Geneva (Kanaga Raja) – The international prices of a basket of key agricultural food commodities rose in November to their highest level in nearly six years, with the prices of vegetable oils rising the most, the UN Food and Agriculture Organization (FAO) has said.
According to the FAO, its Food Price Index (FFPI) averaged 105.0 points in November 2020, up 4.0 points (3.9 percent) from October and 6.4 points (6.5 percent) higher than its value a year ago.
The November increase did not only mark the biggest month-on-month rise since July 2012, but it also resulted in the index reaching its highest level since December 2014, said FAO.
All sub-indices of the FFPI registered gains in November, with the vegetable oil sub-index rising the most, followed by those of sugar, cereals, dairy and meat, it added.
The FAO Food Price Index is a trade-weighted index that tracks the monthly change in the international prices of a basket of key food commodities.
According to FAO, its Cereal Price Index averaged 114.4 points in November, up 2.7 points (2.5 percent) from October and as much as 19.0 points (19.9 percent) higher than its November 2019 value.
The latest increase marked the fifth consecutive monthly rise in the value of the index, it said.
Wheat export prices continued to edge upwards in November, largely on a tightening outlook for export supplies and reduced harvest prospects in Argentina, it added.
According to FAO, maize prices also rose further in November, supported by continued large maize purchases by China, amidst further cuts to this year’s production estimates in the United States of America and Ukraine, both major exporters.
“Among other coarse grains, firm demand continued to push up feed barley and sorghum prices.”
On the other hand, international rice prices held steady in November, as support provided by tight availabilities and currency movements in selected South East Asian exporters was offset by limited demand and harvest pressure in other major origins.
The FAO Vegetable Oil Price Index averaged 121.9 points in November, gaining a stunning 15.4 points (or 14.5 percent) month-on-month and reaching its highest level since March 2014.
“The rally mainly reflects additional spikes in palm oil prices, combined with further increases in soy, rapeseed and sunflower seed oil values,” it said.
International palm oil price quotations rose for a sixth consecutive month, on account of sharp contractions in world inventory levels, as smaller than customary output in major producing countries coincided with firm global import demand.
Prices of soy oil firmed amid subdued export availabilities in South America and upbeat import demand, notably from India.
In a similar vein, rapeseed and sunflower seed oil values strengthened further on limited supplies. Meanwhile, firming petroleum prices also lent support to vegetable oil prices, said FAO.
According to FAO, its Dairy Price Index averaged 105.3 points in November, up 0.9 points (0.9 percent) month-on-month.
This continues the upward trend registered in recent months and nearing an 18-month record high, it said.
“The latest rise was largely driven by firmer butter and cheese prices, reflecting steady increases in global import demand and a surge in retail sales in Europe coinciding with the region’s milk production reaching seasonal lows.”
In contrast, following six months of consecutive increases, skim milk powder prices dropped due to a slower pace of purchases in Asia, especially China, coupled with increased global export availabilities, including India’s powder surpluses.
Despite a rise in demand for spot supplies from the Middle East and North Africa, especially Algeria, smaller purchases by China weighed on whole milk powder price quotations, said FAO.
The FAO Meat Price Index averaged 91.9 points in November, up 0.8 points (0.9 percent) month-on-month, marking the first increase since January, but still 14.6 points (13.7 percent) below its value in the corresponding month last year.
“International bovine meat prices increased, after four months of consecutive declines, due to robust demand from China and tight supplies from Oceania,” said FAO.
Pig meat prices recovered slightly, underpinned by a fast pace of purchases by China amidst low availability of slaughter-ready animals in Brazil, while Germany and Poland remained banned from exporting to the Asian markets over African swine fever outbreaks.
Ovine (lamb and mutton) meat prices also rose, mainly because of firm import demand from China and low supplies from Oceania, said FAO.
On the other hand, poultry meat quotations fell, reflecting increased shipments from leading producers amidst subdued international import demand.
According to FAO, its Sugar Price Index averaged 87.5 points in November, up 2.8 points (3.3 percent) from October, representing the second consecutive monthly increase.
“The increase in international sugar quotations in November was mainly underpinned by firmer new data supporting earlier expectations of a global production shortfall in the 2020/21 marketing season,” said FAO.
These expectations result from weaker crop prospects in the EU, Thailand and the Russian Federation, as unfavourable weather conditions had negatively impacted yields.
FAO said sugar prices also received further support in the aftermath of hurricane-damaged sugarcane crops and infrastructure in Nicaragua, Honduras and Guatemala.
LOWER FORECAST FOR WORLD CEREAL PRODUCTION
In a separate Cereal Supply and Demand Brief, FAO said that its forecast for global cereal production in 2020 has been lowered for the third consecutive month, with downward revisions for all the major cereals.
Nonetheless, global cereal production is still expected to reach a record high level of 2,742 million tonnes, 1.3 percent above the previous year’s out-turn, it added.
Forecast at 1,472 million tonnes in 2020, world coarse grains production has been cut by 6.8 million tonnes month-on-month, said FAO.
“The bulk of the revision reflects reduced yield prospects for maize in the United States of America (USA), which, however, is still on course to harvest its third-largest crop on record, and in Ukraine.”
