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THIRD WORLD NETWORK INFORMATION SERVICE ON SUSTAINABLE AGRICULTURE

United Nations: Food commodity prices rise sharply in January, says FAO
Published in SUNS #9279 dated 5 February 2021

Geneva, 4 Feb (Kanaga Raja) – The international prices of a basket of key agricultural food commodities rose for the eighth consecutive month in January, mainly driven by sugar, cereals and vegetable oils, the UN Food and Agriculture Organization (FAO) has said.

According to FAO, its Food Price Index (FFPI) averaged 113.3 points in January 2021, 4.7 points (4.3 percent) higher than in December 2020.

This not only marked the eighth month of consecutive rise but also registered its highest monthly average since July 2014, said FAO.

“The latest increase reflected strong gains in the sugar, cereals and vegetable oils sub-indices, while meat and dairy values were also up but to a lesser extent,” 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 the FAO, its Cereal Price Index averaged 124.2 points in January, marking a sharp increase of 8.3 points (7.1 percent) from December and the seventh consecutive monthly rise.

International maize prices increased significantly, surging by 11.2 percent in January, up 42.3 percent above their January 2020 level, reflecting increasingly tight global supply with lower-than-earlier-expected production and stock estimates in the United States of America and substantial purchases by China, it said.

“Concerns over dryness in South America and a temporary suspension of maize export registrations in Argentina added support, pushing international maize prices up to their highest level since mid-2013.”

Among other coarse grains, barley prices also increased in January, by 6.9 percent, supported by firmer demand and price rises for maize, wheat and soybeans, while sorghum prices remained stable, said FAO.

Wheat prices also registered strong increases in January, up by 6.8 percent, influenced by the strength in maize prices as well as strong global demand and expectations of reduced sales by the Russian Federation from March 2021, when the wheat export duty will double.

FAO said robust demand for rice from Asian and African buyers, combined with tight supplies in Thailand and Viet Nam, continued to underpin export prices in January.

FAO said its Vegetable Oil Price Index averaged 138.8 points in January, up 7.7 points (or 5.8 percent) from December and marking the highest level since May 2012.

The eighth consecutive monthly increase in the index mainly reflected higher palm, soy and sunflower seed oil prices, it said.

According to the FAO, with palm oil production in both Indonesia and Malaysia turning out lower than earlier expected due to excessive rainfall (and, in the case of Malaysia, continued shortages in migrant labour force), international palm oil quotations climbed to eight-and-a-half year highs.

Meanwhile, international soy oil prices rose for the eighth month in succession, fuelled by reduced export availabilities and prolonged strikes in Argentina, said FAO.

“Continued rising prices for sunflower seed oil stemmed from lingering global supply tightness owing to sharply reduced 2020/21 sunflower seed harvests.”

According to the FAO, its Dairy Price Index averaged 111.0 points in January, up 1.7 points (1.6 percent) from December 2020, rising for the eighth consecutive month and placing the index at 7.1 points (6.9 percent) above its value in the corresponding month last year.

It said in January, butter and whole milk powder (WMP) price quotations increased, underpinned by China’s high purchases in the wake of the country’s upcoming New Year holiday festivities amid seasonally lower exportable supplies in New Zealand.

Price quotations for skim milk powder (SMP) also rose, pressured by high import demand for spot supplies and lagging production activities in Western Europe.

On the other hand, cheese prices fell slightly from the highs registered in December 2020 due to limited internal sales in Europe, coupled with a stock build-up in the United States of America, said FAO.

The FAO Meat Price Index averaged 96.0 points in January, up 0.9 points (1.0 percent) from December 2020, marking the fourth consecutive monthly increase, but still down 7.6 points (7.3 percent) from the corresponding month last year.

“International price quotations for all meat types that constitute the index increased in January, with those of poultry meat rising the most, especially for Brazilian origins, underpinned by brisk global import demand while avian influenza outbreaks constrained poultry exports from several European countries,” said FAO.

Despite high purchases by China in the run-up to the country’s New Year celebrations, bovine and pig meat price quotations increased only slightly, as global supplies remained adequate to meet demand.

FAO said ovine (lamb and mutton) meat prices firmed for a fourth consecutive month, driven by tight supplies from Oceania and strong demand from China.

FAO said its Sugar Price Index averaged 94.2 points in January, up 7 points (8.1 percent) from December 2020 and reaching the highest level since May 2017.

FAO attributed the increase in prices mostly to concerns over lower global availabilities in 2020/21, following worsening crop prospects in the European Union, the Russian Federation and Thailand, and drier-than-normal weather conditions in South America.

