Global food prices fall for 11th consecutive month, says FAO

Food shop, Photo courtesy Gabriella Clare. Unsplash

Penang, 17 Mar (Kanaga Raja) — The international prices of a basket of key agricultural food commodities fell for the eleventh consecutive month in February, mainly due to significant drops in the prices of vegetable oils and dairy products, the UN Food and Agriculture Organization (FAO) has said.

According to FAO, its Food Price Index (FFPI) averaged 129.8 points in February 2023, marginally down (0.6 percent) from January, continuing the downward trend for the eleventh consecutive month.

With the latest decline, the index has fallen 29.9 points (18.7 percent) from the peak it reached in March 2022, said FAO.

“The marginal decline of the FFPI in February reflected significant drops in the price indices of vegetable oils and dairy, together with fractionally lower cereals and meat indices, more than offsetting a steep rise in the sugar price index,” 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 147.3 points in February, down fractionally (0.1 percent) from January and 2.0 points (1.4 percent) above its level one year ago.

After falling for three consecutive months, international wheat prices rose marginally (0.3 percent) in February, it said.

“The slightly firmer tone mostly reflected ongoing concerns over dry conditions in key production areas of Hard Red Winter wheat in the United States of America, and robust demand for supplies from Australia, while strong competition among exporters helped to cap price gains.”

FAO said that world maize prices changed little, up just 0.1 percent month-on-month.

Support stemmed from worsening conditions in Argentina, and planting delays for the second maize crop along with a strong export pace in Brazil, while low demand for supplies from the United States of America weighed on maize export prices, it added.

On the other hand, FAO said among other coarse grains, world prices of sorghum were down fractionally (0.2 percent), while barley prices declined slightly (0.9 percent) in February, mostly attributed to higher seasonal availability in the southern hemisphere.

FAO said that international rice prices eased by 1.0 percent in February, as trading activities in most major Asian exporters slowed, while their national currencies depreciated against the United States dollar.

It said this was especially the case in Thailand, where the baht weakened from the ten-month highs it reached in January, contributing to the reversal of most of the price increases registered in January.

The FAO’s Vegetable Oil Price Index averaged 135.9 points in February, down 4.5 points (3.2 percent) from January and marking the lowest level since the beginning of 2021.

“The continued weakness of the index was driven by lower world prices across palm, soy, sunflower seed and rapeseed oils.”

International palm oil prices dropped for the third consecutive month in February, chiefly weighed by lingering sluggish global import demand, despite seasonally lower production from major growing regions in Southeast Asia, said FAO.

Meanwhile, FAO said world soy oil prices also continued to decline, underpinned by softened purchases from key importing countries and prospects of rising outputs from South America.

As for sunflower and rapeseed oils, world quotations remained on a downward trajectory, depressed by their abundant global exportable availabilities, it added.

According to FAO, its Dairy Price Index averaged 131.3 points in February, down 3.6 points (2.7 percent) from January and standing 10.2 points (7.2 percent) below the corresponding month last year.

In February, the decline in the index was driven by lower prices across all dairy products, with the steepest falls in butter and skim milk powder (SMP).

The continued weakness in global import demand, especially for near-term deliveries underpinned the price declines, despite a noticeable increase in purchases in recent weeks by North Asia, said FAO.

In addition, increased exportable supplies, including inventories of butter, cheese and SMP, in Western Europe, where seasonal milk deliveries in recent months have tracked above their corresponding monthly averages, also weighed on global export prices, it added.

According to FAO, its Meat Price Index averaged 112.0 points in February, fractionally lower (0.1 points and 0.1 percent) from January and standing 1.9 points (1.7 percent) below its value a year ago.

It said in February, international poultry meat prices fell for the eighth consecutive month, reflecting abundant global supplies compared to softer import demand, notwithstanding avian influenza outbreaks in several leading producer countries.

On the other hand, FAO said international pig meat prices increased, underpinned by market concerns over the low availability of slaughter-ready hogs amid rising internal demand in Europe.

Meanwhile, bovine meat prices were stable, following continuous declines since June 2022, as improved import purchases, especially from North Asia, led global demand to balance relatively well with current supplies.

International ovine (lamb and mutton) meat prices also remained broadly unchanged, as global demand was adequate to absorb elevated supplies from Australia, said FAO.

