Global food prices fell to the lowest level in nearly seven years due to a sharp decline in the prices of all agri commodities led by sugar. Data compiled by the Food and Agricultural Organisation (FAO) of the United Nations showed its benchmark Food Price Index fell in January by 1.9% below its level in December 2015. The Food Price Index averaged 150.4 points in January, down 16% from a year earlier and registering its lowest level since April 2009.
The main factors underlying the lingering decline in basic food commodity prices are the generally ample agricultural supply conditions, a slowing global economy, and the strengthening of the US dollar. In February, FAO also raised its forecast for worldwide cereal stocks in 2016, as a result of lowering its projected consumption and raising 2015 production prospects.
"World cereal production in 2015 is estimated at close to 2531 million tonnes, 3.9 million tonnes more than reported in December but still 30.1 million tonnes (1.2%) below the 2014 record. This month's upgrade mostly reflects positive output revisions for wheat, mainly in Canada and Russia, and coarse grains in China, Canada and Paraguay, more than compensating for reductions of coarse grains production in the EU, the Sudan, Russian Federation, Ukraine and the United States. The 2015 world rice production forecast was also raised, but only slightly, as much of the improved outlook in China, Vietnam and the United States made up for a worsening in Japan and Nepal," FAO said in a report.
The FAO forecast for world cereal utilisation in 2015-16 has been lowered by 2.3 million tonnes since the previous report to 2527 million tonnes, only 0.8% more than in 2014-15. Food consumption of cereals is projected at 1096 million tonnes, up 1.2% from 2014-15, while feed utilisation is forecast at 906 million tonnes, 1.3% higher than in 2014-15.
Meanwhile, the FAO Sugar Price Index fell 4.1% from December, its first drop in four months, as crop conditions improved in Brazil, by far the world's leading sugar producer and exporter.
The Dairy Price Index dropped by 3.0% on the back of large supplies, in both the EU and New Zealand, and torpid world import demand. It's Cereal Price Index declined 1.7% (to 149.1 points) amid ample global supplies and increased competition for export markets, especially for wheat and maise, as well as a strong US dollar.
Weak prospects for 2016
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Weather patterns associated with El Ni?o are sending mixed signals about the early prospects for cereal crops in 2016, especially in the Southern Hemisphere, according to FAO's Cereal Supply and Demand Brief, also released today. Crop prospects for 2016 have been "severely weakened" in Southern Africa, and a 25 percent cut in wheat production in South Africa now appears likely.
Conditions for the crop are generally favourable in the Russian Federation and the European Union, but winter plantings declined in the United States and Ukraine. The area under wheat is also expected to be cut in India, following a poor monsoon and below average rains since October, FAO report said
The 2016 outlook for rice along and south of the Equator is "dim" due, at times, to insufficient water and, at others, to excessive rains. As for the 2015 season, FAO modestly raised its forecast for world cereal production to 2531 million tonnes, up slightly from that released in December.
Wheat output in Canada and Russia and maise output in China, Canada and Paraguay drove the upward revision.
Meanwhile, FAO lowered its forecast for world cereal utilisation in the 2015-16 season to 2527 million tonnes, which remains 0.8% above that of the previous year. This reflects a 2.0% increase for wheat, largely on account of higher livestock feed use in developed countries and a 0.3% increase in maise. World rice utilisation is projected to expand by 1.1%, keeping world per-capita consumption stable.
As a result of the upgraded production and downgraded consumption forecasts, world cereal stocks are set to end the 2016 seasons at 642 million tonnes, higher than they began. That level implies a steady and comfortable global cereal stock-to-use ratio of around 25%.