November 8, 2013

FAO reports balanced food markets, less price volatility

Driven by improved supplies and a recovery in global inventories of cereals, world's food commodity markets are becoming more balanced and less price volatile than in recent years, according to FAO's "Food Outlook" report.

"The prices for most basic food commodities have declined over the past few months. This relates to production increases and the expectation that in the current season, we will have more abundant supplies, more export availabilities and higher stocks," said David Hallam, Director of FAO's Trade and Markets Division.

The sharp increase in 2013 cereal production mostly stems from a recovery of corn crops in the US and record wheat harvests in Commonwealth of Independent States (CIS) countries. World rice production in 2013 is expected to grow only modestly.

Global stocks ending in 2014 are also anticipated to increase by 13%, to 564 million tonnes, with coarse grains alone up by 30%, mostly in the US. Wheat and rice stocks are also projected to rise, by 7% and 3% respectively.

The expansion in world cereal stocks would result in the global cereal stocks-to-use ratio reaching 23%, well above the historical low of 18.4% in 2007-08.

In 2013, the world food import bill is set to decline by 3% to US$1.15 trillion, with import costs of cereals, sugar, vegetable oils and tropical beverages falling, but dairy, meat and fish remaining firm, according to FAO's latest Food Outlook.

The FAO Food Price Indexrose slightly in October, averaging 205.8 points. This was 2.7 points, or 1.3% above September, but still 11 points, or 5.3% below its October 2012 value. The slight increase was largely driven by a surge in sugar prices, although prices of the other commodity groups were also up.

The Index, which is a measure of the monthly change in international prices of five major food commodity groups (including 73 price quotations), has undergone some changes in the way it is calculated, although the new approach did not significantly alter the values in the series. The revised Index has also been extended back to 1961. The revisions are discussed in the Special Feature section of Food Outlook.

According to the report, world oil crop production could climb to an all-time high in 2013-14, supported by record soy crops in South America. Global output of oilseed products should match world utilisation for the second consecutive year, although a sizeable surplus is possible in the case of meals/cakes.

World meat production is anticipated to grow by 1.4% in 2013. Prices have remained at historically high levels since the beginning of 2011. There is no sign of overall price decreases, despite reduced feed costs.

World milk production in 2013 is forecast to grow by 1.9%. Asia and Latin America and the Caribbean are expected to account for most of the increase, with only limited growth elsewhere. International dairy products prices have declined from their April peak, but still remain at historically high levels.

Aquaculture continues to boost overall fish supply, pushing quotations down from earlier levels. Fish consumption per capita keeps growing, with aquaculture in the process of overtaking capture fisheries as the main source of supply for direct human consumption.