THIRD WORLD NETWORK INFORMATION SERVICE ON SUSTAINABLE AGRICULTURE

United Nations: Food commodity prices continue to rise, says FAO
Published in SUNS #9343 dated 10 May 2021

Geneva, 7 May (Kanaga Raja) – The international prices of a basket of key agricultural food commodities rose for the eleventh consecutive month in April, mainly driven by strong increases in prices for sugar, the United Nations Food and Agriculture Organization (FAO) has said.

According to the FAO, its Food Price Index (FFPI) averaged 120.9 points in April 2021, 2.0 points (1.7 percent) higher than in March and as much as 28.4 points (30.8 percent) above the same period last year.

The increase marked the eleventh consecutive monthly rise in the value of the FFPI to its highest level since May 2014, said FAO.

“The April rise was led by strong increases in the prices of sugar, followed by oils, meat, dairy and cereals,” 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 125.1 points in April, up 1.5 points (1.2 percent) from March, resuming its climb after a short-lived one month respite in March, and stood at 25.8 points (26.0 percent) above its April 2020 level.

Upward pressure from smaller-than-anticipated planting intentions in the United States of America (USA) and concerns about crop conditions in Argentina, Brazil and the USA pushed maize prices up 5.7 percent in April, said FAO.

“With overall tightening maize supplies, on top of continued strong demand, maize prices stood 66.7 percent above their values one-year-earlier and remain at their highest level since mid-2013.”

International barley and sorghum prices continued to soften, falling 1.2 and 1.0 percent in April, but remained 26.8 and 86.5 percent above their respective values in the corresponding month last year.

International wheat prices were generally steady in April, remaining over 17 percent above their April 2020 values, said FAO.

While wheat quotations received support from rising maize prices, along with crop condition concerns in the USA and several countries in Europe, the expectations for good global production prospects kept prices generally stable.

On the other hand, international rice prices decreased again in April, mainly reflecting currency movements and slow trading activities, with persistent logistical constraints and freight costs continuing to hinder fresh deals, said FAO.

The FAO Vegetable Oil Price Index averaged 162.0 points in April, up 2.9 points (1.8 percent) month-on-month, driven by rising soy, rapeseed and palm oil quotations more than offsetting lower sunflower oil values.

“International palm oil prices continued to rise in April on concerns over slower-than-expected production growth in major exporting countries,” said FAO.

FAO said soy and rapeseed oil values also climbed, underpinned by, respectively, firm global demand, including from bio-diesel producers, and protracted global supply tightness.

On the other hand, international prices of sunflower oil contracted moderately on demand rationing, it added.

According to FAO, its Dairy Price Index averaged 118.9 points in April, up 1.4 points (1.2 percent) from March, rising for the eleventh consecutive month and lifting the index 24.1 percent above its value a year ago.

In April, butter quotations rose, underpinned by solid import demand from Asia, notwithstanding weaker internal demand in Europe, it said.

“Skim milk powder prices increased due to high import demand from East Asia, induced partly by concerns over potential shipping delays amid limited spot supplies from Europe and Oceania.”

Cheese prices also increased due to high demand from Asia, amid lower-than-expected production in Europe and seasonally declining supplies from Oceania.

In contrast, quotations for whole milk powder declined slightly, reflecting lower import demand for the available supplies, following significantly high volumes traded recently, said FAO.

According to the FAO, its Meat Price Index averaged 101.8 points in April, up 1.7 points (1.7 percent) from the slightly revised value for March, marking a seventh consecutive monthly increase and raising the index by 5.1 percent above the corresponding month last year.

In April, bovine and ovine (lamb and mutton) meat quotations rose, underpinned by solid demand from East Asia, amidst tight supplies from Oceania due to ongoing herd rebuilding and low inventories, it said.

“Elevated internal sales in some producing regions also supported bovine and ovine meat prices.”

According to FAO, pig meat quotations firmed on continued high purchases by East Asia, despite increased overall shipments from the European Union, while Germany continued to have no access to the Chinese market over African swine fever concerns.

Meanwhile, poultry meat prices remained steady, reflecting generally balanced global markets, it said.

The FAO Sugar Price Index averaged 100.0 points in April, up 3.8 points (3.9 percent) from March and reaching levels nearly 60 percent above those registered in the corresponding month last year.

“The April rebound in international sugar price quotations was prompted by strong buying amid heightened concerns over tighter global supplies in 2020/21, due to the slow harvest progress in Brazil and frost damage in France,” said FAO.

Further support was provided by the strengthening of the Brazilian Real against the US Dollar, which tends to affect shipments from Brazil, the world’s largest sugar exporter, it added.

However, the upward pressure on prices was somewhat limited by prospects of large exports from India and the slight decline in crude oil prices, said FAO.

GLOBAL CEREAL MARKETS TIGHTEN

Meanwhile, in a separate Cereal Supply and Demand Brief, FAO raised its forecast for global cereal production in 2020 by 1.7 million tonnes this month to 2,767 million tonnes, 2.1 percent above the 2019 output.

The month-on-month increase almost entirely reflects upward revisions to coarse grain output forecasts in several countries in Africa, it said.

As for rice, officials in the Democratic People’s Republic of Korea and Guinea indicated lower production turnouts than previously foreseen by the FAO, outweighing an upgrade for Madagascar and resulting in a slight downward revision to the 2020 global rice production forecast, which nonetheless remains set at an all-time record high, it added.

FAO raised its forecast for world cereal utilization for 2020/21 by 6.0 million tonnes from the April figure to 2,783 million tonnes, an increase of 2.7 percent from the 2019/20 level.

FAO said that this month’s increase stems mainly from a 4.2-million-tonne upward revision to the 2020/21 maize utilization forecast, largely reflecting greater than earlier anticipated feed uses in China and the United States of America (USA).

