Global food prices ease slightly in April, says FAO

Food. Dietmar Rabich. Creative Commons.JPG

Geneva, 11 May (Kanaga Raja) – The international prices of a basket of key agricultural food commodities eased slightly in April from the all-time high registered in March, driven by modest declines in the prices of vegetable oils and cereals, according to the UN Food and Agriculture Organization (FAO).

According to FAO, its Food Price Index (FFPI) averaged 158.5 points in April 2022, down 1.2 points (0.8 percent) from the all-time high reached in March, though still 36.4 points (29.8 percent) above its value in the corresponding month last year.

“The drop in the FFPI in April was led by a significant downturn in the vegetable oil sub-index, along with a slight decline in the cereal price sub-index,” said FAO.

“Meanwhile, sugar, meat and dairy price sub-indices sustained moderate increases,” it added.

“The small decrease in the index is a welcome relief, particularly for low-income food-deficit countries, but still food prices remain close to their recent highs, reflecting persistent market tightness and posing a challenge to global food security for the most vulnerable,” said FAO Chief Economist Maximo Torero Cullen.

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 169.5 points in April, down 0.7 points (0.4 percent) from the record high reached in March (since 1990).

After surging to a record level in March, international coarse grain prices dropped by 1.8 percent in April, led by a 3.0 percent decline in maize prices, as seasonal supplies from ongoing harvests in Argentina and Brazil helped ease the pressure on markets, said FAO.

“World sorghum prices also declined in April by 0.4 percent, while tight supplies pushed barley prices up by 2.5 percent.”

“International wheat prices edged upwards in April, albeit marginally, gaining 0.2 percent. Continued blockage of ports in Ukraine and concerns over 2022 crop conditions in the United States of America kept prices elevated, but the price increases were moderated by larger shipments from India, higher-than-expected exports from the Russian Federation, and slightly dampened global demand as a result of high prices,” said FAO.

International rice prices went up 2.3 percent in April from their March levels, sustained by a combination of strong local demand in various Asian exporters, purchases by Near Eastern and Chinese buyers and weather setbacks in the Americas, it added.

According to FAO, its Vegetable Oil Price Index averaged 237.5 points in April, shedding 14.3 points (5.7 percent) from the record high registered in March, but remaining markedly above its year-earlier level.

FAO said the decline was driven by lower world prices of palm, sunflower and soy oils, which more than offset higher rapeseed oil quotations.

“International palm oil prices dropped moderately in April, mainly weighed by subdued global import purchases amid high costs as well as a weakening demand outlook in China.”

Nevertheless, FAO said that uncertainties about export availabilities out of Indonesia, the world’s leading palm oil exporter, contained further declines in international prices.

“In the meantime, world sunflower and soy oil prices also fell month-on-month, largely tied to demand-rationing following the record high prices seen lately.”

On the other hand, FAO said that rapeseed oil prices stayed firm in April, sustained by lingering global supply tightness.

According to FAO, its Dairy Price Index averaged 147.1 points in April, up 1.3 points (0.9 percent) from March, marking the eighth consecutive monthly increase and lifting the index 28.0 points (23.5 percent) above its value a year ago.

“In April, the upward trend of dairy product prices continued, driven by the persistent global supply tightness, as milk output in Western Europe and Oceania continued to track below their seasonal levels,” it said.

International quotations for butter rose the most, reflecting tight supplies, including low inventories, especially in Western Europe, amidst a surge in the demand for near-term deliveries, partly induced by the current shortage of sunflower oil and margarine, it added.

“Despite a decline in foreign purchases, sustained internal demand and low inventories in Europe provided support to world skim milk powder and cheese prices”.

On the other hand, FAO said that whole milk prices fell moderately, mainly due to a demand slowdown in China.

According to FAO, its Meat Price Index averaged 121.9 points in April, up 2.7 points (2.2 percent) from March and setting a new record high.

“The continued price strength stemmed from higher world poultry, pig and bovine meat prices. The poultry meat price increase was driven by solid demand amidst tight global supplies, reflecting disruptions to exports from Ukraine and rising avian influenza outbreaks in the Northern hemisphere,” it said.

Meanwhile, it said pig meat prices rose further, although less steeply than in March, on the prolonged low supply of slaughter pigs in Western Europe and high internal demand in large producing countries.

FAO said world bovine meat prices increased moderately, reflecting high export volumes from Brazil, despite the low slaughter cattle supply. With this increase, bovine meat prices reached a new record high, it added.

