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FAO. 2021. Food Outlook: Biannual Report on Global Food Markets. Rome. https://doi.org/10.4060/cb4479en

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HIGHLIGHTS

Against the background of fast expanding trade and a surge in food import bills, which has come to characterise much of the developments shaping global food markets in 2020/21, early forecasts for 2021/22 point to resilient food trade and a continuation of strong international prices amidst many supply and demand uncertainties.

WHEAT

Global wheat supplies in the new season 2021/22 are expected to increase further, given large carryover stocks and the forecast record production in 2021. However, demand is also expected to remain strong, thus keeping international prices firm.

COARSE GRAINS

Despite a record 2021 global production, as currently expected, coarse grains stocks are forecast to fall below opening levels for the fourth consecutive season. Robust demand and tight supplies are expected to sustain elevated international price levels.

RICE

Early prospects for 2021/22 point to global rice production and utilization reaching new peaks, while stocks remain ample. International trade is forecast to expand in 2021, although smaller Asian imports may stall trade growth in 2022.

MEAT

World meat output in 2021 is forecast to expand despite the many challenges facing meat value chains. Global meat trade is seen heading towards a stagnation, with higher trade in bovine and poultry meat offsetting a contraction in trade of pig and ovine meat.

SUGAR

World production of sugar in 2020/21 is forecast to decline for the third consecutive year and fall short of global consumption. World trade in sugar is foreseen to contract slightly because of reduced availabilities in key exporters.

OILCROPS

A tight market outlook for oilseeds and derived products is expected for 2020/21, with resumed growth in production foreseen insufficient to satisfy world demand. Tentative forecasts for 2021/22 suggest a slight improvement in the global supply-demand picture, including moderate stock replenishments.

DAIRY

Global milk production in 2021 is forecast to increase at a steady pace, despite the likely dampening effects of the COVID-19 pandemic on output in some key producing countries. Global trade in milk products is foreseen to rise in 2021, with a higher import concentration in Asia.

FISHERIES

With gradual economic recovery under way, the global fish industry is preparing for the return of food service demand. Retail market gains and stricter sanitary procedures are among the many changes forced by the pandemic and expected to persist in the longer term.

SPECIAL FEATURE

Surging trade, record import bills and rising food prices: how the international food system kept a lid on a global health crisis

The Special Feature puts recent trends in global food trade under the spotlight, with particular focus on how commodity flows have measured-up during the COVID-19 pandemic. Contrary to widespread predictions of a collapse in global markets, recent data show that trade continues to reach new heights. With rapidly rising international food prices, alternative indicators to better capture this momentum are also presented.

ACKNOWLEDGEMENTS

MARKET SUMMARIES

MARKET ASSESSMENTS

Wheat

Coarse grains

Rice

Oilcrops, oils and meals

Sugar

Meat and meat products

Milk and milk products

Fish and fishery products

SPECIAL FEATURES

Surging trade, record import bills and rising food prices: how the international food system kept a lid on a global health crisis

Food import bills

MAJOR POLICY DEVELOPMENTS

Grains

Rice

Oilcrops, oils and meals

Meat

Dairy

STATISTICAL TABLES

MARKET INDICATORS

Futures markets

Ocean freight rates

The FAO price indices

ACKNOWLEDGEMENTS

The Food Outlook report is a product of the FAO Markets and Trade Division. This report was prepared under the overall guidance of Boubaker Ben-Belhassen, Director and Abdolreza Abbassian, Senior Economist. It is written by a team of economists, whose names appear under their respective market summary contributions. The report benefited from research support by many staff, namely, David Bedford, Harout Dekermendjian, Alice Fortuna, Grace Maria Karumathy, Lavinia Lucarelli, Emanuele Marocco, Marco Milo, Fabio Palmeri, and the fisheries statistical team.

Special thanks go to David Bedford and Lavinia Lucarelli for preparing the charts and statistical tables and to Valentina Banti for her administrative support. Additionally, the team is grateful to Ettore Vecchione for the desktop publishing and to Clare Pedrick for her valuable editorial assistance.

CEREALS

Current prospects for world cereal production point to a third successive year of moderate growth, with FAO’s first forecast for the world cereal output in 2021 now pegged at nearly 2 821 million tonnes (including rice in milled equivalent), a new record and 1.9 percent above the outturn in 2020. The bulk of this year’s foreseen growth relates to maize, with output anticipated up 3.7 percent from 2020. Global wheat production is also expected to increase, up 1.4 percent year-on-year, while rice production is set to go up by 1.0 percent.

