TWN Info Service on Sustainable Agriculture
14 October 2022
Third World Network

UN: Global food prices fall for the sixth consecutive month, says FAO
Published in SUNS #9664 dated 11 October 2022

Geneva, 10 Oct (Kanaga Raja) -- The international prices of a basket of key agricultural food commodities declined for the sixth month in a row in September, driven by a sharp fall in the prices of vegetable oils, the United Nations Food and Agriculture Organization (FAO) has said.

According to the FAO, its Food Price Index (FFPI) averaged 136.3 points in September 2022, down 1.5 points (1.1 percent) from August, marking the sixth monthly decline in a row.

FAO said the FFPI's decline in September was driven by a sharp fall in the international prices of vegetable oils and moderate decreases in those of sugar, meat and dairy products, more than offsetting a rebound in the cereal price sub-index.

"Despite the new decline, the FFPI remained 7.2 points (5.5 percent) above its value in the corresponding month last year," 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 147.8 points in September, up 2.2 points (1.5 percent) from August and 14.9 points (11.2 percent) above its September 2021 value.

"In September, international wheat prices rebounded by 2.2 percent, underpinned by heightened uncertainty about the Black Sea Grain Initiative's continuation beyond November and the potential impact on Ukraine's exports," said FAO.

Moreover, said FAO, concerns regarding dry conditions in Argentina and the United States of America, as well as a fast pace of exports from the European Union on top of the bloc's higher internal demand for wheat amid tighter maize supplies, provided further support to wheat prices.

International prices of coarse grains rose marginally (+0.4 percent) again in September, with mixed price trends, it added.

FAO said world maize prices were nearly stable (+0.2 percent) as a strong United States dollar countered pressure from a tighter supply outlook with further downgraded production prospects in the United States of America and the European Union amid uncertainty regarding Ukraine's exports.

"International barley prices declined by 3.0 percent, mostly reflecting improved harvest prospects in Australia and the Russian Federation, while world sorghum prices increased by 13.2 percent due to reduced production prospects in the United States of America."

According to the FAO, its Rice Price Index rose by 2.2 percent in September, with Indica prices spearheading this increase, rising in response to export policy changes in India, which fostered anticipation that buyers would turn to other rice suppliers.

FAO said marketing disruptions and production uncertainties stemming from severe floods in Pakistan added to the price firmness. Nevertheless, it said, demand was generally sluggish, thus capping increases in rice prices.

According to the FAO, its Vegetable Oil Price Index averaged 152.6 points in September, down 10.8 points (6.6 percent) month-on-month, marking the lowest level since February 2021.

The continued drop of the index reflected lower prices across palm, soy, sunflower and rapeseed oils. In September, international palm oil prices declined for the sixth consecutive month, largely driven by lingering heavy inventories that coincided with seasonally rising production in Southeast Asia, it said.

In the meantime, world soy oil quotations dropped moderately after a short-lived rebound in August in response to elevated export availabilities in Argentina, owing to sharply higher farmer sales, it added.

As for sunflower oil, FAO said international prices declined to a 14-month low due to increased export supplies from the Black Sea region amid subdued import demand.

It said world rapeseed oil prices also fell markedly, primarily due to prospective abundant global production in the 2022/23 season, adding that lower crude oil prices also contributed to the downward pressure on world vegetable oil prices.

According to FAO, its Dairy Price Index averaged 142.5 points in September, down 0.8 points (0.6 percent) from August, marking the third consecutive monthly decline, but remained 24.4 points (20.7 percent) above its value a year ago.

In September, international prices of all dairy products declined moderately, to a great extent reflecting the impact of the weaker Euro against the US dollar in world dairy prices (expressed in US dollars), it said.

FAO said that limited market demand for medium-term deliveries due to apprehensions over market uncertainties stemming from tight milk production, high energy costs and labour shortages, especially in Europe, coupled with bleak global economic growth prospects, also weighed on international dairy price quotations.

Meanwhile, demand for spot supplies remained robust, especially from Asia, it added.

According to FAO, its Meat Price Index averaged 121.4 points in September, down 0.6 points (0.5 percent) from August, also registering the third consecutive monthly decline, but still 8.7 points (7.7 percent) above its value in the corresponding month last year.

FAO said that in September, international price quotations for ovine (lamb and mutton) meat declined the most, underpinned by the impacts of currency movements.

It said bovine meat prices also fell on high export availabilities from Brazil and elevated cattle liquidation in some producing countries.

