Record Wheat and Rice Harvests to Keep World Food Import Bill Low

07 Oct 2016 --- Global food markets are expected to remain balanced as prices for most internationally-traded staple agricultural commodities are low and stable, as there is a record production forecast for this year’s wheat and rice harvests as well as rebounding maize output, which will keep the world food import bill low.

The global wheat and rice harvests are poised to set new records, and the “benign” outlook for staple grains is on track to lower the world food import bill to a six-year low, accord to the FAO’s food outlook report for October 2016.

The increased productions are helping to keep inventories ample and prices low. Worldwide cereal production in 2016 should rise 2,569 million tons, up 1.5 percent from the previous year and enough to further boost existing inventories.

FAO raised its forecast for global wheat production to 742.4 million tons, boosted by increases in India, the US and the Russian Federation, which is set to overtake the European Union as the grain's largest exporter. In terms of global rice products, the prediction is for a 1.3 percent increase which produced an all-time high of 497.8 million tons.

The abundant monsoon rains in Asia led to greater productions and there were also sizable increases in Africa. Record crops of coarse grain is Argentina, India and the US is increasing the crop by 1.8 percent, another high in terms of volume.

Another all-time production high could be on the cards for soybeans and other oil crops, thanks to record yields in America. Demand is expected to grow even faster. While the dairy markets are also expected to return to general balance in 2016 following a long period of oversupply.

Production of cassava, a dietary mainstay in Africa where per capita consumption is above 100 kilograms annually, is also projected to grow 2.6 percent this year to 288 million tons. However, China's shift to drawing down its maize stockpile for domestic industry and feed has curbed international prices and trade flows for cassava.

Meanwhile, cereal prices are drifting lower on the backs of the expected hefty supply. Wheat and maize futures on the Chicago Board of Trade have both dropped more than 16 percent since the start of the year, while quoted rice prices are at their lowest level since early 2008.

Meat prices continue to be boosted by increasing international demand for pigmeat and poultry, particularly from the East Asian markets, while global fish production is forecast to expand by 1.8 percent this year to 174 million tons. Aquaculture output is also expected by increase 5 percent and wild-caught fish output to drop by 0.9 percent, partly because of the impact El Niño had on Pacific sardines, anchovetas and squid.

Total food imports are predicted to fall 11 percent in US dollar terms this year to 1.168 trillion as lower bills for livestock products and cereal-based foodstuffs more than offset higher bills for fish, fruit and vegetables, oils and sugar.

At the same time, the FAO says the decline may be slower for economically vulnerable countries experiencing a depreciating currency.

The FAO Food Price Index (a trade-weighted index tracking international market prices for the five key commodity groups) averages 170.9 points in September, up 2.9 percent from August and 10 percent from a year earlier. The increase was driven by a 13.8 percent monthly jump in the FAO Dairy Price Index, partly because of a sharp increase in butter prices benefiting exporters in the EU where dairy output is declining.

Meanwhile the FAO Sugar Price Index rose 6.7 percent from August following unfavorable weather in Brazil and palm oil prices also increased, helped by low stock levels in exporting and importing countries. This was similar for soy and rapeseed oil, lifting the FAO Vegetable Oil Price Index by 2.9 percent for the month. The FAO Meat Price Index was unchanged from August and the FAO Cereal Price Index declined 1.9 percent from the previous month and is 8.9 percent down on its year-earlier level.

by Gaynor Selby

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