These reductions more than outweigh a lifting of Serbia’s maize production forecast, which is now seen to reach an all-time high in 2020, said FAO.
FAO has reduced marginally since last month its forecast for world wheat production in 2020 to 761.7 million tonnes, putting this year’s output at a comparable level with the 2019 out-turn.
“The downward revision reflects reduced forecasts for Argentina and Brazil, on account of recent sparse rains that curbed yield expectations, as well as in Kazakhstan, offsetting an increase made to the production estimate in the Russian Federation,” it said.
Production prospects for rice have deteriorated in Bangladesh and Viet Nam, in both cases reflecting the adverse impact of weather on secondary crops.
However, the foreseen lower output in both countries, alongside other smaller downward revisions, are partly compensated by an upgrade for Pakistan, where preliminary official assessments indicate that another robust area expansion should lead to a record 2020 harvest.
As a result, world rice production in 2020 is now predicted to reach an all-time high of 508.4 million tonnes, 1.5 percent above the 2019 reduced level but marginally down from the previous month’s expectations, said FAO.
Looking further ahead, FAO said planting of the 2021 winter wheat crop in the northern hemisphere is underway, and sowing in several major producing countries are foreseen to increase driven by remunerative prices, although recent dry weather could curb planting expansions and hinder yields.
“In the USA, sowing operations are progressing at a fast pace, but dry weather conditions, influenced by the prevailing La Nina weather phenomenon, have resulted in moderately poorer crop conditions compared to the previous year.”
In Europe, robust export demand and rising prices have incentivized an area expansion in the Russian Federation, with sowings officially estimated at 19.2 million hectares, while limited rainfall in Ukraine caused 2021 sowings to fall to a below-average level.
FAO said that following a reduced acreage in 2019, wheat sowings in the European Union (EU) are expected to recover substantially.
In Asia, weather conditions have been generally conducive for the 2021 wheat crop and, supported by profitable prices, acreage in China, India and Pakistan are all foreseen to increase, it added.
FAO has forecast world cereal utilization in 2020/21 at a record 2,744 million tonnes, nearly unchanged from the previous month and 1.9 percent higher than in 2019/20.
FAO has forecast total utilization of coarse grains in 2020/21 at 1,477 million tonnes, up 2.6 percent from the previous season stemming mostly from increased feed use, especially of maize and sorghum in China, as well as other uses, resulting from a rise in the production of maize-based ethanol in Brazil and the USA.
At 757.6 million tonnes, global wheat utilization in 2020/21 is expected to exceed the estimated level for 2019/20 by 1.1 percent, largely as a result of a foreseen increase in food use.
FAO said that global rice utilization in 2020/21 is anticipated to reach 510.3 million tonnes, unchanged from last month’s forecast and up 1.5 percent from 2019/20.
FAO has cut its forecast for world cereal stocks by the close of seasons in 2021 by 9.6 million tonnes since the previous month to 866.4 million tonnes, with stocks now seen falling below their opening level by 0.7 percent.
At 402.5 million tonnes, total coarse grain inventories are seen lower by more than 10 million tonnes than earlier anticipated, largely reflecting a downward revision to maize inventories in the USA.
With this month’s revision, world coarse grain inventories would fall by 2.8 percent below their opening levels.
On the other hand, FAO has raised its forecast for world wheat inventories by almost 2 million tonnes since November, mainly on expectations of larger stocks in Canada, China and the EU, and is now pegged at 282.9 million tonnes, up 2.3 percent from opening levels.
It said that wheat stock build-ups in China account for the bulk of the expected year-on-year expansion in global inventories.
FAO has pegged world rice stocks at the close of 2020/21 at 181.0 million tonnes, down 0.4 percent from their opening levels and 1.0 million tonnes below last month’s expectations.
The monthly revision primarily reflects an anticipated decline in reserves in India owing to improved export prospects for the country, it said.
“Stocks in India are nevertheless still predicted at an all-time record. Indeed, the expected accumulation in India, alongside an even higher than previously anticipated build-up in Thailand, is seen driving an increase in the major exporters’ aggregate rice reserves.”
FAO has forecast world trade in cereals in 2020/21 at 454.6 million tonnes, up 3.2 million tonnes from last month and now 3.4 percent higher than the 2019/20 level.
It has raised its forecast for world trade in coarse grains in 2020/21 (July/June) by 2.7 million tonnes month-on-month and is now pegged at nearly 223 million tonnes and surpassing the previous season’s record by 5.7 percent.
This month’s upward revision primarily stems from a faster-than-expected pace in maize sales by the USA, driven by continued strong purchases by China, said FAO.
At 184.5 million tonnes, world wheat trade in 2020/21 (July/June) is forecast to remain near the 2019/20 level, unchanged since last month as greater expected sales from the Russian Federation balance a downward revision to Argentina’s exports as a result of lower crop prospects.
FAO has forecast world trade in rice in 2021 (January-December) at 47.6 million tonnes, 6.9 percent above the revised 2020 forecast of 44.5 million tonnes.
“Upward import revisions are introduced for various Near Eastern and African countries this month, more than compensating for a somewhat less buoyant import outlook for the Philippines,” it said.
(Published in SUNS #9248 dated 7 December 2020)
