the corresponding month last year.
“The October rise marked the fourth month of consecutive increase,” said FAO.
It said that wheat export prices rose further in October, reflecting strong global demand amidst shrinking export availabilities, poor growing conditions in Argentina and continued dry weather adversely affecting winter wheat conditions in parts of Europe, northern America and the Black sea region.
International maize prices also rallied to over six-year highs, largely underpinned by a fast pace in purchases by China and higher-than-earlier-anticipated drawdown of stocks in the United States of America as well as sharp declines in export supplies in Brazil and Ukraine.
Feed barley and sorghum prices also increased in October, supported by strong demand and spill-over from rising maize and wheat prices.
On the other hand, international rice prices fell to seven-month lows, as main-crop harvests got underway in Asia, intensifying efforts to attract buyers, said FAO.
The FAO Vegetable Oil Price Index averaged 106.4 points in October, up 1.8 points (1.8 percent) month-on- month and posting a nine-month high.
“The continued strength of the index largely reflects firmer palm and soy oil prices, while those of rapeseed oil declined moderately,” said FAO.
International palm oil quotations rose for a fifth consecutive month, underpinned by below-potential production prospects in leading producing countries and robust global import demand.
According to the FAO, soy oil values were supported by continued supply tightness in South America.
In contrast, after rising five months in succession, international rapeseed oil values decreased in October, amid increased uncertainty regarding demand in the EU following the recent deterioration of the COVID-19 situation across the region, said FAO.
According to the FAO, its Dairy Price Index averaged 104.4 points in October, up 2.2 points (2.2 percent) from September, marking the fifth consecutive monthly increase and lifting the index 3.6 points (3.5 percent) above its value in the corresponding month last year.
In October, price quotations for all dairy products represented in the index rose, with cheese rising the most, followed by skim milk powder, whole milk powder and butter, said FAO.
“Price increases in October reflected some degree of market tightening for near-term deliveries, underpinned by robust import demand from Asian and Middle Eastern markets amidst expectations for less export availabilities from Oceania later this year when production will be declining seasonally.”
Furthermore, FAO said that increases in internal demand for future deliveries in Europe, where production is nearing its seasonal low, also contributed to spot market tightening and price strengthening.
The FAO Meat Price Index averaged 90.7 points in October, down slightly (0.5 points or 0.5 percent) from September, marking the ninth monthly decline since January, and standing 10.9 points (10.7 percent) lower than its value a year ago.
“Pig meat prices dropped, as a fall in the quotations of German products, reflecting continued influence of the import restrictions imposed by China on Germany, outweighed an increase in those from Brazil due to robust import demand,” said FAO.
Bovine meat prices declined due to weak demand in the United States of America, coupled with rising shipments from South America, although supplies from Australia drifted lower due to rising demand for cattle for herd re-building.
Poultry meat prices also fell slightly because of reduced orders from China and Saudi Arabia, said FAO.
On the other hand, prices of ovine (lamb and mutton) meat rose on steady internal demand and low export supplies, especially in Australia.
According to the FAO, its Sugar Price Index averaged 85.0 points in October, up 6.0 points (7.6 percent) from September and 7.2 points (9.3 percent) from last year.
“This increase reflected mostly the prospects of a lower sugar output in both Brazil and India, the two largest sugar producing countries, due to below average rainfalls,” it said.
Sugar prices were also supported by developments in Thailand, where sugar output is seen lower by almost 5 percent from last year as a result of protracted dry conditions.
FAO said additional upward pressure was provided by fund buying, as evidenced by the weekly Commitment of Traders (COT) report.
In addition, sugar prices displayed high volatility, driven also by uncertainties in crude oil market and movements in the Brazilian Real against the United States Dollar, it added.
WORLD CEREAL OUTPUT AT ALL-TIME HIGH
Meanwhile, in a separate Cereal Supply and Demand Brief, FAO reduced its forecast for 2020 world cereal production for a second consecutive month, by nearly 13 million tonnes, largely on expectations of diminished world coarse grains production.
Despite the downward revisions, global cereal output is still forecast at a record 2,750 million tonnes, surpassing the 2019 output by 1.6 percent, said FAO.
“This month’s 10.1 million tonnes cut to the world coarse grains production forecast is driven by lowered maize production forecasts in the European Union (EU) and Ukraine, where continued adverse weather has further reduced yield prospects, as well as in the United States of America (USA) on a smaller acreage.”
FAO also trimmed its forecast for global wheat production for 2020 by 2.3 million tonnes and now stands at 762.7 million tonnes, just short of the 2016 record level.
“This reduction largely rests on lower output expectations in Ukraine, as well as in Argentina, where persistent dry weather curtailed yield prospects,” it said.