"Meanwhile, poultry meat prices fell marginally as world import purchases remained subdued, notwithstanding constrained export supplies from some large exporting countries amid avian influenza outbreaks," it added.

On the other hand, world pig meat prices increased further, reflecting the supply shortfall of slaughter-ready pigs in the European Union, it said.

According to FAO, its Sugar Price Index averaged 109.7 points in September, down 0.8 points (0.7 percent) from August, marking the fifth consecutive monthly decline and reaching its lowest level since July 2021.

It said the September decline was mostly related to the good production prospects in Brazil, the world's largest sugar exporter, with rains benefiting yields of standing crops and lower ethanol prices prompting a greater use of sugarcane to produce sugar.

"The weakening of the Brazilian real against the United States dollar exerted further downward pressure on world sugar prices while encouraging greater exports."

FAO said that although the favourable production outlook for the 2022/23 season contributed to lowering prices, prevailing overall tight global sugar supplies limited the month-on-month price decline.

LOWER FORECASTS FOR CEREAL OUTPUT, STOCKS & TRADE

Meanwhile, in a separate Cereal Supply and Demand Brief, FAO said that pegged at 2,768 million tonnes, its latest forecast for global cereal production in 2022 has been lowered for a second consecutive month, down 5.9 million tonnes from September and now 1.7 percent below the 2021 out-turn.

It said that a lower global coarse grain production forecast makes up the bulk of this month's overall cut-back, as adverse weather continued to curb yield prospects in major producing countries.

Standing at 1,468 million tonnes, the 2022 world coarse grain production forecast is 14.3 million tonnes lower month-on-month and down 2.8 percent year-on-year, it added.

Most of the monthly decrease is linked to reduced maize production prospects in the United States of America, as deficient rainfall resulted in further cuts to maize yield estimates and a small downward revision to the area planted, it said.

FAO said that its forecasts for maize production in the European Union and the Republic of Moldova were also lowered, albeit by smaller amounts, as the drier-than-usual conditions that have characterized the season resulted in additional reductions to yield expectations.

FAO said in Brazil, maize production was cut moderately based on recently released official data. However, the national output remains at a record high.

"Partly offsetting these downward adjustments, the forecast for global barley production was raised by 2.5 million tonnes, mostly to reflect better prospects in the Russian Federation, and now stands at 147.9 million tonnes, 1.7 percent higher on a yearly basis."

In Ukraine, the production forecast for coarse grains remains unchanged from last month at 33.1 million tonnes, 38 percent lower year-on-year, said FAO.

Following a 1.7 million tonne reduction since September, world rice production in 2022 is now seen in the order of 512.8 million tonnes (milled basis), down 2.4 percent from the 2021 all-time high, but still an above-average crop.

The revision primarily stems from more subdued output prospects in China, where prolonged summer dryness and high temperatures affected crops along the Yangtze River basin, and in Pakistan, on account of the recent severe flooding, said FAO.

It said combined with smaller downward revisions for other countries, these cuts outweighed raised forecasts for production in the Islamic Republic of Iran, Thailand and a few West African producers.

In contrast to the coarse grain and rice outlooks, FAO said that the global wheat production forecast for 2022 was raised since September by 10.2 million tonnes and is now expected to reach a new record high of 787.2 million tonnes, up 1.0 percent from last year.

"Better-than-expected harvest results in the European Union, predominantly related to improved yields of the soft wheat crop, and in the Russian Federation, owing to conducive weather, represent the largest proportion of this month's increase."

Good soil moisture at planting time and a favourable rainfall outlook have also bolstered Australia's production outlook, pointing to a potential second largest wheat output on record in 2022, following the all-time high in 2021, said FAO.

It said these revisions more than offset a minor cut to Argentina's wheat forecast, where limited rainfall amounts to slightly degraded crop conditions, portending to potentially lower yields.

"In Ukraine, the wheat production estimate remains the same this month at 20 million tonnes, also 38 percent down from the preceding year."

FAO said it has forecast world cereal utilization in 2022/23 at 2,784 million tonnes, down 8.7 million tonnes since September and 0.5 percent below the 2021/22 level.

It said in line with the reduced production forecasts, this month's downward revision is led by a 6.4-million-tonne cut in the coarse grains utilization forecast, which is now pegged at 1,491 million tonnes, down 0.6 percent from the previous season's level, stemming almost entirely from a foreseen reduction in feed use.

"Maize feed use is seen falling especially in the European Union and the United States of America, where supplies are tighter due to reduced domestic harvests, as well as in Canada, reflecting a retreat from last season's elevated level to compensate for tighter supplies of other grains."