Regarding ovine (lamb and mutton) meat, FAO said that the pandemic-related lockdowns and port delays in China eased the country’s meat purchases, pushing prices marginally lower.

According to FAO, its Sugar Price Index averaged 121.8 points in April, up 3.9 points (3.3 percent) from March, marking the second consecutive monthly increase and reaching levels more than 20 percent above those registered in the corresponding month last year.

FAO said higher ethanol prices in Brazil, coupled with the sustained strengthening of the Brazilian Real against the US dollar, continued to underpin the increase in world sugar prices. Additional support was provided by concerns over the slow start of the 2022 harvest in Brazil.

“However, larger-than-previously-anticipated availabilities in India, a major sugar exporter, bolstered the global supply outlook and prevented more substantial price increases,” it added.

CEREAL TRADE EXPECTED TO FALL

Meanwhile, in a separate Cereal Supply and Demand Brief, FAO said with almost all the crops harvested, its world cereal production forecast for 2021 has remained unchanged this month at 2,799 million tonnes, 0.8 percent above the out-turn in 2020.

“Pegged at 1,502 million tonnes, global coarse grain production in 2021 is 18.9 million tonnes higher on a yearly basis, almost entirely underpinned by a larger maize out-turn that more than offset a sizeable decrease in world barely production.”

Global wheat output is pegged at 777 million tonnes, virtually on par with the crop produced in 2020, said FAO.

As for rice, FAO said that consistent with the generally conducive weather conditions prevailing over the season, somewhat higher reported yield outcomes raised production expectations for Bangladesh, the Philippines and Cote d’Ivoire, while, in the case of Mali, a slight upward revision to output followed official indications of the area under paddy having registered a less pronounced contraction than previously reported.

Put together, FAO said these changes raised its forecast for world rice production by a small margin of 0.4 million tonnes to 520.8 million tonnes (milled basis), which represents a 0.7 percent increase from the 2020 harvest and a new record high.

At 2,785 million tonnes, the forecast for the 2021/22 world cereal utilization has been revised down slightly since the previous month, but it still represents a 0.9 percent expansion from 2020/21, it added.

Despite a 5.2 million-tonne downward revision this month, mostly reflecting lower feed use estimates in India, FAO has forecast global wheat utilization to rise by 0.7 percent in 2021/22, mainly driven by higher food consumption foreseen in Asia and Africa.

FAO said its forecast for total utilization of coarse grains is nearly unchanged this month, pointing to a 2.0 percent increase in 2021/22 from the previous year, largely due to an expected increased use of maize for feed, especially in Brazil, Canada and China, as well as for ethanol production in the United States of America.

Offsetting some of that increase, barley utilization is seen falling in 2021/22 mostly in Canada, the European Union and the United Kingdom of Great Britain and Northern Ireland on account of reduced harvests, as well as in Saudi Arabia as a result of lower imports compared with last season, it added.

“Rice utilization remains forecast to grow by 1.8 percent in 2021/22 to a fresh peak of 520.7 million tonnes. The increase is anticipated to be underpinned by a 1.6 percent annual foreseen expansion in food intake to 424.6 million tonnes, as well as an 11.9 percent rise in animal feed use to 22.3 million tonnes.”

FAO said its forecast for world cereal stocks by the close of seasons in 2022 stands at 856 million tonnes, up 5.2 million tonnes since the previous forecast and pointing to an increase of 2.8 percent above opening levels.

Following an 8.7-million-tonne upward revision this month, mostly attributed to adjustments to India’s inventories based on official estimates, global wheat stocks are forecast to rise by 4.2 percent above opening levels, it added.

Notwithstanding a 3.5-million-tonne downward revision this month, world coarse grain stocks are also expected to rise above opening levels, by 2.4 percent.

However, FAO said that the large majority of that increase stems from a 5.5 percent expected rise in global maize stocks, underpinned by a build-up of inventories in Ukraine as a result of suspended exports, while global barley stocks are expected to contract by 12.0 percent.

Following only minor adjustments to carry-out forecasts for a few countries, world rice stocks at the close of 2021/ 22 marketing seasons are now pegged at 192.7 million tonnes, said FAO.

“This level would imply a 1.2 percent year-to-year expansion, as anticipated draw-downs in China and, to a lesser extent, Indonesia, the Islamic Republic of Iran and the United States of America are foreseen to be more than offset by accumulations expected elsewhere, especially in Bangladesh, India and Viet Nam.”

FAO has forecast world trade in cereals in 2021/22 at 473 million tonnes, up 3.7 million tonnes from last month’s forecast but 1.2 percent below the 2020/21 record level.

