World food prices peak to ten-year high as inflation bites and supply chains face disruption

05 Nov 2021 --- The FAO Food Price Index has surged to a new peak reaching its highest level in a decade. The index highlights the soaring cost of cereals and vegetable oils around the world, while noting that global food prices have increased 30% in the last year.

This is the biggest increase since July 2011, the Food and Agriculture Organization of the United Nations (FAO) reports.

The FAO Food Price Index, which tracks monthly changes in the international prices of a basket of food commodities, averaged 133.2 points in October, up 3% from September, rising for the third consecutive month.

Meanwhile, the FAO Cereal Price Index in October increased by 3.2% from the previous month, with world wheat prices rising by 5% amid tightening global availabilities due to reduced harvests in major exporters, including Canada, Russia and the US.

“International prices of all other major cereals also increased month-on-month,” the FAO highlights.

These developments starkly contrast the FAO’s overview published last August, which outlined a consecutive downward trend in global food commodity prices.

The FAO Vegetable Oil Price Index went up 9.6% in October, hitting an all-time high.Vegetable oil and sugar update
The FAO Vegetable Oil Price Index went up 9.6% in October, hitting an all-time high. The increase was driven by firmer price quotations for palm, soy, sunflower and rapeseed oils.

Palm oil prices rose for a fourth consecutive month in October, largely underpinned by persisting concerns over subdued output in Malaysia due to ongoing migrant labor shortages.

The FAO Sugar Price Index dropped by 1.8% from September, marking the first decline after six consecutive monthly increases.

This decline was mainly the result of limited global import demand and prospects of large exportable supplies from India and Thailand as well as a weakening of the Brazilian real against the US dollar.

Meat and dairy outlook
The FAO Dairy Price Index rose by 2.6 points from September, influenced by generally firmer global import demand for butter, skim milk powder and whole milk powder amid buyers’ efforts to secure supplies to build stocks.

By contrast, cheese prices remained largely stable, as supplies from major producing countries were adequate to meet global import demand.

The FAO Meat Price Index slipped 0.7% from its revised value in September, marking the third monthly decline. International quotations for pig and bovine meats fell amid reduced pork purchases from China  and a sharp decline in quotations for supplies from Brazil of bovine products.

By contrast, poultry and ovine meat prices rose, boosted by high global demand and low production expansion prospects.

Cereal output dips while demand rises
Despite an expected world cereal production record in 2021, global cereal inventories are seen heading for a contraction in 2021/22, according to new forecasts in FAO’s Cereal Supply and Demand Brief.

The forecast for world cereal output in 2021 is now pegged at 2,793 million metric tons, down by 6.7 million metric tons since the previous report in October, largely due to cuts to the estimates of wheat production in Iran, Turkey and the US.

The FAO Dairy Price Index ose by 2.6 points from September.While cereal production has decreased, world total cereal utilization in 2021/22 is heading for a 1.7% gain from the 2020/21 estimated level. It is forecasted at 2,812 million metric tons, led by an anticipated increase in global food consumption of wheat, rising in tandem with world population.

By contrast, global coarse grains output has been revised upwards.

An upward revision to maize production was driven by better-than-previously expected yields in Brazil and India and improved prospects in several West African countries. Compared to last year, global cereal production is anticipated to increase and reach a new record level.

Meanwhile, foreseen higher feed and industrial uses of maize should are anticipated to also contribute to the expected annual increase.

World cereal stocks by the close of seasons in 2022 are forecasted to fall 0.8% below their opening levels to 819 million metric tons. Consequently, the world cereals stocks-to-use ratio is expected to decline slightly, from 29.4% in 2020/21 to 28.5% in 2021/22, but still indicating an overall comfortable level.

Following an upward revision this month on stronger-than-earlier-anticipated global trade in wheat and rice, world trade in cereals is now anticipated to expand and reach a new record in 2021/22 at 478 million metric tons, up 0.3% from the 2020/21 level.

Resilient seeds are essential
The FAO stresses that the world’s farmers must have access to seeds for more productive, nutritious and climate-resilient crop varieties if they are to produce the 50% more food needed for a global population predicted to reach ten billion by 2050.

“There are no good crops without good seeds. Seeds are the foundation of agri-food systems. We rely on seeds to produce food, feed, fiber, fuel, and they contribute to a friendly environment,” remarks director-general Qu Dongyu.

Raising the quality of seeds “which are resilient to climate stress, improving the use of natural resources, boosting the food and nutrition security, is a great contribution to secure higher crop yields,” economic development and higher incomes for farmers, says Fatma Ben Rejeb, CEO of the Pan-African Farmers Organization, representing smallholder farmers from at least 45 countries. 

She also stresses the importance of smallholder farmers’ ancestral knowledge, describing them as “the drivers for agriculture development.”

Using its AI-boosted smart breeding technology, Equinom is currently developing seed varieties that offer an elevated nutritional profile. The Israeli agri-tech specialist recently partnered with Sabra to breed the ideal tahini sesame for their hummus products.

By Benjamin Ferrer