On the other hand, FAO has forecast world rice production in 2020 to increase by 1.5 percent year-on-year to a new record of 508.7 million tonnes.
It said this level stands slightly (0.4 million tonnes) below October expectations, as somewhat less pessimistic prospects for output in Indonesia were outweighed by downgrades to production in Myanmar and Nigeria, in both cases reflecting the adverse impact of weather on main-crop output.
Noting that planting of the 2021 winter wheat crop has begun in the northern hemisphere, FAO said encouraged by higher prices, farmers are expected to expand planting in several main producing countries, notably in the EU where production could rebound in 2021 from the low out-turn this year.
In the USA, 2021 winter wheat planting is progressing at a generally quick pace and the sown area is expected to remain broadly unchanged on a yearly basis.
However, a continuation of reduced rainfall in the southern and central parts of the Great Plains could curb yields, said FAO.
“Similarly, scarce precipitation in the Russian Federation might stifle early crop development, while low soil moisture levels in Ukraine could lead to below-average planted area.”
In Asia, remunerative prices and generally ample agricultural input supplies are expected to sustain above- average wheat acreage in China, India and Pakistan, it said.
FAO has forecast world total cereal utilization in 2020/21 to reach 2,745 million tonnes, up marginally since October and 1.9 percent higher than in 2019/20.
FAO said it scaled up slightly this month its forecast for total wheat utilization in 2020/21, mostly on increased consumption expected in the EU. The global forecast has been raised to 758 million tonnes, up 1.0 percent from the 2019/20 level.
Upward revisions for the feed use of coarse grains this month are balanced by lowered demand for non-food uses, keeping the coarse grains utilization forecast for 2020/21 unchanged from last month at 1,477 million tonnes, up 2.6 percent from 2019/20, driven largely by increased feed use.
On the back of expanding food use, FAO has forecast global rice utilization in 2020/21 to reach 510 million tonnes, also barely changed since October, but up 1.5 percent from the 2019/20 estimate.
FAO has lowered its forecast for world cereal stocks by the close of seasons in 2021 by 13.6 million tonnes since October to 876 million tonnes, just 0.5 percent above opening levels and now falling below the 2017/18 record.
The latest downward revision to stocks largely stems from a further sharp cut (10.8 million tonnes) in the global maize inventory forecast, with lowered stocks in several countries, including Brazil on stronger exports, China on greater domestic consumption, and the EU and the USA on reduced production prospects, FAO said.
“This month’s cut negates previous expectations of growth in global maize stocks, now forecast to fall 2.5 percent below their opening levels, reaching their lowest level in five years, as well as global coarse grains inventories, now forecast just slightly below their opening levels at 281 million tonnes,” it added.
FAO also lowered its forecast for global wheat inventories by 3.8 million tonnes this month, on lower expected stocks in the EU, the USA and the Russian Federation.
Despite these downward revisions, global wheat stocks are still forecast to increase to 184 million tonnes, 1.9 percent above opening levels, it said.
“However, if China is excluded from the forecast, global wheat inventories would likely contract by 3.7 percent, driven by expected declines in several leading wheat exporters, including Argentina, the EU and the USA, mostly due to reduced harvests”.
On the other hand, continued build-ups in the major rice exporters are anticipated to keep world rice stocks at the close of 2020/21 essentially stable year-on-year, at 182.0 million tonnes.
“If confirmed, these trends would result in the global rice stock-to-use ratio falling only marginally below the year-earlier estimate, while the major exporters’ stock-to-disappearance ratio rising to a seven-year high,” it said.
FAO has raised its forecast since October for global trade in cereals in 2020/21 to 451 million tonnes, now 3.0 percent higher than in 2019/20.
“The bulk of the upward revision this month and the year-on-year foreseen increase is attributed to global coarse grains trade, now forecast to rise by 4.7 percent from the 2019/20 levels,” it said.
It added that scaled up maize imports by the EU to compensate for lower expected production and stronger-than- earlier anticipated sales by Brazil and the USA pushed up the global maize trade forecast by 3.8 million tonnes to 179.8 million tonnes, 3.7 percent above last season’s level.
FAO has forecast world rice trade in 2021 (January-December) at 47.2 million tonnes, marginally changed since October and up 6.3 percent year-on-year.
It has continued to forecast global wheat trade at a record 184.5 million tonnes in 2020/21 (July/June), slightly up from 2019/20 and unchanged since October.
FAO said larger expected sales by the Russian Federation since the previous forecast in October are balanced by anticipated reduced exports from Ukraine, on lower availability of exportable supplies.
On the import side, foreseen greater purchases from Pakistan are countered by cuts in imports by the Philippines on expectations of reduced feed demand, it added.