According to FAO, its Sugar Price Index averaged 124.9 points in February, up 8.1 points (6.9 percent) from January, reaching the highest level since February 2017.

The February rebound was mostly related to the downward revision to the 2022/23 sugar production forecast in India, which dampened export prospects for the current season, it said.

Concerns over lower export availabilities from India amid strong global import demand lent additional support to world sugar prices.

However, the good harvest progress in Thailand and abundant precipitation in the key growing areas of Brazil prevented a larger monthly price increase, said FAO.

The decline in international crude oil price quotations and ethanol prices in Brazil also contributed to limit the upward pressure on world sugar prices, it added.

GLOBAL CEREAL STOCKS SET TO FALL

Meanwhile, in a separate Cereal Supply and Demand Brief, FAO said that its latest forecast for world cereal production in 2022 has been revised upward by 9 million tonnes this month, now standing at 2,774 million tonnes, still 1.3 percent lower year-on-year.

FAO said the bulk of the upward revision concerns rice and, to a lesser extent, coarse grains that largely reflect the incorporation of recently released official figures.

Regarding rice, FAO said February assessments by Indian officials report a more contained impact of uneven monsoon rains on main-crop output, which coupled with a pronounced increase in secondary crop plantings (just concluded), overturned expectations of an Indian production decline this season.

Output was also upgraded for several other countries, most notably Sri Lanka and Thailand, it added.

On the other hand, it said official reports in the United Republic of Tanzania suggest that poor rains resulted in a greater output reduction than previously envisaged, while provincial authorities in Pakistan’s Punjab indicate a lower area realization, adding to the output losses endured by the country as a result of severe floods, particularly in Sindh.

Put together, these changes raised FAO’s forecast of global rice production in 2022 by 4.9 million tonnes to 517 million tonnes (milled basis), which while being 1.5 percent below the 2021 all-time high would still constitute an above-average harvest, it added.

FAO said at 2,780 million tonnes, the forecast for global cereal utilization in 2022/23 is nearly unchanged this month and still pointing to a decline of 0.6 percent below the 2021/22 level.

It said following a 1.4-million-tonne downward revision this month, total global utilization of coarse grains is forecast to fall in 2022/23 by 1.5 percent below the 2021/22 level stemming from anticipated contractions in the utilization of all major coarse grains (maize, barley, and sorghum).

On the other hand, FAO said its forecast of global rice utilization in 2022/23 has been raised by 0.5 million tonnes to 520 million tonnes, which is still marginally below the 2021/22 all-time high.

The upward revision largely mirrors expectations that ample supplies and a strong pace of domestic public procurement may encourage Indian officials to continue releasing supplies from public stocks for ethanol production, thus boosting non-food uses in the country, it added.

FAO said that its forecast of global wheat utilization was also revised upwards since the previous report by 1.8 million tonnes, mostly reflecting greater feed use of wheat in the European Union, where substitution from maize to wheat for feed is expected due to tighter domestic maize supply and higher wheat supply levels.

This upward revision brings the total wheat utilization forecast for 2022/23 to 779 million tonnes in 2022/23, up 0.8 percent from the 2021/22 level, it added.

FAO said global cereal stocks ending in 2023 are forecast to decline by 1.2 percent from their opening levels, reaching 844 million tonnes, driven by expected draw-downs of global coarse grain and rice stocks that outweigh a rise in wheat stocks.

FAO said a sharp downward revision to Brazil’s maize stock estimate following their strong export pace has led to a 3.2-million-tonne cut in the global maize stocks forecast this month.

It said that this downward revision further lowers the global coarse grain stocks forecast to 344 million tonnes, pointing to a decline of 5.5 percent below their opening levels almost exclusively attributed to an 8.3 percent fall in global maize stocks.

Largely reflecting higher carry-over forecasts for India, FAO said its forecast of world rice stocks at the close of 2022/23 marketing years has been raised by 1.9 million tonnes to 194 million tonnes.

It said the revised forecast puts global stockpiles 0.8 percent below their 2021/22 record high and at their second highest level on record, as draw-downs in rice importing countries look set to be partly offset by a further increase in carry-overs by exporters.

At 306 million tonnes, FAO said that its global wheat inventory forecast for 2022/23 remains near last month’s forecast and points to a rise of 4.1 percent above opening levels, with most of that increase concentrated in China and the Russian Federation.

