TWN Info Service on UN Sustainable Development (Jun22/05)
23 June 2022
Third World Network

UN: Global food import bill to reach all-time high in 2022, says FAO
Published in SUNS #9601 dated 23 June 2022

Geneva, 22 Jun (Kanaga Raja) -- The global food import bill is forecast to reach another all-time high in 2022, surpassing USD 1.8 trillion, a near 3 percent increase, or USD 51 billion, from last year's record level, the UN Food and Agriculture Organization (FAO) has said.

In its latest Food Outlook, FAO said that higher prices and transport costs rather than volumes account for the bulk of the expected increase.

FAO said the expansion in international food purchases will moderate significantly, considering that the increase from 2020 to 2021 amounted to almost 18 percent.

The anticipated slowdown in growth in 2022 reflects higher food prices, depreciating currencies vis-a-vis the US dollar as well as rising freight costs, all of which are expected to weigh on the purchasing power of importers and subsequently on the quantity of food imports, it added.

"In view of the soaring input prices, concerns about the weather, and increased market uncertainties stemming from the war in Ukraine, FAO's latest forecasts point to a likely tightening of food markets and food import bills reaching a new record high," said FAO economist Upali Galketi Aratchilage, lead editor of the Food Outlook.

According to the FAO report, overall, in 2022, developed regions are foreseen to account for 60 percent of world expenditures on imported food and over 90 percent of global growth.

The bulk of the increase in the world food import bill is expected to be cost-driven, reflecting record food prices that come on the back of surging input prices, it said.

Imports by developing regions are expected to become increasingly responsive to soaring prices. Their imports are forecast to come to a near standstill in 2022, with an overall bill rising by just 1 percent, said FAO.

Slower growth or outright contractions are foreseen in the most vulnerable countries, where consumer expenditures are highly sensitive to rising prices, owing to low incomes, it added.

"While Net Food-Importing Developing Countries (NFIDCs) and sub-Saharan Africa (SSA) could experience an increase of 1.0 percent and 2.8 percent, respectively, in their food import bills, Least Developed Countries (LDCs) are anticipated to undergo a 5 percent contraction in their 2022 food import bill from last year."

The anticipated increase in the 2022 import bill is almost entirely on account of higher prices: USD 49 billion are due to higher international prices and merely USD 2 billion reflect higher volumes, said the report.

The upshot is that higher import bills mainly reflect higher unit costs rather than higher volumes, with many regions set to face higher bills in return for lower volumes, it added.

"Worryingly, this development is much more pronounced in economically vulnerable regions," said the report.

It said sub-Saharan Africa, for instance, is expected to spend USD 1.5 billion more on food imports, but could see a decline in volumes worth USD 0.9 billion.

The report said that as for NFIDCs, with a forecast USD 1.3 billion in extra costs for importing food, volumes are anticipated to decline by a value of USD 2.2 billion.

"Similarly, LDCs are expected to see a contraction in their food import bill by USD 2.4 billion fully on account of lower volumes."

"These are alarming signs from a food security perspective, indicating that importers will find it difficult to finance rising international costs, potentially heralding an end of their resilience to higher prices," said the report.

From a food group perspective, existing differences across importing regions are likely to become more pronounced in 2022, it cautioned.

FAO said while developed countries continue purchasing across the entire spectrum of food products, the budgets of developing regions will be increasingly concentrated on importing staple foods, with shrinking inflows of high value products such as meat, beverages and oilseeds.

It said continued purchases of high price, high quality foods by developed regions reflects their generally low price responsiveness of food demand.

The report said the profile of imported foodstuffs by developing regions, dominated by staples, signals a further deterioration of dietary diversity and quality.

"Overall, the year 2022 may usher in an era of lower resilience to higher food prices, notably by the poorer regions of the developing world," it added.

It said this would also signal a departure from the remarkable resilience that many countries displayed throughout the COVID-19 pandemic in terms of sustaining food imports.

In response to these developments, FAO said that it has proposed a Food Import Financing Facility (FIFF), which would provide balance-of-payment support to the low-income, highly food import-dependent countries to ease their access to international food markets.

MODEST DECLINE IN FOOD PRICES IN MAY

Meanwhile, FAO said that the international prices of a basket of key agricultural food commodities declined for the second consecutive month in May, mainly as a result of lower prices for vegetable oils and dairy products.

According to FAO, its Food Price Index (FFPI) averaged 157.4 points in May 2022, down 0.9 points (0.6 percent) from April, marking the second consecutive monthly decline, though still 29.2 points (22.8 percent) above its value in the corresponding month last year.