“Further support to sugar prices was provided by recent increases in crude oil prices and the strengthening of the Brazilian Real against the US Dollar, which tends to affect shipments from Brazil, the world’s largest sugar exporter,” it said. Continued robust global import demand for sugar also supported prices, it added.

It said that the upward pressure on prices was somewhat limited by the large exportable supplies in India amid expectations of a bumper crop and the Government’s approval of export subsidies for the 2020/21 season.

WORLD CEREAL STOCKS SET TO FALL SHARPLY

Meanwhile, in a separate Cereal Supply and Demand Brief, FAO raised its forecast for global cereal production in 2020.

It said early prospects for this year point to a modest increase in wheat production in the northern hemisphere but a decline in maize production in the southern hemisphere.

FAO said its latest forecast for world cereal production in 2020 stands at nearly 2,744 million tonnes, up slightly (0.1 percent) from the previous report in December.

Among the major cereals, the forecast for world wheat production has been revised upward by 4.8 million tonnes to an all-time high of 766.5 million tonnes.

“The increase since the previous report rests mostly on better-than-expected yields that boosted production to its second highest level on record in both Australia and Canada while wheat production in Iraq is also lifted to reflect latest official estimates,” it said.

FAO also raised its forecast for world rice production in 2020 by 2.2 million tonnes, to 510.6 million tonnes, up 1.8 percent year-on-year and marking an all-time high.

FAO said that the revision mainly stems from better than previously anticipated 2020 yield out-turns in China (Mainland), the Philippines and Guinea, although upward, area-based, historical revisions were also introduced for the Democratic Republic of Congo and Venezuela.

In contrast, FAO trimmed its forecast for world coarse grains production by nearly 5 million tonnes, reflecting sizeable cuts to maize production estimates in the United States of America and Ukraine, owing to poor weather conditions that curtailed yields.

Looking ahead to the 2021 cereal output, FAO said that early production prospects for winter wheat crops in the northern hemisphere indicate a modest increase this year.

“In the United States of America, encouraged by higher prices, winter wheat acreage increased by 5 percent year-on-year. However, continued dry weather has partially curbed prospects, and field reports confirm inferior crop conditions compared to the average.”

In the European Union, conducive rainfall and mild temperatures, in combination with increased planted area, particularly in France, indicate a likely strong production recovery from the poor 2020 harvest, said FAO.

In the Russian Federation, 2021 winter wheat acreage is up on a yearly basis, surpassing initial expectations.

Although warm and dry weather in December raised the risk of winter-kill and possibly higher abandonment rates, heavy snowfall in January partly abated these concerns, said FAO.

In India, the area sown to wheat increased to a record level, underpinned by strong prices and continued government support, as well as satisfactory crop conditions, owing to well-distributed monsoon rains, which portend good yields in 2021, it added.

Optimistic conditions also prevail in Pakistan, where wheat sowings are above average, driven by government support, in the form of subsidized access to inputs, and higher crop prices.

Based on January field reports, FAO said wheat crop conditions in China are favourable and production in 2021 is expected to remain near average levels.

In Turkey, the leading producer in the Near East region, less-than-ideal weather conditions are constraining crop prospects.

In the southern hemisphere, FAO said that 2021 coarse grain crops are expected to be harvested from the second quarter of the year.

In Brazil, 2021 maize production is officially forecast at 102.3 million tonnes, slightly short of the 2020 record output but well above the five-year average.

“The outlook is based on a likely increase in the second season harvest that would offset a lower first-season crop due to dry conditions and reduced planted area,” said FAO.

Similarly, maize production in Argentina is set to decline in 2021 from the 2020 record level, due to rainfall deficits in main producing provinces, but is still foreseen at an above-average level, it added.

In South Africa, driven by better remunerative prices, maize plantings have increased and the production outlook has been further bolstered by favourable yield prospects owing to good rainfall, said FAO.

It added that production expectations in neighbouring countries are similarly favourable, though recent cyclones have increased the risk of crop losses.

Prompted by China’s unexpectedly large imports of maize so far this season, FAO said it decided to undertake a further review of its maize supply and demand balance sheet for China.

It said in addition to China’s substantial increase in maize imports, persistently higher domestic maize prices (as compared to international prices) on top of a swift recovery in pork production from the African swine fever (ASF) disease point to much higher feed utilization in China than earlier anticipated, and hence a much greater draw-down of stocks than earlier estimates suggested.

“Building on the official production and trade estimates, it was necessary to make balance corrections not only for the current season but also for previous seasons, starting from the 2013/14 marketing season,” said FAO.

Indeed, given China’s importance in terms of its share in global maize stocks and consumption, the adjustments also heavily effected FAO’s estimates for world utilization and stocks, it said.

