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Posts Tagged ‘food import

Only 16 points under the 2008 peak, FAO’s food price index

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International prices of most agricultural commodities have increased in recent months, some sharply. The FAO Food Price index has gained 34 points since the previous Food Outlook report in June, averaging 197 points in October, only 16 points short from its peak in June 2008. The upward movements of prices were connected with several factors, the most important of which were a worsening of the outlook for crops in key producing countries, which is likely to require large draw downs of stocks and result in tighter global supply and demand balances in 2010-11.

Another leading factor has been the weakening of the United States Dollar (US Dollar) from mid-September, which continues to sustain the prices of nearly all agricultural and non-agricultural traded commodities. The increase in international prices of food commodities, all of which accruing in the second half of 2010, is boosting the overall food import bill in 2010 closer to the peak reached in 2008.

Seedlings waiting to be transplanted in village of Gbarnga-ta, 15km from Gbarnga in Bong county, where CRS and Caritas NGOs support farmers to diversify their crops as part of their nutrition push. Photo: Anna Jefferys/IRIN

Seedlings waiting to be transplanted in village of Gbarnga-ta, 15km from Gbarnga in Bong county, where CRS and Caritas NGOs support farmers to diversify their crops as part of their nutrition push. Photo: Anna Jefferys/IRIN

The pressure on prices to rise was first felt in the cereal market, most notably for wheat and barley, in August. This prompted FAO to call for an extraordinary meeting on 24 September 2010 to discuss the underlying causes and possible remedies. The meeting clearly identified the importance of reliable and upto-date information on crop supply and demand to cope with unexpected developments in world markets. More transparency and a better understanding of the role of commodity futures markets and government responses were also viewed as necessary to address price volatility.

Amid fears of a repeat of the price surge experienced in 2008, FAO expects supplies of major food crops in 2010-11 to be more adequate than two years ago, mainly because of much larger reserves. The fact that supplies of rice, wheat and white maize, the most important staple food crops in many vulnerable countries, are also more ample lessens the risk of a repeat of the 2007-08 crisis in the current season. Nonetheless, following a series of unexpected downward revisions to crop forecasts in several major producing countries, world prices have risen alarmingly and at a much faster pace than in 2007-08.

Attention is now turning to plantings for the next (2011-12) marketing season. Given the expectation of falling global inventories, the size of next year’s crops will be critical in setting the tone for stability in international markets. For major cereals, production must expand substantially to meet utilization and to reconstitute world reserves and farmers are likely to respond to the prevailing strong prices by expanding plantings. Cereals, however, may not be the only crops farmers will be trying to produce more of, as rising prices have also made other commodities attractive to grow, from soybeans to sugar and cotton.

This could limit individual crop production responses to levels that would be insufficient to alleviate market tightness. Against this backdrop, consumers may have little choice but to pay higher prices for their food. With the pressure on world prices of most commodities not abating, the international community must remain vigilant against further supply shocks in 2011 and be prepared.

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Wheat sends food prices up, US agriculture exports to be $107.5 bn

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Surging wheat prices drove international food prices up 5% last month in the biggest month-on-month increase since November 2009, the Food and Agriculture Organization (FAO) has announced. The FAO Food Price Index (FFPI) averaged 176 points in August, up nearly nine points from July, FAO said in its latest update on the global cereals supply and demand situation. The 5% increase brought the Index up to its highest level since September 2008, but still 38% down from its peak in June 2008.

FAO Food Price Index

FAO Food Price Index, 2010 September

The FFPI surge mainly reflected the sudden sharp rise in international wheat prices following drought in the Russian Federation and the country’s subsequent restrictions on wheat sales. But other drivers included higher sugar and oilseed prices. FAO’s update said that the forecast for world cereal production in 2010 has been lowered by 41 million tonnes to 2,238 million tonnes from 2,279 million tonnes reported in June.

