TWN Info Service on Sustainable Agriculture
12 April 2023
Third World Network

UN: Global food prices fall for twelfth month in a row, says FAO
Published in SUNS #9761 dated 11 April 2023

Penang, 11 Apr (Kanaga Raja) — The international prices of a basket of key agricultural food commodities fell for the twelfth consecutive month in March, mainly due to drops in the prices of cereals, vegetable oils and dairy products, the UN Food and Agriculture Organization (FAO) has said.

According to the FAO, its Food Price Index (FFPI) averaged 126.9 points in March 2023, down 2.8 points (2.1 percent) from February, marking the twelfth consecutive monthly decline since reaching its peak one year ago.

During the past twelve months since March 2022, the index has fallen by as much as 32.8 points (20.5 percent), it said.

“The decline in the index in March was led by drops in the cereal, vegetable oil and dairy price indices, while those of sugar and meat increased,” FAO added.

“While prices dropped at the global level, they are still very high and continue to increase in domestic markets, posing additional challenges to food security. This is particularly so in net food importing developing countries, with the situation aggravated by the depreciation of their currencies against the USA dollar or the Euro and [a] mounting debt burden,” said FAO Chief Economist Maximo Torero.

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 138.6 points in March, down 8.2 points (5.6 percent) from February and 31.6 points (18.6 percent) below its level one year ago.

“This month’s decrease reflects a fall in international prices of all major cereals,” it said.

International wheat prices fell the most, by 7.1 percent, driven by ample global supplies and strong competition among exporters, it added.

The extension of the Black Sea Grain Initiative, allowing Ukraine to continue to export from its Black Sea ports, also contributed to the decline, said FAO.

“Higher estimates for Australia’s production, along with improved crop conditions in the European Union this month, boosted the global supply outlook further.”

“Strong competition from the Russian Federation, where high supplies continue to support competitive prices, also sustained the downward pressure on markets,” it added.

World maize prices also fell, by 4.6 percent, in March, pressured by seasonal availability from harvests in South America, expectations of a record output in Brazil, and the extension of the Black Sea Grain Initiative, it said.

FAO also said among other coarse grains, world prices of barley and sorghum declined by 6.7 percent and 5.7 percent, respectively, influenced by spillover from weakness in international maize and wheat markets.

“International rice prices eased by 3.2 percent in March, weighed by ongoing or imminent harvests in major exporting countries, including India, Viet Nam and Thailand.”

According to FAO, its Vegetable Oil Price Index averaged 131.8 points in March, down 4.1 points (3.0 percent) from February and standing as much as 47.7 percent below its level a year ago.

It said the decrease in the index was the net result of lower soy, rapeseed and sunflower oil quotations more than offsetting higher world palm oil prices.

After falling for three consecutive months, international palm oil prices rebounded in March, it added.

It said besides lower output levels in Southeast Asia due to unfavourable weather and flooding in some growing regions, palm oil prices received further support from limited global exportable supplies amid temporary export restrictions imposed by Indonesia.

On the other hand, FAO said that world soy oil prices continued to fall, following the trend of lower international soybean quotations.

In the meantime, it added, rapeseed and sunflower oil prices also kept declining, underpinned by, respectively, ample world supplies and subdued global import demand.

According to the FAO, its Dairy Price Index averaged 130.3 points in March, down 1.1 points (0.8 percent) from February and standing 15.6 points (10.7 percent) below its level in the corresponding month a year ago.

“The decline in March was driven by lower price quotations for cheese and milk powders, while butter prices increased,” it said.

It also said the decline in the international price quotations for cheese was underpinned by slower purchases by most leading importers in Asia amid increased export availabilities, including inventories, in leading exporters.

Milk powder prices fell for the ninth consecutive month, primarily reflecting sluggish import demand, especially for near-term deliveries, and seasonally rising milk production in Western Europe, it added.

On the other hand, FAO said that butter prices increased due to solid import demand, especially from North and Southeast Asian countries, for supplies from Oceania, where seasonally falling milk production tracked slightly below trend levels.

According to the FAO, its Meat Price Index averaged 113.0 points in March, slightly up (0.9 points and 0.8 percent) from February but down 6.3 points (5.3 percent) from one year ago.

In March, price quotations for bovine meat increased, influenced by rising internal prices in the United States of America, where cattle supply is expected to be lower in the months ahead, it said.

