Global Food Prices Continue to Rise
Armenian cheese at a market in Yerevan. (Picture courtesy of FAO)
The price of food around the world appears to be on an upward spiral.
According to the latest figures from the Food and Agriculture Organisation of the United Nations, the trend that has been seen this year continued in October.
The FAO Food Price Index averaged 172.6 points in October, up 0.7 per cent for the month and 9.1 per cent from a year earlier, with the staple grains’ index rising for the first time in three months.
The Food Price Index has risen continuously throughout 2016 except for a brief dip in July.
While the rise in October was driven by jumps in sugar and dairy prices, the prices of meat and oils and fats fell.
The FAO Sugar Price Index rose by 3.4 per cent in October following reports of production shortfalls in Brazil’s Centre South region and India’s Maharashtra state.
The FAO Dairy Price Index rose by 3.9 per cent from September, led by rising prices of cheese and in particular butter, as a result of sustained internal demand in the European Union after a period during which stocks were drawn down.
However, the FAO Oils/Fats Price Index fell by 2.4 per cent from September, because of weaker palm oil quotations leading to sluggish global import demand.
The FAO Meat Price Index fell by one per cent in October, with the drop largely driven by a fall in import demand in China for European pig meat.
The FAO Cereal Price Index rose by one per cent in October, buoyed by tightening supplies of high-quality wheat even as the overall prospects for global wheat harvests have improved.
The FAO says that world cereal production for 2016 is expected to reach 2.571 billion tonnes, up marginally from FAO’s October forecast and 1.5 per cent above the 2015 output.
The updated figure, released today in the Cereal Supply and Demand Brief, reflects a substantial upgrade of the outlook for world wheat production, which is now expected to rise to 746.7 million tonnes, a 4.3 million increase from FAO’s October forecast.
The Russian Federation’s wheat output is now anticipated to set a new record, while favourable weather is also boosting yield prospects in Kazakhstan.
The increase in world wheat and barley production more than offsets the expected 4.8 million tonne fall in the 2016 global maize crop due to weather-induced yield downgrades for Brazil, China, the European Union and the United States of America. The forecast for global rice production was largely unchanged.
Early signs from the planting of the 2017 winter wheat crop in the northern hemisphere indicate that U.S. farmers are reducing the area because of low price prospects and a subdued export outlook due to a stronger US dollar.
However, wheat plantings in the Russian Federation and Ukraine are ahead of last year’s pace.
Meanwhile, sowing of summer 2017 cereal crops is underway in southern hemisphere countries, and conducive weather conditions are leading to expansion in South America. The maize area planted in Argentina is expected to expand by 6.0 per cent from last year’s high level.
Total cereal use for the 2016/17 season is now forecast at 2 562 million tonnes, up slightly from October and 1.7 per cent higher than a year earlier.
A primary driver of increased use of cereals is global feed use, which the FAO says is likely to expand by 2.7 per cent. The use of wheat for animal feed, buoyed by ample supplies of lower-quality wheat, is anticipated to grow by 6.1 per cent to 146.6 million tonnes, an all-time high.
Global food consumption of cereals is forecast at 1 106 million tonnes, up 1.3 per cent from a year earlier and sufficient to maintain a broadly stable per capita consumption level globally.
World cereal stocks will likely increase to nearly 662 million tonnes by the end of the 2017 seasons, driven by growing wheat inventories, especially in China, the U.S. and Russia.
Coarse grains stocks are projected to drop by 1.7 per cent, led by reductions in China, Brazil and South Africa. World rice inventories are expected to fall slightly to 169.8 million tonnes.