Global food import bill to reach all-time high in 2021: FAO

Food. Rice grains (IRRI). Creatice Commons

Geneva, 17 Nov (Kanaga Raja) – The world food import bill is forecast to reach a record high in 2021, surpassing USD 1.75 trillion, according to the Food and Agriculture Organization of the United Nations (FAO).

In its latest Food Outlook report, FAO said that this would represent a 14 percent increase (USD 218 billion) over 2020, and up 12 percent (USD 185 billion) on its earlier forecast in June 2021.

According to the report, the upward revision since June reflects stronger-than-anticipated imports by developed countries in the second and third quarter of 2021.

It said the bulk of the foreseen growth in the global food import bill over last year is set to be cost-driven, reflecting higher price levels of internationally traded food, as well as a three-fold increase in freight costs, as indicated by the Baltic Dry Index (BDI).

Developed regions are foreseen to account for nearly 60 percent of the global food import bill in 2021, recording a growth of 11 percent, said FAO.

The report said that developing regions, while accounting for the remaining 40 percent of the bill, are forecast to see even higher growth in 2021, with their aggregate food import bill expanding by nearly 20 percent from 2020, marking the fastest growth on record.

Record year-on-year growth is also anticipated for the most vulnerable country groups, it added.

“The Least Developed Countries (LDCs) could see their food import bill rise by 16 percent, while sub-Saharan Africa (SSA) and Low-Income Food-Deficit Countries (LIFDCs) are expected to experience even faster growth, with rates in excess of 20 percent compared with 2020.”

However, the higher import bills are mainly on account of higher unit costs, rather than higher import volumes (quantities), said the report.

For instance, of the additional imports of USD 25 billion by LIFDCs, more than USD 14 billion are due to higher prices and freight costs, whereas only USD 11 billion reflect higher volumes.

Similarly, for the LDCs, higher costs account for almost USD 5 billion of the total expansion of USD 7.5 billion.

FAO said that for SSA, the increase of USD 10 billion over 2020 reflects in equal parts higher prices and higher volumes.

From a food group perspective, the report said that cereals, animal fats, vegetable oils and oilseeds are forecast to see the fastest expansion, both in absolute and percentage terms, with import bills predicted to rise by USD 40.1 billion, USD 37.2 billion and USD 31.1 billion, respectively.

More than 70 percent of these increases are on account of additional purchases by developing regions, which bears testimony to the need to maintain basic staple availabilities, it added.

On the other hand, developed regions account for nearly 70 percent of the growth in high-value foods, notably fruits and vegetables, fishery products, and beverages.

“This reflects the swift economic recovery in these economies and the low-income responsiveness of consumers, even for these high-value food items,” said FAO.

Overall, however, the global food system has demonstrated a remarkable resilience to disruptions throughout the COVID-19 pandemic, said the report, noting that food trade has not only continued to expand in value and volume, but growth has even accelerated.

OCEAN FREIGHT MARKET

Meanwhile, highlighting developments in the ocean freight market (May-October 2021), FAO said the dry bulk freight complex exhibited strength in the past six months, building on steep gains seen in the first quarter of the calendar year.

“Aside from buoyant grains and oilseeds trade, markets witnessed a broad-based up-turn in coal import demand against the backdrop of soaring natural gas prices.”

Logistical and weather-related challenges also featured, notably in China, where stricter COVID-19-related rules increased vessel turnaround times and worsened congestion at local ports, said the FAO report.

According to data from Lloyd’s List Intelligence, as of late October, around 7 percent of the global bulk fleet was waiting at Chinese ports to either load or discharge cargo.

“Supply-side prospects were also supportive, as annual dry bulk fleet growth in 2022 was increasingly expected to fall short of this year’s envisaged 3.5 percent expansion due to potentially reduced new-build deliveries and heavier vessel scrapping.”

Still, said FAO, freight markets lacked clear direction at times, as new waves of coronavirus infections in some countries contributed to supply and demand uncertainties, while there were ideas that inflated transport costs were capping fresh enquiries.

FAO said that despite the recent sharp correction in Capesize earnings and occasional setbacks in other constituent segments, the Baltic Dry Index (BDI) – which measures movements in time-charter rates across main carrier sizes – has advanced by a net 44 percent since late April.

According to the FAO report, delivery costs on the main grains and oilseeds routes (which comprise marine fuel and other associated charges) have also surged over the period, as evidenced by movements in the International Grains Council (IGC) Grains and Oilseeds Freight Index (GOFI), a trade-weighted measure of nominal voyage rates.

Reflecting rallying vessel hire prices and climbing bunker costs, the GOFI firmed by 53 percent since late April, led by sub-indices for northern hemisphere grains and oilseeds origins.

The Index was at its highest point on record as of late October (since its introduction in January 2013), also posting a more than two-fold rise year-on-year, said FAO.

Average earnings in the Capesize segment, which mainly moves heavy raw materials, have strengthened by around one-quarter since April, although trends have been two-sided.

FAO said that with exporters trying to boost sales amid record-high iron ore prices, sector earnings climbed to a more-than-decade high in early May, but retreated thereafter, in part tied to a disruption to coal shipments from Colombia and talk of China’s plans to strengthen commodity price controls.

Despite occasional pressure from Capesize losses, average rates in the Panamax sector reached a decade high in early July, it added.

According to the report, the upside was primarily driven by Asia, where coal cargoes out of Indonesia and iron ore inquiries in Western Australia were remarkable features, while demand was also good for minerals and grains from the Atlantic.

“Supramax and Handysize segments generally outperformed the wider bulk freight complex, as split cargoes from larger carriers boosted demand for smaller vessels.”

Reflecting near-constant increases, corresponding Baltic Indices rose by 66 percent and 86 percent, respectively during the past six months, to multi-year highs, said the FAO report.

FAO also said that the US Gulf witnessed solid advances in freight prices, especially in recent weeks, as activity gathered pace after the earlier weather-related downturn.

- Third World Network