Global food prices rise further in September, says FAO

Food vendor sells produce at Victoria Market in Port Victoria, Seychelles. Credit. UN Women-Ryan Brown

Geneva, 7 Oct (Kanaga Raja) – The international prices of a basket of key agricultural food commodities rose further in September, mainly driven by higher prices of cereals and vegetable oils, the UN Food and Agriculture Organization (FAO) has said.

According to FAO, its Food Price Index (FFPI) averaged 130.0 points in September 2021, up 1.5 points (1.2 percent) from August and 32.1 points (32.8 percent) from the same month last year. “The latest rise of the FFPI was largely driven by higher prices of most cereals and vegetable oils. Dairy and sugar prices were also firmer, while the meat price sub-index remained stable,” said FAO.

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 132.5 points in September, up 2.6 points (2.0 percent) from August and 28.5 points (27.3 percent) above its level of September 2020.

Among the major cereals, world wheat prices increased the most in September, up almost 4 percent month-on- month and as much as 41 percent year-on-year, it said.

“Tightening export availabilities amidst strong world demand continued pushing up international wheat prices,” said FAO.

Rice prices rose in September to stand above the multi-year lows touched in August 2021, sustained by a mild improvement in trading activities.

FAO said international barley prices also increased in September, by 2.6 percent, mostly driven by strong demand, downgraded production prospects in the Russian Federation and gains in other markets.

On the other hand, world maize prices remained generally stable, up only 0.3 percent from August, as upward pressure from hurricane-related port disruptions in the US was countered by improved global crop prospects and the start of harvests in the US and Ukraine.

Nonetheless, FAO said maize prices remained elevated at nearly 38 percent above their levels of September 2020.

The FAO Vegetable Oil Price Index averaged 168.6 points in September, up 2.9 points (or 1.7 percent) month-on- month and about 60 percent above its year-earlier level.

The increase was mainly driven by higher palm and rapeseed oil values, whereas quotations for soy and sunflower oils declined, said FAO.

“International palm oil prices rose for a third consecutive month reaching ten-year highs, underpinned by robust global import demand that coincided with concerns over below-potential production in Malaysia due to persisting migrant labour shortages,” it added.

According to FAO, global rapeseed oil prices also appreciated markedly, fuelled by protracted global supply tightness.

On the other hand, world soy and sunflower oil prices declined in September on, respectively, uncertainties regarding soy oil uptake by the biodiesel industry and prospects of ample global supplies in the 2021/22 season.

According to FAO, its Dairy Price Index averaged 117.9 points in September, up 1.7 points (1.5 percent) from August and exceeding by 15.6 points (15.2 percent) its value in the corresponding month last year.

In September, international quotations for all dairy products represented in the index rose, with skim milk powder (SMP) and butter rising sharply, said FAO.

FAO attributed the rise to solid global import demand amid limited export availabilities, especially from Europe on the back of low inventories and seasonally declining milk production.

Limited milk production at this early stage of the new season in Oceania, coupled with low stocks, also lifted world butter and SMP prices, it said.

Meanwhile, whole milk powder (WMP) and cheese prices rose moderately, owing to a combination of constrained production, low inventories and steady internal demand in Europe.

According to FAO, its Meat Price Index averaged 115.5 points in September, virtually unchanged from its revised value for August and 24.1 points (26.3 percent) above its value in the corresponding month a year ago.

In September, international quotations for ovine (lamb and mutton) meat increased further, driven by firm global demand while exportable supplies remained tight, it said.

“The bovine meat price rally also continued unabated, as limited availability of cattle for slaughter in Oceania and South America weighed on global supplies.”

In contrast, FAO said after rising consecutively for nine months, quotations for poultry meat slipped on increased global supply volumes, while world pig meat prices also declined due to lower import demand from China and depressed internal demand, especially in Europe.

The FAO Sugar Price Index averaged 121.2 points in September, up 0.6 points (0.5 percent) from August and 42.2 points (53.5 percent) above the level registered in the corresponding month last year.