Pig meat prices increased slightly, mainly due to higher prices in Europe on the continued supply limitations and increased pre-Easter demand, it added.

In contrast, FAO said poultry meat prices fell for the ninth successive month on subdued global import demand, despite supply challenges amid widespread avian influenza outbreaks in several large exporting countries.

FAO added that ovine (lamb and mutton) meat prices also averaged lower, reflecting a downward adjustment from the high prices registered in February, driven by increased pre-Easter demand and the impact of exchange rate movements.

According to the FAO, its Sugar Price Index averaged 127.0 points in March, up 1.8 points (1.5 percent) from February, marking the second consecutive monthly increase and reaching its highest level since October 2016.

“The increase in prices mostly resulted from concerns over lower global availabilities of sugar in the 2022/23 season, following declining production prospects in India, Thailand and China,” it said.

However, it added that the positive outlook for the sugarcane crops in Brazil, about to be harvested, limited the upward pressure on world sugar prices.

FAO said that the decline in international crude oil prices, encouraging a greater use of sugarcane to produce sugar in Brazil, coupled with the weakening of the Brazilian real against the United States dollar, contributed to limiting the month-on-month increase in world sugar prices.

PROSPECTS FOR CROP PRODUCTION & TRADE

Meanwhile, in a separate Cereal Supply and Demand Brief, FAO said that its latest forecast for world cereal production in 2022 has been lifted marginally to 2,777 million tonnes, albeit remaining 1.2 percent lower year- on-year.

The latest increase, with almost all of the 2022 crop harvested, reflects minor upward revisions to coarse grain estimates for production in Australia and Ukraine, it added.

It said that global rice production figures have undergone a small (0.6 million tonne) downward revision since March, largely due to official lower estimates of the Indonesian harvest concluded last December.

“This reduction outweighed an upgrade to output prospects for Cambodia, reflecting a strong pace of plantings during the ongoing dry-season cycle.”

As a result, it said world rice production in 2022/23 is now pegged at 516.0 million tonnes (milled basis), down 1.6 percent from the 2021/22 record high, but still an above-average harvest.

FAO has forecast world cereal utilization in 2022/23 at 2,779 million tonnes, down 1.0 million tonnes since the last report and still pointing to a decline of 0.7 percent from the 2021/22 level.

Lower anticipated feed use of maize, especially in the European Union as well as minor adjustments made for several importing countries on account of smaller expected imports, is the main driver behind this month’s 1.5- million-tonne downward revision to global coarse grain utilization, it said.

Now pegged at 1,479 million tonnes, global coarse grain utilization in 2022/23 is forecast to fall by 1.6 percent below the 2021/22 level, it added.

FAO said global wheat utilization is pegged at 780 million tonnes, fractionally up this month, reflecting higher than previously anticipated feed use of wheat in China, and now 0.9 percent above the 2021/22 level.

FAO said its forecast for world rice utilization in 2022/23 has changed little since March, pointing to global rice use amounting to 519.9 million tonnes, just 0.3 percent less than the 2021/22 peak.

FAO said it raised its forecast for world cereal stocks by the close of the 2023 seasons by 5.8 million tonnes, to 850 million tonnes, but still pointing to a decline of 0.3 percent below their opening levels.

Based on the latest forecasts, FAO said that the world cereal stocks-to-use ratio in 2022/23 would stand at 29.7 percent, still indicating an overall comfortable level although down slightly from 30.7 percent in 2021/22.

“Global coarse grain stocks are still seen heading for a 4.3 percent fall from their opening levels despite a 2.2- million-tonne upward revision this month.”

Most of this month’s upward revision reflects expectations of higher maize stocks in major maize exporting countries as a result of lower export prospects for Argentina and the United States of America and an upward revision to the production estimate in Ukraine, said FAO.

FAO said it also raised its forecast for global wheat stocks this month, by 3.9 million tonnes, further amplifying the anticipated rise above the opening levels to 5.3 percent.

“Similar to coarse grains, this month’s upward revision to wheat stocks is also concentrated in major exporters, including Australia (due to a higher production estimate), the European Union (official balance revisions), and the Russian Federation (due to lower export expectations).”

FAO said it has forecast world rice stocks at the close of 2022/23 marketing seasons at 194.1 million tonnes, 2.4 million tonnes below the 2021/22 record high.