FAO said that world trade in cereals in 2022/23 is forecast to fall by 1.8 percent below the 2021/22 level to 473 million tonnes, nearly unchanged from the previous forecast.

Pegged at 223 million tonnes, FAO said its coarse grains trade forecast for 2022/23 (July/June) still points to a decline of 3.3 percent from the 2021/22 level, driven by expected declines in global barley and sorghum trade, while global maize trade is seen remaining near its 2021/22 level.

International trade in rice in 2023 (January-December) is forecast at 53 million tonnes, marginally changed from February and 5.6 percent below the 2022 peak, it added.

“Import expectations changed little from last month, while on the export side, shipment forecasts were raised for India and cut for Pakistan and Thailand.”

Despite lingering uncertainties surrounding the duration of India’s ban on broken rice exports, which could cause its overall shipments to contract if protracted, exportable supplies of other qualities of rice in India look set to remain ample.

FAO said this could keep Indian overall exports abundant in 2023, likely displacing some shipments by Pakistan and Thailand.

In contrast to coarse grains and rice, world wheat trade in 2022/23 (July/June) is set to increase by 1.1 percent above the 2021/22 level to 198 million tonnes, it added.

EARLY PRODUCTION OUTLOOK FOR 2023 CROPS

For 2023, FAO said its preliminary forecast for world wheat production points to a year-on-year decline, but at 784 million tonnes, the global out-turn would still be the second highest on record.

“In North America, incentivised by high prices, farmers in the United States of America increased 2023 winter wheat sowings to the largest level since 2015.”

FAO said although dry weather is still a concern in the Central Plains, forecasts of more precipitation in some areas support expectations for an increase in total wheat production from the reduced 2022 out-turn to 51 million tonnes in 2023, which would be the biggest output in three years.

In Canada, official projections point to an above-average sown area in 2023, as farmers are expected to react positively to the high grain prices, it added.

“Assuming normal weather conditions, Canada’s wheat production is forecast to reach 35 million tonnes.”

In Europe, provisional prospects point to an overall fall in wheat production. In the Russian Federation, reflecting drier-than-average weather conditions in southern regions and a cutback in winter plantings amid softer domestic prices, wheat production is forecast to decline from the record level in 2022.

FAO said in Ukraine, severe financial constraints, infrastructure damage and obstructed access to fields in parts of the country have resulted in an estimated 40 percent year-on-year reduction in the 2023 winter wheat area, and a well below-average wheat output is anticipated in 2023.

It said wheat plantings in the European Union are seen to remain broadly unchanged in 2023, and with generally conducive weather auguring well for yields, total production is forecast at 136.5 million tonnes, on par with the previous year’s good output.

A moderate upturn in wheat plantings is forecast in the United Kingdom of Great Britain and Northern Ireland, but with yields anticipated to retreat from the highs of 2022, production is seen falling to about 14.4 million tonnes in 2023, said FAO.

It said in Asia, mixed conditions were present at the start of the year.

“In India, government support programmes encouraged farmers to maintain a near-record wheat area, whilst in Pakistan, an average wheat acreage is estimated, as receded floodwaters and government support facilitated access to land and seeds.”

Weather conditions have been favourable in both countries and, as a result, 2023 wheat harvests are forecast to surpass their five-year averages, said FAO.

In Near East Asian countries, after uneven rains during the first months of the season, sustained rainfall is needed during the remainder of the season to shore up 2023 production prospects.

In North Africa, rainfall deficits have negatively affected crops in Morocco, Algeria and Tunisia, denting wheat production prospects in 2023, which follows reduced outputs in the previous year, it added.

According to FAO, in southern hemisphere countries, the production outlook for the 2023 coarse grain crops, with harvesting operations underway, is generally favourable.

“Underpinned by robust export demand, total maize plantings are foreseen to increase to a record level in Brazil, and buoyed by generally beneficial weather conditions, total production is provisionally forecast at an all-time high of 123.7 million tonnes in 2023.”

In Argentina, early season rainfall shortages adversely affected maize crops, but an up-tick in rainfall quantities at the start of 2023 led to a partial recovery in crop conditions for the later-sown crops, said FAO.

It said in South Africa, a modest cut-back in maize plantings is expected to drive a year-on-year production decrease in 2023, but with conducive weather supporting good yield prospects, production is nevertheless anticipated to exceed the five-year average. 

- Third World Network