“This upward revision brings the forecast for total utilization of coarse grains to 3.4 percent above the 2019/20 level.”

China is expected to account for nearly 60 percent of the year-on-year anticipated growth in the feed use of coarse grains.

Nearly unchanged this month, total wheat utilization in 2020/21 is forecast to exceed the previous season’s level by 1.7 percent, with an expected rise in feed use as the primary driver, for the first time since 2011/12 and almost entirely occurring in China, said FAO.

FAO said its forecast for world rice utilization in 2020/21 is changed only fractionally from April’s expectations, now pointing to a 1.9 percent annual expansion and a record high level, underpinned by an anticipated expansion in food uses and a recovery in feed uptake.

FAO revised downwards its forecast for world cereal stocks by the close of the 2021 seasons by 2.8 million tonnes to 805 million tonnes, representing a decline of 2.3 percent from their opening levels.

As a result of this downward revision, on top of the higher utilization expectations, the global cereals stocks-to-use ratio would stand at 28.3 percent, down from 29.6 percent in 2019/20 and hitting a seven-year low, it said.

FAO cut its forecast for global coarse grain stocks by 4.1 million tonnes from last month’s report, now falling 7.4 percent below opening levels largely on a likely draw-down of maize inventories in the USA and China.

A slight upward revision to world wheat inventories since last month has lifted the forecast to 2.8 percent above the opening level, with over 40 percent of the year-on-year increase foreseen to occur in China.

FAO said following a 400,000 tonne upward revision, world rice stocks at the close of 2020/21 are seen on-par with their opening levels, as anticipated draw-downs in Bangladesh, China and Indonesia, primarily, will likely be compensated by expected build-ups in India, Thailand and the USA.

FAO has forecast world trade in cereals in 2020/21 to reach 467 million tonnes, up only marginally from April but representing a year-on-year expansion of 5.9 percent.

It said its forecast for global coarse grains trade in 2020/21 (July/June) is largely unchanged since last month and still points to a robust increase of 9.2 percent above the 2019/20 level, mostly due to likely record purchases of maize and barley by China.

FAO has forecast global wheat trade in 2020/21 (July/June) to increase by 2.0 percent from the 2019/20 estimated level, supported by year-on-year expected increases in imports by China, Morocco, and Pakistan.

Meanwhile, FAO said its forecast for world rice trade in 2021 (calendar year) is essentially unchanged since April but 6.4 percent above the 2020 level.

OUTLOOK FOR WHEAT IN 2021/22

FAO said it has lowered this month its prospects for global wheat production in 2021, with its latest forecast now standing at 778.8 million tonnes, albeit still 4 million tonnes (0.5 percent) more than the 2020 production estimate.

“The cut to the global production forecast is mostly related to the European Union (EU), where a smaller than previously expected planted area resulted in a 4-million-tonne decrease to the earlier forecast,” it said.

Nevertheless, the EU’s output is still anticipated to increase by 6 percent on a yearly basis to 133.3 million tonnes and, along with favourable outlooks in the United Kingdom, USA, and Ukraine, is underpinning the overall positive global production outlook for this year, it added.

FAO has forecast global wheat utilization in the 2021/22 marketing season to rise by 0.9 percent to 770 million tonnes on anticipated year-on-year growth in food consumption and industrial use.

It said food consumption is forecast to increase mostly in line with population growth, while India and the United Kingdom are forecast to lead the way in increasing industrial use of wheat in 2021/22.

On the other hand, FAO said that feed use of wheat is likely to contract from its estimated record level in 2020/21 primarily on expectations of less feed use of wheat in China, where potentially more attractive prices of maize and other coarse grains could encourage substitution away from wheat for feed.

FAO said its preliminary forecast for world wheat stocks by the close of seasons in 2022 is pegged at a record level of 293 million tonnes, up 3.0 percent above their opening levels.

“Wheat inventories in China are forecast to rise further in 2021/22, accounting for the bulk of the anticipated increase in global stocks, along with anticipated rebounds in the EU’s and Ukraine’s stocks following consecutive years of tight supplies,” it said.

On the other hand, wheat inventories in the USA, the Russian Federation, as well as several countries in Africa and Asia, are expected to drop below their opening levels.

At the regional level, said FAO, wheat stocks are set to decline in Asia (excluding China) and Africa, where stocks are expected to reach their lowest levels since 2012/13.

FAO said following the 2020/21 (July/June) expected trade expansion to a record level, wheat trade in 2021/22 could contract by 1.8 percent, to 185 million tonnes.

“Early indications point to smaller purchases by China as well as Morocco and Pakistan, following a year of high imports and good domestic supply prospects.”

On the export side, said FAO, larger shipments anticipated from Argentina and the EU, supported by increased harvest expectations, are seen to be offset by reduced sales from Australia, Canada and the Russian Federation, on lower production prospects, as well as from the USA due to tighter supplies from low carry-over stocks and greater expected feed use.

Nevertheless, the Russian Federation is expected to remain the world’s leading wheat exporter in 2021/22, it added.

PROSPECTS FOR COARSE GRAINS PRODUCTION

FAO said early prospects for global coarse grains production in 2021 indicate a third consecutive year of growth, mostly related to maize.

“Driving the expected increase is the USA where, despite some recent un-conducive weather that has impeded planting operations, a price-induced acreage expansion is expected to support a substantial production upturn in 2021.”

Larger year-on-year outputs are also foreseen in Brazil, China and the Ukraine, on account of increases in planted areas, and in the EU, reflecting a likely recovery in yields in several countries, it added.

Sizeable production increases are also forecast in South Africa and neighbouring countries, further reinforcing the positive global growth prospects for coarse grains, said FAO.