This level would be sufficient to cover 4.4 months of prospective global consumption, largely due to prospects of Asian reserves remaining at near-record levels, thanks, namely, to expected stock rebuilding in India, it added. However, FAO reported that “carry-over prospects are more downcast for other regions.”

It said this would be especially so for Latin America and the Caribbean and Africa, owing to decreased outputs witnessed in South America and Eastern Africa, but also due to reduced import prospects for countries such as Ghana, Ethiopia and Senegal.

Forecast at 469 million tonnes, FAO said that world trade in cereals in 2022/23 is predicted to fall by 2.7 percent below its 2021/22 level following a 4.1-million-tonne downward revision this month.

It said this revision stems from a 6.1-million-tonne cut to the world coarse grain trade forecast for 2022/23, now pegged at 217 million tonnes, down 6.1 percent from 2021/22.

“Foreseen smaller maize sales from Argentina and the United States of America, both based on sluggish export pace, outweighed larger than anticipated exports by Brazil,” it added.

Along with reduced purchases by several countries on the import side, these revisions resulted in a 4.9-million- tonne cut this month to the global maize trade forecast, now pointing to a 3.0 percent decline from the 2021/22 level, said FAO.

Slow sales of sorghum by the United States of America underpinned a 1-million-tonne downward revision to the global sorghum trade forecast, now 36 percent below the 2021/22 level, it added.

On the other hand, FAO said that its global wheat trade forecast for 2022/23 has been raised this month by 1.6 million tonnes, mostly reflecting stronger than previously anticipated demand from China and larger sales by Australia and Kazakhstan, and is set to reach an all-time high of 199 million tonnes, up 1.9 percent from 2021/ 22.

As for world trade in rice in 2023 (January-December), FAO said improved domestic supply prospects lowered its forecast for imports by Bangladesh.

However, it said this reduction was outweighed by an upgrade to Indonesia’s import outlook, consistent with the country’s ongoing efforts to reconstitute state stockpiles and ease inflationary pressure.

As a result, international trade in rice in 2023 is now forecast at 53.1 million tonnes, 0.5 million tonnes more than predicted in March but still down 5.2 percent from the 2022 record level, it added.

CROP PROSPECTS FOR 2023

Looking ahead, FAO said its forecast for world wheat production in 2023 has been raised marginally compared to preliminary expectations in March and now stands at 786 million tonnes, which would be the second largest out-turn on record and only 1.3 percent below the 2022 level.

FAO said that in the European Union, wheat production is seen increasing moderately year-on-year due to an expansion in plantings and generally good conditions at the start of spring, notwithstanding dryness in parts of Italy, Portugal and Spain.

In the Russian Federation, although dry conditions in southwestern parts of the country eased, a decline in winter wheat plantings is expected to constrain production in 2023, it added.

FAO said in Ukraine, the economic impacts of the war, including low farm-gate prices, dissuaded many farmers from planting wheat.

“As a result, in addition to pockets of dryness in the southeast, a well below-average wheat harvest is forecast for 2023.”

In the United States of America, with recent rains providing some relief to dry conditions in key wheat areas of the Central Plains and winter sowings up year-on-year, production is forecast to exceed the drought-reduced out-turn in 2022, said FAO.

In Canada, resting on expectations of an upturn in plantings, wheat production in 2023 is projected to increase year-on-year, it added.

FAO said that in Asia, despite heatwaves during March in northern India, the 2023 wheat harvest is forecast to exceed the five-year average underpinned by a near-record sown area and favourable weather until February.

“Similarly, generally good crop conditions have prevailed in Pakistan and production is anticipated to exceed the five-year average.”

FAO said that in Near East Asian countries, following uneven precipitation during the first months of the season, good rains in recent months improved crop conditions, including in Turkiye and Iran, both significant producers.

“In North Africa, rainfall deficits in Algeria, Tunisia and, albeit to a lesser degree, Morocco, are resulting in below-average wheat harvest expectations for 2023, following the already low out-turns in 2022.”

FAO noted that south of the equator, planting of the main season maize crop is nearly complete in Brazil and the sown area is expected at an all-time high, underpinned by robust export demand.

Consequently, and also reflecting conducive weather conditions, maize production is forecast at a record high in 2023, it said.

In Argentina, prolonged dry conditions have adversely affected maize crops, eroding production prospects, FAO added.

In South Africa, good yield prospects following beneficial weather point to a year-on-year increase in production, potentially reaching the second highest level on record in 2023, it further said. +