May 12, 2015

Five-year low for food import bill as prices of agricultural commodities drop: FAO


On a global scale, the prices of agricultural commodities are seen on a continual drop in April this year, according to the Food and Agriculture Organization of the United Nations (FAO). The organisation's report reveals that the world food import bill is expected to reach a five-year low in 2015.

The downward trend is supported by falling world prices, low freight rates and a potent US dollar, and could benefit low-income nations.

As of April, FAO's Food Price Index slid 1.2% from March, at 171 points, its lowest since June 2010 and 19.2% lesser than 2014. The index monitors prices of five key food commodity groups on global markets and aggregates price sub-indices of cereals, meat, dairy products, vegetable oils and sugar.

In the meantime, there remains little changes to import volumes of several food components in the bill, albeit some increases.

Additionally, international harvests may decrease slightly this year. However, the impact from such will be mitigated by adequate supplies, with corn as one such case.  The crop's lower acreage will result in a 1.5% drop of world cereal production from 2014, but backed by significantly abundant stocks, based on the latest forecast in FAO's biannual Food Outlook report.

Concerning cereal production in 2015, the FAO's first forecast reflects a volume of 2.509 billion tonnes if a favourable weather stays throughout the season. The volume dwindles from 2014's record but close to 5% above the average of the past five years.

Given the "modest decline" in production, the FAO reasoned that inventories would be ran down by around 3% in the new season of 2015-16, with "faster drawdowns for coarse grains and rice than for wheat".

For soybean, bumper volumes of the crop will trigger a 5.7% boost to the overall oil-crop output for 2014-15. Supported by higher supplies, the increase is accompanied by diminishing prices which are attributed to weak demand from the biofuels sector, and could foster a lower production in the future season.

The world's meat production is expected to increase 1.3% in the coming year, with beef expanding only 0.2%.

A steady growth of about 2% is anticipated for dairy output this year as lower global prices underpin imports into Africa. Milk production will likely rise with the end of the EU's milk quota system which has been identified as a critical factor for the 6.7% monthly drop in the Dairy Price Index.

In the year ahead, aquaculture will expand by 5%, a trend that would continue to elevate the popularity of fish, according to the FAO. In addition, the sector will be supported by a rebound in wild fish catches which provide feed for aquaculture.

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