World cereal utilization in 2021/22 is expected to expand by 1.7 percent, to a new peak of 2 826 million tonnes. Total cereal food consumption is forecast to rise in tandem with world population, resulting in a stable annual per capita level of 150 kg. As for animal feed use of cereals, similar to 2020/21, a notable feature is an anticipated continued growth in the use of wheat for feed, which is seen to rise to 156 million tonnes, still well below the level of coarse grains, forecast at 895 million tonnes. Based on current production and utilization forecasts for 2021/22, world cereal stocks at the close of crop seasons ending in 2022 are anticipated to increase, but by only 0.3 percent, to 811 million tonnes. The expected small rise in the level of world cereal inventories, which follows three consecutive seasons of declines, may not be sufficient to prevent a further drop in the stocks-to-use ratio, which is forecast to fall from 28.6 percent in 2020/21 to 27.9 percent in 2021/22.

While FAO’s first forecast for world trade in cereals in 2021/22 indicates an increase of only 0.3 percent from the high level estimated for 2020/21, much will depend on the volume of cereals to be imported by China. World cereal trade in 2020/21 is seen to expand by as much as 6.3 percent, reaching a peak level of 468 million tonnes. Most of this sharp increase, however, reflects surges in imports of cereals by China, which are expected to rise by 30 million tonnes (123 percent) from the previous season.

WHEAT

Preliminary forecasts for global wheat markets in 2021/22 point to overall adequate supplies. World wheat production in 2021 is forecast to surpass last year’s record by 1.4 percent to reach a new all-time high level. Expected larger outputs in the European Union, Morocco and the United Kingdom of Great Britain and Northern Ireland account for most of the projected increase and are seen offsetting production declines anticipated in Australia, Canada, the Russian Federation and several countries in Asia.

Ample wheat supplies and tightening coarse grain markets are expected to drive global wheat utilization up 2.5 percent in 2021/22. Accounting for most of this growth, a robust 7.5 percent rise in feed demand for wheat is anticipated, largely in Asia and Europe, as well as North America, due to increased price competitiveness of wheat relative to maize. Food consumption and industrial use are also projected to increase.

As a result of large carryover stocks and the foreseen increased production in 2021, world wheat stocks by the close of seasons in 2022 are forecast to rise above their high opening levels for a third consecutive year. The global wheat stocks-to-use ratio is expected to register a small increase in 2021/22 to 38.0 percent, exceeding the five-year average level. Although the greatest rise in stocks is expected to occur in China, global wheat stocks excluding China are also forecast to rise, mostly on account of likely inventory buildups in Australia, the European Union, India, Morocco and Ukraine.

The preliminary forecast for world trade in wheat in 2021/22 (July/June) points to a small increase from the 2020/21 level, reaching a new record level. The expected growth reflects larger anticipated imports by several countries in Asia, mostly driven by reduced domestic production and increased demand. On the export side, the Russian Federation is expected to maintain its position as the world’s leading exporter, and production rebounds are seen supporting larger sales by Argentina, the European Union, and Ukraine. By contrast, smaller exports are forecast for Australia, Canada and the United States of America.

Contact:

Erin Collier

Jonathan Pound (Production)

COARSE GRAINS

FAO’s preliminary forecasts for world coarse grain markets in 2021/22 point to another season of tight supplies. Despite expectations of a sizeable increase in production, continued strong utilization growth is seen lowering stocks below opening levels for the fourth consecutive season.

At a record 1 516 million tonnes, world coarse grains production in 2021 is forecast to increase by 36 million tonnes (2.5 percent) from 2020, almost exclusively due to higher maize production. A large expansion in maize production in the United States of America accounts for the bulk of the expected global increase, in addition to greater outputs anticipated in China, the European Union and Ukraine. World production of sorghum is also foreseen to rise in 2021/22, while barley production is set to decline, largely on expected reduced output in Australia.

World utilization of coarse grains is forecast to increase in 2021/22 by 1.4 percent, reaching an all-time high of 1 526 million tonnes. The main driver of this growth is a rise in industrial use, stemming from expected greater utilization of maize for the production of ethanol in Brazil and, especially, the United States of America, as well as starch in China, as economies begin to recover from the COVID-19 pandemic. Increased feed use of both maize and sorghum, especially in China, is also seen lifting coarse grains utilization in 2021/22.

With the 2021/22 utilization forecast exceeding the global production forecast, coarse grains stocks are expected to contract by the close of seasons in 2022, falling by 1.7 percent below their opening levels. This decline is largely attributed to a likely further drawdown of maize inventories in China. In combination with the forecast rise in utilization, the expected fall in global coarse grain inventories would lower the world stocks-to-use ratio to its lowest level since 2012/13.

