Rome, Italy
June 4, 2009
With the second-highest recorded
cereals crop expected this year and stocks replenished, the
world food supply looks less vulnerable to shocks than it was
during last year’s food crisis, FAO
said in its
Food
Outlook report published today. But some potential dangers
remain, it also noted.
“In spite of strong gains in recent weeks, international prices
of most agricultural commodities have fallen in 2009 from their
2008 heights, an indication that many markets are slowly
returning into balance,” the twice-yearly report said.
Apparent easing of market conditions was reflected in the
benchmark FAO Food Price Index, which had fallen by one third
since its peak in June 2008 at the height of the world food
crisis.
But food prices remained high in many developing countries, and
access to food by the poor also continued to be threatened by
loss of employment, income and other effects of the global
economic crisis.
Critical sector
So far the improvement largely concerned cereals – the critical
sector for food security – after record production in 2008
overshot original forecasts, the report said. The bumper crop
had also facilitated replenishment of global reserves to
pre-crisis levels.
“With the new 2009-2010 marketing season commencing, prospects
continue to be positive as world cereal production is expected
to be the second largest, after last year’s record,” it added.
World production was forecast at 2 219 million tonnes as
compared with 2 287 million tonnes in 2008/09.
FAO’s first forecast for world cereal utilization in 2009/10
suggested a relatively weak growth of around 1.3 percent from
the estimated 2008/09 level, to 2 230 million tonnes. This
compared with nearly 4 percent growth in the previous season.
First forecasts
First forecast for world cereal trade in 2009/10 was 257 million
tonnes, down by nearly 4 percent from last year. This
contraction mostly concerned wheat imports, which could fall by
as much as 10 million tonnes in the new season, reflecting a
strong anticipated recovery in production in several major
wheat-importing countries.
More problematic was the oilseed products sector, with prices on
world markets increasing as a consequence of production setbacks
in some major producers and of expanding consumption of animal
feed in China and India. Oilseeds production in 2008/09 was
forecast at 405.9 million tonnes, 0.7 percent more than the
403.1 million tonnes estimated for the year before.
“The surge in soybean quotations in recent weeks, on the back of
shrinking world reserves, is emerging as a cause for concern
given its strong bearing on food and feed prices,” Food Outlook
noted.
Sugar demand up, meat and milk down
World sugar consumption was set to expand, albeit at a slower
rate than in the past two years, propelled by sustained demand
in the developing countries. As a result, consumption was
expected to outstrip 2008/09 production of 158.5 million tonnes
for the first time since 2005/06, bringing global carry-over
inventories down.
On the other hand fish, meat and milk prices have tumbled,
driven down by faltering demand as economies slowed and by
recurring outbreaks of animal diseases. Prices have plummeted in
the dairy sector in particular.
Import savings
And while a welcome development was that falling prices were
expected to save importing countries as much as $226 billion in
food imports in 2009 as compared with 2008, “the deteriorating
economic environment ... could offset much of the benefit,” the
report warned.
Eroding purchasing power through a combination of falling
incomes and real exchange rates over much of the past 12 months
afflicts the affordability of food, however cheap it has become
on the international marketplace, it said.
Concern had now shifted from high food prices to the global
economic downturn’s potential impact on demand for food,
especially higher-value-products, Food Outlook said. But growing
linkages between the agricultural sector and the energy,
financial and currency markets made food prices increasingly
vulnerable to external shocks.
Upward pressure
Specifically, a continuation of the weakening of the US Dollar
and the sharp rebound in energy prices witnessed in recent weeks
could exert renewed upward pressure on international prices, the
report cautioned.
“However, barring major crop setbacks, with world staple food
stocks at more comfortable levels than in 2008, the food economy
looks less vulnerable to those external developments than it was
last year,” the report added. |
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