FAO said feed use of barley is also forecast to fall in 2022/23, mostly on lower feed use in Morocco as a result of lower production, while an expected fall in China makes up the bulk of a forecast decline in global sorghum feed use.

FAO has also lowered its forecast for world rice utilization in 2022/23 by 3.6 million tonnes since September, to 518.6 million tonnes.

This level would represent a 0.7 percent decline from the 2021/22 peak, reflecting expectations of non-food uses of rice declining from the above-normal levels registered the previous season, while food intake should largely keep pace with population growth, it said.

Forecast at 774 million tonnes, FAO said that total wheat utilization is foreseen to remain near the 2021/22 level following an upward revision of 1.3 million tonnes since September, driven by higher-than-previously-expected feed use of wheat in the European Union, as tighter supplies and higher domestic prices of maize are seen shifting demand to wheat.

Despite an upward revision of 2.9 million tonnes this month, FAO said world cereal stocks by the close of seasons in 2023 are still forecast to contract by 1.6 percent below their opening level, down to 848 million tonnes.

The anticipated fall in total cereal stocks is mainly attributed to a forecast 5.4 percent decline in global coarse grain inventories from their opening levels, to 352 million tonnes, down 2.9 million tonnes since the previous forecast, it said.

"Global maize stocks in particular are seen headed toward a sharp contraction of 5.3 percent in 2022/23, led by large maize inventory draw-downs anticipated in the European Union and the United States of America due to falls in production, as well as in China on account of higher expected domestic feed use of maize."

A 2.1 million tonne upward revision since September has raised FAO's forecast for world rice stocks at the end of the 2022/23 marketing year to 193.1 million tonnes, it said.

"At this level, they would be down 1.8 percent from the 2021/22 all-time high, but still the third largest on record."

This relative abundance is anticipated to be sustained by some forecast build-ups in China and India. The outlook is less buoyant elsewhere, with aggregate reserves held by all other countries seen falling 8.2 percent year-on-year to a three-year low of 50.1 million tonnes, said FAO.

In contrast to expectations for coarse grains and rice, FAO said global wheat inventories are forecast to rise by 3.2 percent above their opening levels, to reach 303 million tonnes, up 3.6 million tonnes since the previous forecast.

"Better production prospects have lifted prospects for higher wheat inventories in the Russian Federation, where, along with Canada, China and Ukraine, much of the projected wheat inventory growth is likely to be concentrated."

FAO said its forecast for global cereals trade in 2022/23 was lowered this month by 2.3 million tonnes, down to 467 million tonnes, pointing to a 2.4 percent decline from the 2021/22 level, with foreseen contractions in trade of all major cereals.

Coarse grains trade in 2022/23 (July/June) is seen declining by 3.0 percent from 2021/22, to 222 million tonnes, nearly unchanged since the previous forecast, it added.

"Global maize trade is likely to drop only marginally (0.5 percent) below the 2021/22 level, reflecting lower import demand from China in particular, and a fall in exports from Argentina, Ukraine and the United States of America."

According to the FAO, while smaller maize harvests underpin the decline in the export forecasts for all three major exporters, additionally, domestic inflation-control measures in Argentina, the impact of the war-related disruptions in Ukraine and uncompetitive prices due to a strong US dollar are also seen hindering the sales for each country, respectively.

FAO said lower import demand from China, along with smaller barley purchases by Turkey on account of higher production, is also a main driver behind the forecast declines in global trade of barley and sorghum in 2022/23, down, respectively, 13.5 percent and 14.0 percent from their 2021/22 levels.

On the export side, FAO said that lower production is seen leading to a fall in exports of sorghum from the United States of America and of barley from Argentina and Ukraine, in addition to export capacity limitations related to the war in the latter.

While nearly unchanged from last month, world wheat trade is forecast to fall in 2022/23 (July/June) by 1.9 percent below the 2021/22 record level to 192 million tonnes, it added.

It said that expected declines in wheat exports from Argentina, India and especially Ukraine from their previous season's levels will likely outweigh foreseen greater shipments by Canada, the European Union and the Russian Federation, boosted by higher supplies.

On the import side, it said higher production is seen reducing purchases by China, the Islamic Republic of Iran and Kazakhstan.

FAO has now predicted international trade in rice to subside somewhat in 2023 (January/December) at 53.0 million tonnes, down 1.4 percent from the 2022 forecast level, reflecting the somewhat tighter exportable availabilities, combined with uncertainties surrounding trade policies and currency movements in importing countries. +