"The drop in May was led by declines in the vegetable oil and dairy price indices, while the sugar price index also fell to a lesser extent. Meanwhile, cereal and meat price indices increased," it said.

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 FAO, its Cereal Price Index averaged 173.4 points in May, up 3.7 points (2.2 percent) from April and as much as 39.7 points (29.7 percent) above its May 2021 value.

FAO said international wheat prices rose for a fourth consecutive month, up 5.6 percent in May, to average 56.2 percent above their value last year and only 11 percent below the record high reached in March 2008.

The steep increase in wheat prices was in response to an export ban announced by India amidst concerns over crop conditions in several leading exporting countries, as well as reduced production prospects in Ukraine because of the war, it added.

On the other hand, FAO said that international coarse grain prices declined by 2.1 percent in May but remained 18.1 percent above their value a year ago.

Slightly improved crop conditions in the United States of America, seasonal supplies in Argentina and the imminent start of Brazil's main maize harvest led maize prices to decline by 3.0 percent, it added.

However, FAO said that they remained 12.9 percent above their level of May 2021.

Similarly, international sorghum prices also fell in May, declining by 3.1 percent, while spillover from the strength in wheat markets and concerns over crop conditions in the European Union boosted barley prices by 1.9 percent, said FAO.

FAO said international rice prices increased for the fifth successive month in May. Quotations strengthened in all the major market segments, but monthly increases were least pronounced (2.6 percent) for the most widely traded Indica varieties, amid ample supplies, especially in India.

According to FAO, its Vegetable Oil Price Index averaged 229.3 points in May, down 8.3 points (3.5 percent) month-on-month, yet remaining markedly above its year-earlier level.

"The monthly decline mainly reflects lower prices across palm, sunflower, soy, and rapeseed oils," said FAO.

FAO said international palm oil prices weakened moderately in May. Apart from demand rationing, the removal of Indonesia's short-lived export ban on palm oil exerted additional downward pressure on prices, although a further price drop was contained by lingering uncertainties over the country's export prospects.

Meanwhile, FAO said world price quotations for sunflower oil fell from recent record highs, with stocks continuing to accumulate in Ukraine owing to logistical bottlenecks.

It said international soy and rapeseed oil prices also declined somewhat in May, chiefly weighed by sluggish import demand in view of elevated costs in recent months.

According to FAO, its Dairy Price Index averaged 141.6 points in May, down 5.1 points (3.5 percent) from April, marking the first decline after eight consecutive monthly increases, but still 20.5 points (16.9 percent) higher than its level in May of last year.

FAO said that world prices of all milk products fell, with milk powders declining the most, underpinned by lower buying interests on market uncertainties stemming from the continued lockdown in China, despite persistent global supply tightness.

It said butter prices also dropped significantly due to weaker import demand in tandem with some improvements to supplies from Oceania and limited internal sales in Europe.

"Meanwhile, robust retail sales and high demand from restaurants ahead of the summer holidays in the Northern Hemisphere prevented cheese prices from falling significantly, despite weakened global import demand."

According to FAO, its Meat Price Index averaged 122.0 points in May, up 0.6 points (0.5 percent) from April, setting a new all-time high, driven by a steep rise in world poultry meat prices, more than offsetting declines in pig and ovine (lamb and mutton) meat values.

In May, poultry meat prices rose, reflecting the continued supply chain disruptions in Ukraine and recent cases of avian influenza amid a surge in demand in Europe and the Middle East, it said.

"Meanwhile, international bovine meat prices remained stable, as increased supplies from Brazil and Oceania were adequate to meet persistently high global demand."

On the other hand, FAO said world pig meat prices fell on high export availabilities, especially in Western Europe, amid lacklustre internal demand and expectations for releasing pig meat from EU Commission's Private Storage Aid scheme.

International prices of ovine meat also dropped, reflecting the impact of currency movements, it added.

According to FAO, its Sugar Price Index averaged 120.3 points in May, down 1.3 points (1.1 percent) from April, marking the first decline after sharp increases registered in the previous two months.

"The recent monthly decline in international sugar price quotations was triggered by limited global import demand and good global availability prospects, mostly stemming from a bumper crop in India," it said.

The weakening of the Brazilian Real against the US dollar and lower ethanol prices resulted in further downward pressure on world sugar prices, said FAO.

"However, uncertainties over the current season's out-turn in Brazil, the world's largest sugar exporter, prevented more substantial price declines," it added. +