June 8, 2011

The meat price index worldwide reached a new record at 183 points in May and a mix of strong import demand and limited export availability lead to a further firming of prices in the next few months, stated the UN's Food and Agriculture Organization (FAO).

In its biannual Food Outlook report, FAO said high feed prices, disease outbreaks and depleted animal inventories are expected to limit the expansion of global meat production to 294 million tonnes in 2011, up just 1% from 2010.

FAO also predicted high and volatile agricultural commodity prices for the rest of this year and into 2012, citing a sharp rundown on inventories and only modest overall production increases for the majority of crops.

"The general situation for agricultural crops and food commodities is tight with world prices at stubbornly high levels, posing a threat to many low-income food deficit countries," according to David Hallam, Director of FAO's Markets and Trade Division.

International food prices declined by 1% in May from April prices but were still up 37% from May 2010.  Declines in international prices of cereals and sugar were more than offset by increases in meat and dairy prices.

FAO predicted record global cereal production in 2011 of 2,315 million tonnes, which would be a .5% increase over 2010 and a 1% drop from 2009.

Even at record levels, however, cereal production is expected to barely meet consumption, providing support to prices.  However, the Russian Federation's announcement that it will remove its cereals export ban from July 2011 could help relieve some of that pressure, according to FAO's grain analyst, Abdolreza Abbassian.

In the oilseeds market, supplies in 2011 and 2012 may not be sufficient to meet growing oil and meal demand, implying further reductions in global inventories, the report predicted.