Global food markets will likely remain "generally well balanced" in the year ahead as prices for most internationally traded agricultural commodities are relatively low and stable, the U.N. Food & Agriculture Organization (FAO) reported Oct. 6.
The benign outlook, especially for staple grains, is poised to lower the world food import bill to a six-year low, according to the FAO "Food Outlook."
Record global production forecasts for this year's wheat and rice harvests, along with rebounding maize output, are helping keep inventories ample and prices low. Worldwide cereal production in 2016 should rise 2.569 billion metric tons, up 1.5% from the previous year and enough to further boost existing inventories.
The value of total food imports is expected to fall 11% in U.S. dollar terms in 2016 to 1.168 trillion, as lower bills for livestock products and cereal-based foodstuffs more than offset higher bills for fish, fruit and vegetables, oils and particularly sugar. However, the decline is expected to be slower for economically more vulnerable nations, many of which have depreciating local currencies.
FAO raised its forecast for global wheat production to 742.4 million mt, led by increases in India, the U.S. and the Russian Federation, which is poised to overtake the European Union as the largest wheat exporter. Total wheat utilization is projected to reach 730.5 mmt, including a big jump in use of lower-quality wheat for animal rations.
Global rice production is predicted to expand for the first time in three years, increasing 1.3% to an all-time high of 497.8 mmt, thanks to abundant monsoon rains over Asia and sizable increases in Africa, FAO said. Coarse grain output is expected to rise 1.8% on the year, buoyed by record crops in the U.S., Argentina and India.
Cereal prices are drifting lower on the backs of the expected hefty supply. Chicago Board of Trade wheat and maize futures have both dropped more than 16% since the start of the year, while quoted rice prices are at their lowest level since early 2008.
Production of cassava, a dietary mainstay in Africa where per capita consumption is above 100 kg annually, is also projected to grow 2.6% this year to 288 mmt. However, China's shift to drawing down its maize stockpile for the domestic industry and feed has curbed international prices and trade flows for cassava, FAO explained.
Production of soybeans and other oilseed crops could reach an all-time high this year thanks to record U.S. yields, although demand is expected to grow even faster.
In the livestock sector, dairy markets are expected to return to general balance in 2016 after a long period of excess supply, but tightening milk availabilities in the EU triggered the largest monthly increase in dairy prices in many years.
Stagnant world meat output in 2016, coupled with rising international demand for poultry and pig meat, especially from East Asian markets, continues to lend support to meat prices.
Global fish production, meanwhile, is forecasted to expand by a below-trend 1.8% this year to 174 mmt as aquaculture output is expected to expand 5% while wild-caught fish output declines 0.9% due, in part, to El Nino's impact on Pacific sardines, anchovetas and squid.
Food Price Index
The FAO Food Price Index, also released Oct. 6, averaged 170.9 points in September, up 2.9% from August and up 10% from a year earlier.
The increase was driven by a 13.8% monthly jump in the FAO dairy price index, which was partly a result of a sharp jump in butter prices benefiting exporters in the EU, where dairy output is declining.
The FAO sugar price index rose 6.7% from August on the back of unfavorable weather in the center-south main production region in Brazil.
Palm oil prices also rose, helped by low stock levels in both exporting and importing countries, as did prices of soy and rapeseed oil, lifting the FAO vegetable oil price index 2.9% for the month.
The FAO meat price index was unchanged from August.
The FAO cereal price index, meanwhile, slipped 1.9% from the previous month and is 8.9% below its year-earlier level.
The FAO Food Price Index is a trade-weighted index tracking international market prices for the five key commodity groups. Its current level is the highest since March 2015. The sub-index for cereals is now at its lowest in a decade in deflated terms.