However, even at this lower level, world cereal output in 2010 would be the third highest on record and above the five-year average. Among the major cereals, wheat accounted for most of the cut, reflecting mainly smaller crops in the leading producers in the CIS due to adverse weather. Under the present forecast world cereal utilization would slightly exceed production in 2010-11. This would trigger a 2% contraction in world ending stocks from their 8-year-high opening levels and to a small decline in world cereal stocks-to-use ratio. At 23%, however, the ratio would still remain well above the 19.5% low witnessed in the 2007-08 food crisis period.

A further cut in the forecast for 2010 world wheat production since FAO’s last update on 4 August puts this year’s wheat crop at 646 million tonnes, down 5% from 2009 but still the third highest ever. The latest revision reflects a further cut in the estimate of this year’s harvest in the Russian Federation to 43 million tonnes (from 48 million tonnes in August) more than offsetting higher forecasts for crops in a number of other countries including the United States and China.

FAO Food Commodity Price Index, 2010 September

FAO Food Commodity Price Index, 2010 September

The forecast for world wheat ending stocks in 2011 was also lowered, to 181 million tonnes, down 9% from their 8-year high opening level. The stock-to-use ratio for wheat in 20010-11 was projected at 27%, down 3% from the previous season but still 5% higher than the 30-year low in 2007-08.

World production of coarse grains was forecast to reach 1 125 million tonnes, down 6 million tonnes from the previous forecast in June but up marginally from 2009 and the second highest on record. Maize production was heading towards an all-time high of 845 million tonnes, with expectation of record crops in China and in the United States. But world barley production was forecast to fall by 22% to a 30-year low of only 129 million tonnes in 2010, driven mostly by a sharp cut in production in the CIS and in the EU as a result of poor weather.

The forecast for global rice production in 2010 was also revised downward and now stands at 467 million tonnes, 5 million tonnes lower than the June 2010 forecast but still 3% more than in 2009 and a  historical record. Much of the revision was the consequence of Pakistan’s floods but it also stemmed from lower expectations in China, Egypt, India, Laos and the Philippines. The recent disturbances in  world cereal markets will be examined by delegates meeting at a special one-day session of FAO’s Intergovernmental Group on Grains and Intergovernmental Group on Rice convened for 24 September at FAO headquarters in Rome.

World Food Day 2010

16 October is World Food Day 2010

Industrial agriculture news sources such as Agweb are reporting the United States Department of Agriculture’s (USDA) agriculture products exports for financial year 2010, which have just been released. Increased exports of grain and feed at higher values along with increased livestock, poultry, and dairy product exports all helped to push up the forecast for US ag exports in fiscal year (FY) 2010. USDA has said the value of US ag exports for FY 2010 will be US$107.5 billion, up US$3 billion from their May forecast. And their first look at FY 2011 has the value of those shipments projected at US$113 billion, up US$5.5 billion from FY 2010 forecast.

On the import side, USDA now puts FY 2010 imports at a value of US$77 billion, up US$500 million from their May forecast. For FY 2011, USDA sees the value of US ag imports rising to US$81.5 billion. USDA now expects a slightly larger trade surplus for US agriculture for FY 2010 – US$30.5 billion, up US$2.5 billion from May, and for FY 2011 they expect the trade surplus will be US$31.5 billion. Analysts for USDA’s Economic Research Service (ERS) also included this caution:

“The three major threats to world growth in 2011 are the EU economy tanking due to their debt situation, the U.S. economy going into a recession, and a continuing widening of the Chinese trade surplus. A major near-term risk to the world recovery is a potential spillover of the crisis brought on by high government debt in Greece, Portugal, Spain, Italy, and Ireland.

“The consensus forecast for 2010 and 2011 is of continuing recovery in both the developed and developing economies, with a few regional rough patches. The case for moderate world growth for the rest of 2010 and solid growth for 2011 is based on low interest rates, increasing trade flows, and the willingness of central banks to keep financial assets on current balance sheets, encouraging easier private credit and strong growth in corporate profits. At this time, that scenario is much more likely than any or all of the downside scenarios.”