FAO said that concerns over a reduced output in Brazil, the world’s largest sugar exporter, due to prolonged dry weather conditions and frosts, continued to underpin the increase in world sugar prices.

In addition, higher ethanol prices encouraged a greater use of sugarcane for ethanol production in Brazil.

However, the upward pressure on prices was limited by a slowdown in global import demand for sugar and good production prospects in key exporters, such as India and Thailand, said FAO.

RECORD CEREAL OUTPUT IN 2021

Meanwhile, in a separate Cereal Supply and Demand Brief, FAO said that its latest information points to a record cereal production of 2,800 million tonnes (including rice in milled terms) in 2021, up 1.1 percent from the out-turn in 2020.

However, at this level, production would still be less than the anticipated consumption requirements in 2021/22, leading to a draw-down in world inventories, it added.

Improved prospects for wheat and coarse grain crops have lifted the overall global cereal production outlook by 12.1 million tonnes (0.4 percent) since the previous report in September, with the bulk of the increase associated with better production prospects for wheat.

FAO said its latest forecast for world wheat production stands at 776.7 million tonnes, 7.2 million higher than the previous figure in September and on par with the output in 2020.

The upward revision principally reflects higher yield estimates in some areas of Eastern Europe owing to conducive weather conditions throughout the season, with also sown area in Ukraine proving larger than earlier predicted.

FAO raised its forecast for wheat production for Australia, based on continued beneficial weather that reinforced good yield expectations.

In Canada, although the wheat output is still foreseen to fall sharply in 2021, FAO raised its forecast to reflect moderately better yield prospects.

“These increases more than offset a cut to the wheat production forecast for the Russian Federation, where the winter harvest has been completed and results show lower yields than previously envisaged, due to the adverse effects of dry weather conditions.”

FAO also raised its forecast for global coarse grains production in 2021 by 4.3 million tonnes since September and is now pegged at 1,504 million tonnes, 1.6 percent higher year-on-year.

The upturn in prospects this month is largely associated with the barley and sorghum crops, it said.

Mostly due to improved yield prospects in Australia, FAO said global barley production forecast has been raised by 1.9 million tonnes to 149.3 million, albeit still 6.7 percent lower than in 2020.

In a similar vein, FAO lifted its forecast for world sorghum production, though moderately, with the global output expected to reach 65.2 million tonnes in 2021, 7.6 percent higher year-on-year, with the month-on-month revision mostly linked to an increase in the sorghum acreage estimate in the United States of America (USA).

FAO said its forecast for global maize production remains largely unchanged, at 1,192 million tonnes, 3.0 percent higher than the previous year.

It said an upward revision to the production forecast for the USA, underpinned by an upturn in yield expectations in eastern states, was offset by a lower forecast for the European Union (EU), where dry weather conditions in eastern countries have curbed yield prospects.

FAO said its forecast of world rice production in 2021 has been scaled up by 617,000 tonnes to 520 million tonnes (milled basis), up 1.3 percent from the 2020 all-time high.

According to FAO, the latest revision primarily reflects more buoyant expectations for India’s main crop, although a reduced incidence of drought and floods has also lifted the outlook for China (Mainland) and Thailand.

“Conversely, prospects are down for Pakistan and Mali given planting delays caused by water constraints, which in the case of Mali were compounded by insecurity problems.”

Expectations of higher area loss have also further lowered forecasts for the United States of America, said FAO.

FAO has forecast world cereal utilization in 2021/22 at 2,811 million tonnes, up 2.7 million tonnes from September and 49 million tonnes (1.8 percent) higher than in 2020/21.

It also raised its forecast for total wheat utilization by 1.6 million tonnes since the previous report to a record 779 million tonnes, surpassing the 2020/21 estimated level by 2.4 percent (18.6 million tonnes).

“Although food consumption accounts for most of the total utilization of wheat, the projected growth in 2021/22 largely stems from an expected 6.4-percent rise in wheat feed use, especially in China, the USA, the EU and the United Kingdom (UK), driven by strong demand and high prices of coarse grains,” said FAO.

FAO has forecast total utilization of coarse grains in 2021/22 at 1,513 million tonnes, up 2.1 million tonnes from the September report and 1.4 percent (20.6 million tonnes) from the 2020/21 estimated level.

