Resources Research

Culture and systems of knowledge, cultivation and food, population and consumption

Posts Tagged ‘crop prospects

Does a food price index plateau signal rising real food prices?

with one comment

The short red line is more worrying than the gyrating blue line.

The short red line is more worrying than the gyrating blue line.

We have from the FAO this month (that means February 2013, released in March), the updated FAO food price index coinciding with its Crop Prospects and Food Situation. This dual release gives us the opportunity to look at the interplay between the FAO food price index and its cereals sub-index, what the ‘Prospects’ quarterly has said about cereals worldwide, and what recent index numbers seem to be telling us.

First the tale of the unfiltered numbers. The FAO Food Price Index averaged 210 points in February 2013, unchanged from January but – FAO points out with what sounds to me like mild relief – “five points (2.5%) below the corresponding month last year”. More interesting is the observation by the food price indexers that “since November the Index has moved within a narrow 210-212 point range, as increases in the prices of dairy products and oils/fats were largely balanced out by declines in the prices of cereals and sugar”.

The usual blue pair

The usual blue pair

If you dwell awhile on the chart I have made for just the cereals sub-index of the FAO food price index (above left), which traces the journey of this sub-index from 2008 January, you will see that from 2008 July it plunged and stayed low (relatively for this period) until 2010 June, and then the ascent to the 230-250 level was steep. And there it has remained. The short red line describes a cumulative average for the 12 months until 2013 February, and the trend for this ‘alarum’ (I am partial to medieval English) is quite clear, forsooth.

Since we have discussed earlier what the FAO food price index in fact describes, which is not what food consumers pay for their daily several hundred grams (if that, sadly) of staples, this does to me look like we can read a plateau as signalling persistent high and rising true cost of food to consumer. Perhaps I should petition the folks inside that citadel on Rome’s Viale delle Terme di Caracalla to rename their index into an indicator.

The leading wheat producers for 2013

The leading wheat producers for 2013

But only if they are not otherwise busy answering telephone calls (or telegrams, as they did in an earlier and far less frenetic age) about the ‘early prospects for 2013 cereal crops’ which is the star of this quarter’s Crop Prospects and Food Situation bulletin. For, here is what they have said:

“FAO’s first forecast for world wheat production in 2013 stands at 690 million tonnes, representing an increase of 4.3 percent from the 2012 harvest and, the second largest crop on record after that of 2011. The increase is expected mostly in Europe, driven by an expansion in area in response to high prices, and a recovery in yields from below-average levels in some parts last year, notably the Russian Federation.”

Cereals production in Asia

Cereals production in Asia

Elsewhere in Europe, we have been told, prospects are satisfactory in the Russian Federation (a big jump, as the chart shows). In neighbouring Ukraine, a large recovery in wheat output is forecast. In North America, the outlook in the USA has been diplomatically called “less favourable than among the other major wheat producing countries” (makes me wonder if the Prospects authors have been fraternising too frequently with UNFCCC staff). Perhaps they haven’t yet noticed the US Drought Monitor, which may explain the “aggregate wheat output is tentatively forecast to decrease” for the USA.

In Asia, the Prospects expects “a record wheat output of some 121 million tonnes in 2013” in the People’s Republic (of China, newly minus Wen Jiabao as premier). It also expects “a record wheat output” in Pakistan and “another bumper crop” in India (what will that do to the already mountainous central stocks of cereals?). Australia and wheat can be summarised (by me, not them) in a word: uncertain.

Advertisements

Written by makanaka

March 7, 2013 at 20:23

Cereals shock, an early indicator using FAO data and outlook

leave a comment »

To what extent do cereals prices pull up (or depress, if at all they do) the FAO food price index? This chart shows the relationship between the main index and the cereals sub-index. As we can see from the shaded areas (which correspond roughly to the 200 mark), the steady steep rise in the cereals index, from around 2007 August onwards, pulled first the cereals sub-index and then the FAO food price index over 200, and kept them above for about nine months. The same phenomenon took place from 2010 July onwards, as a soaring cereals sub-index shot above the main index and pulled it up above 200 in 2010 October, and has kept both above 200 ever since.

Now FAO has said (in its global information and early warning system on food and agriculture, GIEWS) that the export prices of grains has risen sharply in 2012 July with maize prices at record levels. Export prices of maize increased by 20% in the first three weeks of July compared to their June level. The benchmark US maize price averaged USD 322 per tonne reaching a new record high. “Prices were underpinned by continuous concerns about the impact of hot and dry weather conditions on yield potential of the 2012 maize crop in parts of the United States,” said FAO. And now has come the downward revision of the US official 2012 maize production forecast.

The question for us is: how will the the FAO Food Price Index, which in June fell for the third consecutive month, respond? The FAO Food Price Index (FFPI) averaged 201 points in June 2012, down 4 points (1.8%) from a May value of 205 points. After the third consecutive month of decline, the June value of the index was 15.4% below the peak reached in February 2011. “Continued economic uncertainties and generally adequate supply prospects kept international prices of most commodities under downward pressure, although growing concerns over adverse weather sustained prices of some crops toward the end of the month,” said the FAO.

In 2012 June, the FAO Cereal Price Index averaged 221 points, unchanged from May and down 45 points (16.8%) from its peak of 265 points in April 2011. Grain prices were very volatile in June, with weather as the main driver. “After a generally subdued situation during the first half of the month, markets moved up in the second half amid deteriorating crop prospects, most notably for maize in the United States,” said the FAO.

Finally, FAO’s cereal supply and demand brief for 2012 July lowered the forecast for world cereal production from last month, which is likely to result in a smaller build-up of world inventories by the end of seasons in 2013 than previously anticipated. “While the bulk of the increase in cereal production from last year is still expected to originate from a significant expansion in maize production in the United States, the deteriorating crop conditions due to the continuing dryness and above-average temperatures in much of the major growing regions of the country have dampened this outlook,” said the brief.

