London, United Kingdom and Rome,
Italy
November 7, 2007
Global cereal prices are expected
to remain at high levels for the coming year due largely to
problems in production in several major exporting countries and
very low world stocks, warns the latest Food Outlook report
issued today by FAO in London.
FAO expects many countries will pay more for importing cereals
from world markets than they did in previous years, even though
they are expected to import less. Record freight rates and high
export prices are the main reasons for the increase in their
import bills.
FAO’s latest analysis suggests that international cereal prices
are fuelling domestic food inflation in many parts of the world.
For most cereals, says the report, “supplies are much tighter
than in recent years while demand is rising for food as well as
feed and industrial use. Stocks, which were already low at the
start of the season, are likely to remain equally low because
global cereal production may only be sufficient to meet expected
world utilization.” The report says that while agricultural
commodity prices rose sharply in 2006, in some cases they are
soaring at an even faster pace this year.
Prices increasing for most all food commodities
According to Food Outlook, the current state of agricultural
markets is distinguished by increasing world prices of nearly
all major food and feed commodities.
High international prices for food crops such as grains continue
to ripple through the food supply chain, contributing to a rise
in retail prices of such basic foods as bread or pasta, meat and
milk.
According to the FAO analysis, the world has rarely felt “such a
widespread and commonly shared concern about food price
inflation, a fear which is fuelling debates about the future
direction of agricultural commodity prices in importing as well
as exporting countries, be they rich or poor.”
The growing impact of biofuels on food availability and
prices
Soaring petroleum prices have driven up prices for agricultural
crops by raising input costs and by boosting demand for those
crops used to produce biofuels. Food Outlook warns that the
combination of high petroleum prices and the desire to address
environmental issues is likely to boost demand for feedstocks,
especially sugar, maize, rapeseed, soybean, palm oil and other
oilcrops as well as wheat for years to come.
Rising cost of shipping adds to food costs
Increased fuel costs, stretched shipping capacity, port
congestion and longer trade routes have pushed up shipping
costs, making freight rates a more important factor in
agricultural markets than in the past. According to Food
Outlook, record freight prices not only increased the cost of
transportation, they have also changed the geographical pattern
of trade, as many countries are sourcing their imports from
suppliers closer to home to save on transport costs.
Weak US dollar lessens impact of rising commodity prices
The fact that the dollar depreciated sharply against all major
currencies lessened the real impact of the rise in world prices
in non-dollar economies. However, countries whose currencies did
not strengthen will bear the full brunt of the rise in US
dollar-denominated commodity prices.
Going forward
According to Food Outlook all indications point to more wheat
being planted around the world for harvesting next year. A
strong expansion in wheat production, assuming normal growth in
consumption, is bound to bring down wheat prices.
On other commodities Food Outlook has this to say: Maize prices
hit a 10-year high in February 2007 but have fallen considerably
since. Supply constraints in the face of brisk demand for
biofuels triggered the initial price hike in maize prices.
However, reacting to a massive expansion in plantings and
expectations of a record crop this year, prices have started to
come down, although by September they had still remained 30
percent above last year.
Prices of barley, another important cereal, also soared lately.
Supply problems in Australia and Ukraine, tighter availability
of maize and other feed grains compounded with strong import
demand have contributed to the doubling of prices of both feed
and malting barley in recent weeks.
Among all agricultural commodities, dairy products have
witnessed the largest gains compared with last year, ranging
from 80 percent to more than 200 percent.
High feed prices have also increased the cost of animal
production and resulted in an increase in livestock prices.
Poultry is up most, by at least 10 percent. Growth in
consumption and gradual reductions in trade restrictions are
contributing to the increase in meat and poultry prices this
season, says Food Outlook.
Food Outlook also has a special chapter on the International
Year of the Potato 2008, explaining the importance of this now
ubiquitous food. |
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