FAO has now forecast world cereal utilization in 2020/21 at 2,761 million tonnes, following a 17.0 million-tonne upward revision to the December forecast.

At this revised level, it said the forecast for world cereal utilization is up 52 million tonnes (1.9 percent) from the previous season.

At 1,493 million tonnes, global coarse grain utilization in 2020/21 is forecast at 37 million tonnes (2.6 percent) above the previous season’s level and up as much as 16.6 million tonnes since December on greater-than-earlier- expected feed use, especially in China, it said.

FAO has forecast world utilization of maize in 2020/21 to reach 1,179 million tonnes, up 21.4 million tonnes (1.8 percent) from 2019/20, of which the year-on-year growth in feed use of maize in China is now projected at 5 percent, reaching 190 million tonnes, up 15.5 million tonnes from the previous forecast in December.

FAO said that its forecast for total utilization of wheat in 2020/21 has been lowered by 1.5 million tonnes from December, but, at 756 million tonnes, still stands at 5.4 million tonnes (0.7 percent) above the 2019/20 level.

“This month’s downward revision stems mostly from lower forecasts for feed use in the European Union as a result of high prices causing a substitution to other coarse grains for feed,” it said.

FAO has forecast global rice utilization in 2020/21 at 512.1 million tonnes, up 1.8 percent from 2019/20 and 1.9 million tonnes more than previously reported following upward revisions to food intake forecasts for the Americas and Africa and to feed use in China.

FAO said its new forecast for world cereal stocks stands at 802 million tonnes, down as much as 64.3 million tonnes from December and 17.8 million tonnes (2.2 percent) from their opening levels and the smallest in five years.

Following this month’s downward revision of 66.6 million tonnes (concerning mostly maize inventories and to a lesser extent also stocks of sorghum and other coarse grains), FAO said world coarse grain stocks will likely fall by 25 million tonnes (6.9 percent) from their opening levels, to reach 336 million tonnes.

The year-on-year contraction stems from a massive downward adjustment to maize inventories in China, which are now pegged at around 139 million tonnes, down nearly 54 million tonnes from the December forecast and 11.6 million tonnes below their opening levels, it said.

In addition to China, FAO said its forecasts for maize inventories in Argentina, the European Union, India, and, most significantly, the United States of America, were also trimmed since December.

In contrast to coarse grains, world wheat inventories are forecast to increase by 7.2 million tonnes (2.6 percent) above opening levels, reaching 284.3 million tonnes following an upward revision of 1.4 million tonnes from December, mainly on expectation of larger stocks in Australia and the Russian Federation, it added.

The bulk of the year-on-year increase in wheat stocks is seen in China, as excluding China, global wheat inventories are set to decrease for the third consecutive year, it said.

FAO has forecast world rice stocks at the close of 2020/21 at 181.9 million tonnes, on par with their opening levels and 800,000 tonnes more than anticipated in December.

It said that upward revisions to the stock forecast were introduced primarily for China this month, followed by Bangladesh, while carry-over expectations were cut namely for India and the United States of America.

FAO raised its forecast for world cereal trade in 2020/21 by as much as 10.6 million tonnes since December to 465.2 million tonnes, representing a hefty 25-million-tonne (5.7 percent) expected expansion from the previous season’s record high, with trade in all major cereals being foreseen to increase in 2020/21.

It said continued large purchases of maize and barley by China, to meet rising feed demand has pushed up the coarse grains 2020/21 (July/June) trade forecast by nearly 10 million tonnes since the previous forecast, now pegged at a record 232.3 million tonnes, up almost 22 million tonnes (10.2 percent) from last year’s level.

Maize imports by China have been revised up by 10 million tonnes since December to an all-time high of 20 million tonnes.

The revision reflects exceptionally large purchases in recent weeks, primarily from the United States of America, it said.

FAO said it has forecast world wheat trade in 2020/21 (July/June) at 184.5 million tonnes, nearly unchanged from December and similar to the 2019/20 estimated level.

This month’s major revisions include an upward adjustment of 1 million tonnes to China’s purchases, offsetting a cut of 1 million tonnes in imports by Iraq on higher domestic production in 2020 than had been predicted earlier, it added.

International trade in rice is anticipated to expand by 7.9 percent in 2021 (January-December) to 48.4 million tonnes, which is 800,000 tonnes more than forecast in December.

“The revision reflects prospects of continued strong growth in exports by India; while on the import side, it mirrors expectations of an upturn in purchases by the Far East, led by Bangladesh, following the approval of duty remissions by the country,” said FAO.

 


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