FAO: Global food markets volatile

FAO: Global food markets volatile

FAO report offers first forecast for global food markets in 2014-15.

GLOBAL food markets have been experiencing instability and higher food prices as a result of unfavorable weather conditions in various countries and political tensions in the Black Sea region, the U.N. Food & Agriculture Organization (FAO) reported in its "Food Outlook" report.

According to World Bank Group, worldwide food prices have climbed 4% for the first four months of this calendar year, which breaks the downward trend occurring since August 2012.


Cereal crops

Following a record level for cereal crop production in 2013, FAO is predicting a 2.4% decline for 2014 to 2.458 million metric tons (Figure 1). Nevertheless, based on the condition of crops already planted and assuming that ideal growing conditions will continue, this year's global crop is expected to be the second largest ever.

In general, wheat and coarse grains will contribute the most to the reduction in production levels.

Wheat production is anticipated to be 1.9% less than the previous year, at 702 mmt worldwide, while FAO is predicting a 3.9% decline in coarse grains for this year due to an expected reduction in corn grown in the U.S., the world's largest producer.

For the most part, a slowdown in industrial use of cereal grains and only a modest rise in feed use will account for the smaller gain in utilization for 2014-15 — at 1.9% versus 4.0% for the previous season.

Although China is expected to have an 8% increase in demand for coarse grains, especially corn, for feed in 2014-15, the net increase in coarse grain use is projected to be up only 1.8% due to a softening in industrial utilization.

At the close of the 2014-15 crop season, FAO is estimating world cereal stocks to fall to 566 mmt, 1.4% lower than the beginning levels.

Looking more closely at the data, world inventories of coarse grains are likely to drop to 206 mmt, or 4%, below opening levels as a result of an anticipated decrease in corn ending stocks in the U.S. and China. In addition, global wheat supplies are expected to tighten in the new season.

Furthermore, trade of cereal grains worldwide for 2014-15 indicates a 1.5% reduction from the previous season as concerns over weather and tension in the Black Sea region pressure the price of corn and wheat higher.


Oilseed crops

In contrast, FAO projects world oilseed production to climb to a fresh high in 2013-14, permitting the output of meals and oils to expand at above-average rates.

As stated in the report, a year-over-year improvement in the domestic availability of oilseed crops in key producing countries is expected, with the exception of the U.S., which started the season with a limited supply.

Largely, the consumption of both oilseed oils and meals worldwide is set to continue expanding, driven by high supplies in general and increased demand in developing countries in Asia. However, global meal consumption could drop below anticipated levels due to the higher meal price and an increase in the corn supply.

On the whole, with South America's record soybean crop coming to market and a slowdown in China's import demand, the global supply and demand situation for oilseeds and oilseed meals should ease. Despite this, the inventory of soybean meal in the U.S. is projected to continue to decline, which is unwelcome news for animal agriculture.


Meat and poultry

Modest growth in world meat and poultry production is projected for 2014, rising 1.1% to 311.8 mmt. The growth will be concentrated in developing countries, where demand will increase as well.

At the international level, historically high meat and poultry prices will continue, with no indications of a decrease in the near future (Figure 2).

Global meat and poultry trade is estimated to increase 1.4% to 31.3 mmt, which is less than the average growth for recent years, reflecting production constraints in some of the main exporting countries, such as the U.S., FAO reported.

Moreover, there are some large differences in projected global trade among the protein species. Beef and poultry trade are expected to increase, while pork is likely to decline. Poultry will remain the leader for trade, representing 43% of the global total, followed by beef and pork, respectively.


Dairy products

The global price of dairy products fell sharply in April as a result of an increase in available product, with strong milk production performance in the Northern Hemisphere and an unusually extended season in New Zealand.

In 2014, milk production worldwide is projected to expand by 2.1%, reaching 783 mmt, with Asia accounting for the biggest increase.

FAO forecasted global trade of dairy products to continue to climb; still, the increase of 69 mmt, or 1.8%, is a reduced rate of growth compared to recent years.

Additionally, Asia — in particular, China — will boost demand for milk and dairy products this year. Lower milk prices may also stimulate increased import demand in Africa. Likewise, strong demand for butter and skim milk powder is anticipated to increase imports by Russia.

FAO: Global food markets volatile

Volume:86 Issue:23

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