Food markets will face many more months of uncertainty due to COVID-19, but the agri-food sector is likely to show more resilience to the pandemic crisis than other sectors, according to a new report by the U.N. Food & Agriculture Organization (FAO).

The "Food Outlook" report provides the first forecasts for production and market trends in 2020-21 for the world's most traded food commodities: cereals, oilseed crops, meat, dairy, fish and sugar.

"The impacts of the COVID-19 pandemic have been felt -- at varying degrees -- across all food sectors assessed by FAO,” Boubaker Ben-Belhassen, director of the FAO Trade & Markets Division, said. “Whilst COVID-19 has posed a serious threat to food security, overall, our analysis shows that from the global perspective, agricultural commodity markets are proving to be more resilient to the pandemic than many other sectors. That said, owing to the size of the challenge and the enormous uncertainties associated with it, the international community must remain vigilant and ready to react, if and when necessary.”

According to the report, total world meat production in 2020 is projected to fall 1.7% to 333 million metric tons due to animal diseases, COVID-19-related market disruptions and the lingering effects of droughts.

“Much of the contraction is again expected to reflect a sharp drop in global production of pig meat, largely concentrated in Asian countries affected by the African swine fever (ASF) viral disease, but also of bovine meat, especially in the United States of America and Australia,” the report noted. “By contrast, global production of poultry meat is forecasted to expand, albeit at half the rate recorded last year.”

FAO is forecasting international meat trade to grow to 37 mmt in 2020, up 2.4% year over year. However, this will be considerably slower than the 6.8% registered in 2019, in large part reflecting a possible reduction in world meat consumption that is consistent with expectations for widespread economic downturns.

China is anticipated to provide much of the trade momentum, the report said, as imports are seen rising by 24% year over year. The expected rise in global demand for meat imports is anticipated to be met mainly through increased exports by Brazil, the U.S., the European Union and the U.K.

International meat prices in May, measured by the FAO Meat Price Index, were down by 16 points (8.6%) from January 2020, with ovine meat registering the sharpest decrease (down 23.5%), followed by poultry meat (down 11.8%), pig meat (down 9.2%) and bovine meat (down 4.1%).

“Since the beginning of the year, imports by China – the world’s largest meat importer – have eased, reflecting high stocks of meat in cold storage that resulted from imports made in preparation for the Lunar New Year celebrations, subsequently cancelled due to the emerging coronavirus crisis, which drastically reduced meat consumption,” FAO reported.

The world cereal supply and demand situation for the 2020-21 season is expected to remain comfortable despite uncertainties posed by the pandemic. Early prospects suggest that global cereal production in 2020 could surpass the previous year's record by 2.6%.

World cereal trade in 2020-21 is projected to stand at 433 mmt, up 2.2% from 2019-20 and setting a new record high, boosted by expected expansions in the trade of all major cereals.

Despite subdued demand prospects, FAO's latest 2019-20 forecasts for oilseeds and derived products point toward a tightening global supply/demand situation, triggered by a marked contraction in production. Tentative forecasts for 2020-21 suggest that supplies could remain tight relative to demand.

Notwithstanding market disruptions caused by the COVID-19 pandemic, FAO reported that global milk production is showing resilience and could possibly grow 0.8% in 2020. However, global dairy exports are expected to contract by 4% amid faltering import demand.

The seafood market, particularly fresh and popular restaurant species, will continue to be heavily affected by COVID-19, FAO said. On the supply side, fishing fleets are sitting idle, and aquaculture producers have drastically reduced stocking targets.

“The pandemic is set to severely hit, in particular, global shrimp and salmon production,” the report noted, adding that the shrimp farming season in Asia, which generally begins in April, is now delayed until June or July. In India, farmed shrimp production is expected to fall 30-40%.

Further, worldwide demand for both fresh and frozen shrimp is declining significantly, while demand for salmon is expected to drop by at least by 15% in 2020.

“Retail sales, in particular, of fresh salmon and trout have fallen greatly, and this will not recover for some time,” FAO added.

World production of sugar in 2019-20 is projected to drop for the second consecutive year and fall below the estimated level of global consumption for the first time in three years.

“Trade in sugar is foreseen to expand, sustained by low prices and stock rebuilding in some traditional importing countries," the report said.

So far, the expectation of a global sugar production deficit for 2019-20 season has done little to support international sugar prices, which have been falling since mid-2017 and are below estimated production costs for the vast majority of world producers, FAO reported.