Moreover, world wheat production is heading toward a contraction of about 3.2%, to 678 million tonnes, or 2 million tonnes less than reported in June, as downward adjustments in Australia, China and the Russian Federation more than offset upward revisions in the EU and Morocco. Where rice production in 2012 is concrened, the FAO estimate is it will grow by 1.6% to 489.1 million tonnes (in milled equivalent), which compares with a previous forecast of 490.5 million tonnes. The small reduction mainly reflects some deterioration of prospects in a few major producing countries, especially India.

Written by makanaka

July 21, 2012 at 12:57

FAO March bulletin, Crop Prospects and Food Situation for 2011

leave a comment »

The FAO has released its Crop Prospects and Food Situation, the first for 2011, in March. The overview is:

  • Wheat production: leading producers, (million tonnes)

    FAO’s first forecast for world wheat production in 2011 stands at 676 million tonnes, 3.4% up from 2010. This level of production would still be below the bumper harvests of 2008 and 2009.

  • International grain prices remained volatile in the first three weeks of March.
  • The cereal import volume in low-income food deficit countries (LIFDCs) as a group is anticipated to decline in 2010-11 due to increased production. However, their import bill is forecast to rise by 20% following higher international prices.
  • In Asia, prospects for the 2011 wheat crop are mostly favourable. In China, the outlook remains uncertain but the easing of the drought situation in the North China Plain is a positive development. In Japan, a powerful earthquake and subsequent tsunami have caused devastation with a potentially significant impact on agriculture and food trade.
  • In North Africa, the current situation in Libyan Arab Jamahiriya has resulted in the displacement of large numbers of people and disruption to the flow of goods and services in this heavily cereal import dependent region. WFP has initiated a regional emergency operation to provide food assistance to the affected people.
  • In Southern Africa, prospects for the main 2011 maize crop are generally favourable and relatively low prices have helped stabilize food security.
  • In Eastern Africa, food insecurity has increased in drought-affected pastoral areas of Somalia, Kenya and Ethiopia despite bumper harvests in 2010 and generally low and stable food prices.
  • In Western Africa, post-election violence continues to cause a large population disruption and disturb trade and livelihoods in Côte d’Ivoire and the neighbouring countries.

Countries requiring external assistance for food, 29 of which 21 in Africa

Overall favourable outlook for global 2011 wheat production: At this stage of the season, with the bulk of the coarse grains and paddy crops yet to be planted in the coming months, it is still too early for even a preliminary forecast of global cereal output in 2011. For wheat, however, in the northern hemisphere, which accounts for the bulk of the global production, winter crops are already developing or soon to come out of dormancy, while spring planting is underway in some countries and a preliminary picture of global prospects is already available.

FAO’s first forecast for world wheat production in 2011 stands at 676 million tonnes, representing a growth of 3.4% from 2010. Plantings have increased, or are expected to increase, in many countries in response to strong prices, and yield recoveries are expected in areas that were affected by drought in 2010, the Russian Federation in particular. The global output forecast for 2011 would be still below the bumper harvests in 2008 and 2009.

In Asia, prospects for the 2011 wheat crop, to be harvested from April, are mostly favourable in India and Pakistan, where good harvests are forecast. However, the outlook in China is uncertain because of winter drought in the North China Plain despite recent beneficial precipitation.

Cereal export prices

In the Asia CIS subregion, Kazakhstan is the major producer and the bulk of the crop is yet to be sown this spring. Weather permitting, farmers are expected to maintain the relatively high planting level of the past two years, especially in view of strong prices. Assuming also a recovery in yields after last year’s drought-reduced level, a significant increase in production could be achieved. In North Africa, early prospects for the 2011 wheat crops are generally favourable, except in Tunisia where dry conditions point to a repeat of last year’s drought-reduced crop.

In the southern hemisphere, where the major wheat crops are still to be sown, producers are also expected to increase plantings in response to this year’s favourable price prospects. However, this may not translate to larger crops in Australia or Argentina, where yields are assumed to return to average after bumper levels in 2010.

World cereal production and utilisation

Estimate of world cereal production in 2010 slightly up on December forecast: The estimate for world cereal production in 2010 has been revised upward slightly since previously reported (Crop Prospects and Food Situation, December 2010) to 2,237 million tonnes (including rice in milled terms), just 1.1% below the bumper output in 2009. The decline in cereal production in 2010 was entirely due to lower output in developed countries while in developing countries production rose significantly by almost 5%. The estimate for world wheat production in 2010 now stands at almost 654 million tonnes, 1 million tonnes above FAO’s December forecast but still some 4% less than in 2009.

The latest revision mostly reflects a better than expected outcome of the harvest in Argentina, which more than offset some downward adjustments to estimates in Asia (most notably Kazakhstan) and Europe (mostly the Russian Federation). For coarse grains, the estimate of output in 2010 is now put at 1 117 million tonnes, 7 million tonnes up from the previous forecast and just marginally less than the 2009 level. The upward revision was largely driven by increased estimates for China, India, Ethiopia and Sudan.

The estimate for global rice production in 2010 remains unchanged since December at 466 million tonnes (in milled terms). Improved prospects for Brazil, China mainland and Thailand largely offset a sizeable downward revision for India. At this level, the aggregate output of the 2010 rice seasons, which will close when the northern hemisphere countries complete the harvest of their secondary crops by May-June, would be 2% up from 2009, mostly on account of large gains in Asia, where Bangladesh, China, India and Indonesia, the leading world producers, are all expected to tally larger crops.