Accounting for the bulk of this month’s upward revision and the year-on-year increase in total utilization of coarse grains, FAO said that the forecast of maize use in 2021/22 has been lifted by 1.5 million tonnes, to 1,197 million tonnes, pointing to a likely 2.0 percent (23.5 million tonnes) increase from the 2020/21 level.

According to the FAO, while sorghum utilization is also forecast to rise in 2021/22 (by 3.1 percent or 2.0 million tonnes), barley utilization is seen falling (by 1.6 percent or 2.5 million tonnes) from its record level in 2020/21 on expectations of lower feed and industrial demand in North America and Europe.

Mirroring revisions to utilization forecasts for India, FAO said that it has downgraded its forecast of world rice utilization in 2021/22 by almost 1.0 million tonnes to 520 million tonnes.

Despite the revision, world rice total use is still anticipated to grow in 2021/22 by 1.8 percent to reach a historical high.

The increase is expected to rest on a 1.6 percent annual expansion in food use, complemented by a 10.4 percent rise in animal feed use, said FAO.

FAO raised its forecast for world cereal stocks by the close of the 2022 seasons by 8.9 million tonnes since the previous month to 817 million tonnes, but still down 3.0 million tonnes (0.4 percent) from their opening levels.

Nearly unchanged this month, global wheat inventories are anticipated to fall by 0.9 percent (2.6 million tonnes) from their opening level to 284 million tonnes, with most of the foreseen draw-downs concentrated in Canada, the Russian Federation and the USA due to anticipated production falls, it said.

FAO said its forecast for world coarse grains stocks has been revised upwards this month by 7.1 million tonnes, mostly on predicted higher maize stocks in China and the USA.

Despite these revisions, world coarse grain stocks are still seen heading to a slight decline in 2021/22 of 0.4 percent (1.5 million tonnes) below their opening levels on account of a foreseen drop in world barley inventories owing to reduced global production, it added.

On the other hand, world maize stocks are set to recover slightly from last year’s six-year low, rising by 1.0 percent (2.8 million tonnes) to 288 million tonnes in 2021/22.

Primarily reflecting prospects of even higher accumulation taking place in rice exporters (particularly India), global rice stocks at the close of 2021/22 marketing seasons are now seen 1.1 million tonnes above their opening levels at a fresh peak of 187 million tonnes, said FAO.

FAO’s said its latest forecast for world trade in cereals in 2021/22 has been raised by 7.4 million tonnes to 473.2 million tonnes, but still pointing to a small contraction of 0.3 percent (1.6 million tonnes) from the 2020/21 level.

“World wheat exports in 2021/22 (July/June) are forecast at 188 million tonnes, remaining near the 2020/21 record level, following an upward revision of 2.9 million tonnes mostly because of stronger import demand in Nigeria and several Asian countries.”

Larger-than-earlier-anticipated sales are forecast for Australia, the EU and Ukraine, supported by better production prospects, which more than offset a lower export forecast for the Russian Federation, said FAO.

For coarse grains, despite this month’s 2.7 million-tonne upward revision, FAO said trade in 2021/22 (July/June) is expected to remain below the 2020/21 level by 1.3 percent (3.1 million tonnes), with declines forecast for both maize and barley trade.

FAO said that its forecast of world maize trade is lifted this month on foreseen larger imports by Canada and the Republic of Korea to meet higher feed demand, but still points to a decline of 1.3 percent (2.5 million tonnes) from its record level in 2020/21 with a fall in exports from Brazil and the US seen overshadowing an increase in sales from Argentina and Ukraine.

Reduced demand from Morocco and China due to ample domestic supplies, with increased production in the former and following a year of high imports in the latter, are seen lowering world barley trade in 2021/22 by 6.7 percent from the 2020/21 record level.

Following a 1.8 million tonne upward revision from September, FAO has now forecast world trade in rice to reach 50.2 million tonnes in 2022 (January-December), up from the revised forecast of 49.2 million tonnes for 2021.

- Third World Network