TWN Info Service on Sustainable Agriculture
12 April 2021
Third World Network

United Nations: Food commodity prices rise for tenth straight month
Published in SUNS #9323 dated 12 April 2021

Geneva, 9 Apr (Kanaga Raja) – The international prices of a basket of key agricultural food commodities rose for the tenth consecutive month in March, mainly driven by vegetable oils and dairy products, the United Nations Food and Agriculture Organization (FAO) has said.

According to the FAO, its Food Price Index (FFPI) averaged 118.5 points in March 2021, 2.4 points (2.1 percent) higher than in February, with the increase marking the tenth consecutive monthly rise in the value of the FFPI to its highest level since June 2014.

“The increase was led by strong gains in vegetable oils, meat and dairy sub-indices, while those of cereals and sugar subsided,” said FAO.

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 the FAO, its Cereal Price Index averaged 123.6 points in March, down 2.2 points (1.7 percent) from February, ending the eight-month rising trend, but still 25.9 points (26.5 percent) above its March 2020 level.

Among major cereals, wheat export prices declined the most in March, falling 2.4 percent. However, they remained 19.5 percent higher than in the same month last year.

The month-to-month decline in wheat prices mostly reflected generally good supplies and favourable production prospects for the 2021 crops, said FAO.

“International maize and barley prices also fell in March, although continued strong import demand from China prevented them from falling more significantly, and sorghum prices even rose.”

Following three months of steady gains, international rice prices edged down in March, as freshly harvested crops began to reach the market and export demand for non-Japonica rice remained slow in all major origins, with the exception of India, said FAO.

According to FAO, its Vegetable Oil Price Index averaged 159.2 points in March, up 11.8 points (or 8.0 percent) from February and marking its highest level since June 2011.

“The persistent strength of the index was driven by higher values of palm, soy, rape and sunflower oils,” said FAO.

According to the FAO, international palm oil prices registered a tenth consecutive monthly increase, as lingering concerns over tight inventory levels in major exporting countries coincided with a gradual recovery in global import demand.

Meanwhile, soy oil prices rose sharply, largely underpinned by prospects of firm demand, especially from the bio-diesel sector, it said.

“As for prices of rapeseed and sunflower seed oils, protracted tightening supplies in, respectively, Canada and the Black Sea region continued to lend support.”

According to the FAO, its Dairy Price Index averaged 117.4 points in March, up 4.4 points (3.9 percent) from February, rising for the tenth consecutive month and lifting the index to nearly 16 percent above its value in the corresponding month last year.

In March, international butter prices rose, mainly underpinned by somewhat tight supplies in Europe due to a slow start to its milk production season and increased internal demand in anticipation of a food-service sector recovery, said FAO.

“Milk powder prices also rose, supported by a surge in imports in Asia, especially China, due to concerns over possible short-term sourcing challenges amidst seasonally declining milk production in Oceania and scarce shipping container availability in Europe and North America.”

On the other hand, FAO said cheese prices fell slightly for a third consecutive month due to limited demand for spot supplies.

The FAO Meat Price Index averaged 98.9 points in March, up 2.2 points (2.3 percent) from February, continuing the upward trend for the sixth consecutive month, but still stood slightly (0.5 percent) below its value a year ago.

“Poultry and pig meat quotations increased, underpinned by a fast pace of imports by Asian countries, mainly China,” said FAO.

A surge in internal sales in Europe in preparation for the Easter celebrations also supported pig meat prices, it added.

Bovine meat prices remained steady at close to the February levels, as increases in quotations for Brazil and the United States of America compensated a decrease in export prices from Australia.

However, FAO said that ovine (lamb and mutton) meat prices fell on increased supplies from New Zealand, as farmers offloaded animals early due to the prevailing dry weather.

According to the FAO, its Sugar Price Index averaged 96.2 points in March, down 4 points (4.0 percent) from February, marking the first decline after sharp increases registered in the previous two months.

However, sugar quotations remained more than 30 percent above their levels in the corresponding period of last year, due to concerns over tight global supplies in 2020/21, said FAO.

“The recent monthly decline in international sugar price quotations was triggered by prospects of large exports from India, despite persisting logistical constraints.”

Upward pressure on prices due to strong import demand, particularly from China, and increases in crude oil quotations prevented more substantial price declines in recent weeks, said FAO.

RISE IN GLOBAL CEREAL PRODUCTION

Meanwhile, in a separate Cereal Supply and Demand Brief, FAO said that although early in the season, it expects global cereal production to increase for a third consecutive year in 2021.

“Harvesting of the winter wheat crop has already begun in some countries in the northern hemisphere and current crop conditions point to slightly better prospects compared to earlier expectations, lifting the preliminary 2021 global wheat production forecast to 785 million tonnes,” said FAO.

In the European Union (EU), FAO has forecast production to rise sharply to 137 million tonnes in 2021.

FAO based its forecast on “an upturn in wheat acreage and favourable winter crop conditions at the start of spring supporting yield expectations above both the previous year’s low level and the five-year average.”

Similarly, in the United Kingdom, wheat crops are in good condition having benefited from drier and warmer weather in late February and March following an excessively wet winter, and production is forecast to reach 14 million tonnes, it said.

In the Russian Federation, despite improved rainfall that partly alleviated early-season moisture deficits, a cold spell in February is likely to result in higher-than-normal rates of winter-kill in the wheat-producing Southern district due to a lack of sufficient snow cover, it added.

FAO said that as a result, and combined with a decline in plantings, production is foreseen to decrease to 79 million tonnes in 2021.

“In Ukraine, prospects are favourable and official data indicate that wheat production would increase to an above- average level of 27.5 million tonnes.”

