In June, global food commodity prices rose for the first time since the beginning of the year, driven by a rebound in vegetable oil, sugar and dairy prices, according to the U.N. Food & Agriculture Organization (FAO). However, in the markets for cereals and meats, most prices remained under downward pressure amid market uncertainties posed by the COVID-19 pandemic.
The FAO Food Price Index, which tracks international prices of the most traded food commodities, averaged 93.2 points in June, about 2.4% higher than the previous month.
Effective as of July 2020, the price coverage of the Food Price Index has been expanded and its base period revised from 2002-04 to 2014-16.
The FAO Dairy Price Index rose 4.0% from May, marking the first increase after four months of successive declines. Renewed import demand for spot supplies, especially from the Middle East and East Asia, coupled with seasonally declining supplies in Europe and limited availability of uncommitted supplies in Oceania, underpinned the recent price increases, FAO noted.
The FAO Cereal Price Index declined 0.6% from May. FAO said downward pressure on wheat prices in June was due partly to new harvests in the Northern Hemisphere and improved production prospects in a number of major exporting countries, including the Black Sea region.
The FAO Meat Price Index fell 0.6% from May, averaging 6.0% below its June 2019 value. Bovine meat and poultry price prices fell, which FAO said was largely due to increased export availabilities in major producing regions, whereas pig meat prices registered a small increase, mostly in Europe, on expectations for the further easing of COVID-19 market restrictions.
The FAO Vegetable Oil Price Index gained 11.3% in June after declining for four consecutive months. The rebound mainly reflects a sharp rise in palm oil prices due to recovering global import demand, following the easing of COVID-19-related lockdowns in a number of countries and concerns over possible production setbacks amid prolonged migrant labor shortages. Prices of soy, sunflower and rapeseed oils also rose.
The FAO Sugar Price Index climbed 10.6% in June from the previous month. The surge in crude oil prices provided strong support to sugar markets, encouraging Brazil's sugar mills to use more sugarcane supplies to produce ethanol instead of sugar, thereby affecting sugar export availabilities and prices.
Record global cereal production to boost stocks
According to the FAO “Cereal Supply & Demand Brief,” world cereal production is poised to reach a new record level of 2.790 billion metric tons in 2020 -- up 9.3 mmt from the May forecast and surpassing the record high registered in 2019 by as much as 3.0%.
FAO raised wheat production forecasts for India and the Russian Federation, more than offsetting a cutback to the expected output of the European Union and the U.K.
The forecast for world coarse grain production in 2020 has also been revised to 1.519 billion mt, up 5.7 mmt from the previous month, reflecting expectations of larger outputs of barley in Australia, the EU and Turkey.
FAO's global rice production forecast for 2020 is now pegged at 509.2 mmt, 400,000 mt above June's figure, primarily reflecting improved prospects for South American countries, where conducive weather raised yield expectations to all-time highs.
World cereal utilization in the year ahead is forecasted to rise to 2.735 billion mt, a 1.6% increase from the previous month's forecast, mostly driven by an upturn in feed and industrial uses of coarse grains compared to earlier expectations. World rice utilization is also predicted to reach a fresh peak of 510.4 mmt in 2020-21, up 1.6% from June, based on expanding food use.
Reflecting new production and consumption forecasts, FAO now expects world cereal stocks by the end of the 2021 seasons to reach 929 mmt, representing a robust, year-over-year expansion of 6.0%. This would drive the global cereal stock-to-use ratio in 2020-21 to a 20-year high of 33.0%, highlighting the comfortable global supply prospects in the new season.
Food assistance needs to grow
While conflicts and weather shocks remain critical factors underpinning the high levels of severe food insecurity in countries requiring external assistance for food, the COVID-19 pandemic is also having wide-ranging and severe effects, particularly through the loss of income, according to FAO’s quarterly “Crop Prospects & Food Situation report.”
Despite the issues, the global cereal harvest is on track for growth in all regions except for Europe. Cereal production in Africa in 2020 is projected to increase 1.0%, although declines are expected in northern, western and central regions of the continent.
FAO's forecast for the aggregate cereal output of low-income, food-deficit countries (LIFDCs) in the 2020-21 season stands at 492.7 mmt, which is 6.0% above the average and would mark a fifth consecutive annual production increase. However, populations are growing even faster, and the overall cereal import requirement for LIFDCs is estimated at 73.4 mmt, an increase of around 5% from the previous year, which also reflects production downturns in several countries.