It said following a 1.2 million tonne upward revision since the previous month, the forecast for global wheat trade in 2021/22 (July/June) is now pegged at 191 million tonnes, 1.0 percent above the 2020/21 level.

While blocked ports continued to hinder wheat exports from Ukraine, this month’s upward revision mainly reflects higher-than-expected exports from the Russian Federation based on continued shipments in April, mostly to Egypt, the Islamic Republic of Iran and Turkey, despite freight and financial difficulties for sales, it added.

FAO said its forecast for global trade in coarse grains in 2021/22 (July/June) has also been lifted by 2.4 million tonnes, almost exclusively on expectations of higher maize trade.

Continued strong maize demand from China, as well as a stronger-than-expected pace of shipments from Argentina in recent months, are behind the bulk of this month’s 1.7-million-tonne upward revision to global maize trade, said FAO.

“Additionally, efforts in Ukraine to move maize via railway to its European borders for export, albeit with many logistical challenges, have resulted in a small (0.5 million tonnes) upward revision for Ukraine’s export forecast compared to last month.”

However, FAO said global coarse grains trade in 2021/22 is still forecast to decline by 4.1 percent from 2020/21, largely attributed to a foreseen 5.7 percent fall in maize trade from the 2020/21 record level.

FAO said its forecast for international trade in rice in 2022 (January-December) continues to point to a 3.8 percent expansion from 2021 to a peak of 53.4 million tonnes.

PRODUCTION OUTLOOK FOR 2022

FAO said that the forecast for world wheat production in 2022 has been scaled back moderately since the previous month, but standing at 782 million tonnes, it still predicts global wheat production to grow this year.

“The month-to-month reduction mostly concerns the United States of America, where persisting drought conditions have impaired yield prospects of the winter wheat crop and curbed overall production expectations.”

However, underpinned by a price-driven expansion in planted area, the country’s total wheat output is still foreseen to increase to 50 million tonnes in 2022, about 5 million tonnes (11 percent) above the previous year’s output, said FAO.

“With the main spring crop about to be sown in Canada, a substantial production recovery is foreseen following the drought-reduced harvest in 2021.”

In Europe, the forecast for wheat production in Ukraine remains unchanged and at a below-average level, reflecting the effects of the conflict that are foreseen to reduce the harvested area by at least 20 percent, said FAO.

Yields are also expected to decline in 2022 due to conflict-related disruptions to agricultural operations prior to the harvest period, it added.

“The outlook in the Russian Federation remains broadly favourable, as conducive weather conditions continue to point to an up-turn in yields that underlie the forecasted production increase in 2022”, said FAO.

In the European Union, FAO said the forecast for wheat production has been raised to 139.5 million tonnes this month on account of recent official data indicating a small year-to-year increase in wheat sowings, compared to earlier expectations.

“However, reflecting persistent dryness in southern areas, an anticipated decline in yields in 2022 is expected to offset the effects of the larger plantings, keeping the output unchanged on a yearly basis,” it added.

It said that in Asia, small production increases are forecast for India and Pakistan in 2022, while in the Near East countries, wheat outputs are forecast at average levels, supported by generally favourable weather.

“However, in North Africa, the effects of drought conditions, which are particularly acute in Morocco, are foreseen to result in sizeable production declines.”

Regarding coarse grains, FAO noted that harvesting of the 2022 crops has started in the southern hemisphere, and prospects continue to point to above-average outputs in leading producer countries.

In South America, official data affirm expectations that Brazil will harvest a record maize crop in 2022, forecast at 116 million tonnes, driven by record-high plantings.

FAO said that despite some lingering concerns regarding dryness in parts of the country that have curtailed yield prospects, favourable crop conditions prevail in the main producing state, Mato Grosso.

In Argentina, dry weather conditions are likely to reduce yields and result in a moderate cut-back in production to about 57 million tonnes. However, the harvest is still anticipated at an above-average level, it added.

In Southern Africa, despite the impact of floods in eastern parts of South Africa, the leading producer and exporter in the region, maize production is still pegged at an above-average level of 15.3 million tonnes in 2022, said FAO.

Elsewhere in Southern Africa, rainfall shortages and the effects of tropical cyclones are foreseen to result in output reductions in 2022, with some countries anticipated to gather below-average harvests.

“In the northern hemisphere, planting of the 2022 maize crop has recently begun. In the largest global producer, the United States of America, initial planting surveys indicate that the maize acreage is likely to decline by 4 percent in 2022, amid concerns about the high costs of inputs,” said FAO.

- Third World Netwrok