In the United States of America, official data indicate a moderately larger area sown to winter wheat compared to initial estimates.

According to FAO, this increase is foreseen to more than offset a reduction in spring sowings and, consequently, total wheat plantings are estimated to be 5 percent higher year-on-year but still the fourth smallest area on record.

Based predominantly on the acreage expansion, as less-than-ideal weather has contained yield prospects, FAO has forecast wheat production to increase marginally to about 52 million tonnes in 2021.

FAO said in Asia, wheat production in Pakistan is foreseen to reach at least the official target of 27 million tonnes, underpinned by an above-average planted area.

FAO also provided a “favourable” outlook for India, where it said that wheat production is officially forecast at a record of 109 million tonnes.

It said based on recent field assessments reporting average conditions and good soil moisture levels throughout the country, 2021 production in China is forecast at 135.5 million tonnes, almost unchanged on a yearly basis.

In the Near East, abnormal dryness continues to undermine the production outlook in several countries, it added.

FAO said that harvesting of the 2021 coarse grain crops has started in southern hemisphere countries and prospects continue to point to above-average outputs.

In South America, maize production in Argentina is on track to reach an above-average level of 58 million tonnes in 2021, mostly on account of a near-record sown area, it added.

“In Brazil, the aggregate maize output is forecast at a record 108 million tonnes, resting on expectations of an expanded planted area for the 2021 main season crop, driven by favourable price prospects.”

In Southern Africa, with continued conducive weather conditions in South Africa, the leading maize-producing country in the region, yields could reach multi-year highs and, combined with an increase in the area sown, push up production to a near-record level of 17 million tonnes in 2021, said FAO.

Meanwhile, FAO noted that in the northern hemisphere, planting of the 2021 maize crop has recently begun.

“In the largest global producer, the USA, early estimates from the March Prospective Plantings report indicate that the maize acreage will likely expand by 1 percent this year, an increase that falls short of market expectations given the strong demand and price prospects,” it said.

FAO said its forecast for world cereal production in 2020 has been scaled up marginally this month and now stands at 2,765 million tonnes, 2 percent above the previous year’s out-turn.

“The latest increase mostly reflects upward revisions to maize production estimates in India, with official data indicating higher than previously expected yields, and to a lesser extent in the Russian Federation.”

FAO also raised slightly its estimate for world rice production, primarily reflecting less downcast expectations for the off-season crop in Thailand, combined with small upward adjustments to production in various other countries.

FAO raised its forecast for global cereal utilization in 2020/21 by 11.0 million tonnes from the previous report. It now stands at 2,777 million tonnes, 2.4 percent above the 2019/20 level.

The bulk of this month’s revision stems from an 8.4 million tonne increase in the forecast of world wheat utilization in 2020/21 to 763 million tonnes, 1.7 percent above the 2019/20 level, it said.

According to the FAO, the monthly increase reflects higher estimates of feed use of wheat in China amidst strong demand, as its livestock sector recovers from the African swine fever (ASF), and highly elevated domestic maize prices.

Also owing mostly to an upwards revision to feed use of barley in China, FAO said that the 2020/21 global coarse grains utilization forecast has been raised by 2.9 million tonnes this month to 1,500 million tonnes, up 2.9 percent from 2019/20.

FAO has forecast global rice utilization in 2020/21 to reach an all-time high of 514 million tonnes, little changed from March expectations and 1.9 percent above the previous season’s estimate.

FAO has forecast global cereal stocks ending in 2021 to fall 1.7 percent below their opening levels, to 808 million tonnes, following a 3.3 million tonne reduction from last month’s forecast.

“This downward revision to stocks, on top of raised utilization, lowers the global cereal stock-to-use ratio from 29.6 percent in 2019/20 to 28.4 percent in 2020/21, a seven-year low,” it said.

FAO said that with increased feed utilization estimates reducing the anticipated build-up of wheat inventories in China, the forecast for global wheat stocks has been cut by 8.0 million tonnes since last month to 284 million tonnes. However, this was still 2.8 percent above their opening levels.

On the other hand, FAO said that at 341 million tonnes, the forecast for global coarse grains stocks has been raised by 4.5 million tonnes month-on-month, mostly on upward revisions to maize inventories in India and the USA.

“However, global coarse grains stocks are still forecast to contract by 5.9 percent from their opening levels, largely due to a 23 million tonne draw-down in maize inventories, most of which is concentrated in China and the USA.”

FAO said upward revisions to rice inventories held by Nepal, Thailand and Saudi Arabia are expected to outweigh a cut to stockpiles in Bangladesh.

“As a result, world rice stocks at the close of 2020/21 are pegged at 183 million tonnes, marginally changed from the previous month’s forecast and their opening levels.”

FAO said that its forecast for world trade in cereals in 2020/21 has been raised marginally since last month to 466 million tonnes, representing a 5.8 percent increase from 2019/20.

Boosted by greater than anticipated demand from China and Nigeria, world wheat trade in 2020/21 (July/June) has been lifted since March by 1.4 million tonnes to 188 million tonnes, surpassing last season’s level by 2.0 percent, it added.

“At 230 million tonnes, almost unchanged from March, total trade in coarse grains in 2020/21 (July/June) is seen heading for a 9.0 percent growth from 2019/20, driven primarily by an unprecedented level of maize purchases by China.”

Despite a somewhat less buoyant import outlook for a number of Near East Asian countries compared to March expectations, FAO said that world trade in rice in 2021 (January-December) is still seen in the order of 48 million tonnes.

“This level would imply a 6.0 percent annual trade expansion, reflecting prospects of greater purchases by all regions except Europe and the Americas,” said FAO