Larger shipments of maize and sorghum are seen balancing an expected reduction in barley trade, keeping global trade in coarse grains in 2021/22 near the 2020/21 record level. Continued strong import demand from China is anticipated to remain an important driver of the expected growth in trade for maize and sorghum, in addition to expectations of increased maize purchases by the European Union, Mexico, and Turkey. On the export side, larger shipments of maize are forecast for Argentina and Ukraine and increased sorghum exports are expected from the United States of America.

Contact:

Erin Collier

Jonathan Pound (Production)

RICE

Assuming normal growing conditions, world rice production is forecast to expand by 1.0 percent in 2021 to an all-time high of 519.1 million tonnes (milled basis). Asia is anticipated to sustain this growth, as strong government support to the sector in the region may attenuate pressure from higher input costs and heightened competition by other crops. Western Africa countries and Australia are also forecast to produce more, while unconducive weather or less attractive margins will likely cause output to stagnate or contract elsewhere.

World rice trade is predicted to expand by 5.6 percent in 2021 to 48.0 million tonnes. A revival of Asian purchases and strong import demand from Africa look set to support the expansion on the import side, while on the supply side, much of the growth is expected to be captured by an expansion in Indian sales. Little global trade growth is tentatively forecast for 2022, as continued strong demand from Africa and the Near East may be insufficient to outweigh a retrenchment in Far Eastern purchases.

World rice utilization is anticipated to reach a record 520.6 million tonnes in 2021/22, up 1.4 percent year-on-year, primarily on the back of expanding food use, but also on rising use of rice for feed. At a forecast level of 184.6 million tonnes, global rice inventories at the close of 2021/22 marketing years are seen only marginally above their opening levels, as accumulations in the major rice exporters, as well as in Bangladesh and Indonesia, may be largely offset by another drawdown in China.

The FAO All Rice Price Index averaged 110.6 points in May 2021, down just 0.7 percent from December, but 4.5 percent below its year-earlier value. Although supply concerns in California have raised Japonica values since December, a slowdown in demand, in tandem with new crop arrivals and currency movements, has kept prices in the other market segments in check or under pressure.

Contact:

Shirley Mustafa

OILCROPS

FAO’s 2020/21 forecasts continue to point towards a tight market situation for oilseeds and oilseed products, with resumed production growth foreseen insufficient to meet world demand. In 2020/21, global oilcrop production is expected to recover from the previous season’s reduced level, with an area-driven rebound in soybean and rapeseed production more than offsetting a weather-induced contraction in world sunflower seed output. While global supplies of meals/cakes are set to recover, global consumption is forecast to continue expanding, led by increasing consumption in China. With global meal uptake expected to surpass world supplies, global carry-out stocks of meals/cakes are anticipated to contract for a second consecutive season, possibly dropping to a seven-year low and entailing a further decline in stocks-to-use ratios.

As for oils/fats, global output is expected to recover from the previous season’s exceptional contraction, largely underpinned by gains in palm and soyoil production. Meanwhile, global utilization of vegetable oils is seen expanding modestly, with below-average growth in both food and non-food uses, linked to the protracted COVID-19 crisis and record-high vegetable oil prices. With total oils/ fats production poised to fall short of utilization, global inventories of oils/fats are forecast to drop to an 11-year low, while stocks-to-use ratios would also fall markedly.

With regard to the forthcoming 2021/22 season, tentative forecasts suggest a slight improvement in the global supply-demand conditions, possibly including a moderate replenishment in stocks. Initial crop forecasts point to a likely significant expansion in global output of oilmeals and vegetable oils, while growth in total utilization of oilcrop products is anticipated to accelerate somewhat. Accordingly, moderate stock replenishments could take place for both meals and oils, although stocks-to-use ratios would still linger below the levels observed in recent years, pointing to persistent supply-demand tightness. However, this outlook remains subject to major uncertainties, notably with regard to weather conditions in key growing regions, the evolution of the COVID-19 pandemic and vaccination campaigns, and national policy measures that could affect global trade flows of oilseeds and derived products, as well as the implementation of biodiesel admixture mandates.

Contact:

Peter Thoenes

Di Yang

SUGAR

FAO foresees world sugar production to decline for the third consecutive season in 2020/21 (October/September), albeit slightly. The current production forecast of 170.3 million tonnes falls short of the predicted world sugar consumption, resulting in a global shortfall of 1.7 million tonnes. Unfavourable weather conditions have led to lower output in Brazil, the European Union, the Russian Federation and Thailand, which more than offsets an expansion in China, India and the United States of America.

On the demand side, world sugar consumption is foreseen to rebound, mainly reflecting the expected resumption of economic growth in 2021, after the COVID-19-driven global economic contraction in 2020.

The forecast for world sugar trade in 2020/21 (October/ September) is pegged at 60.4 million tonnes, slightly down from the 2019/20 estimated volume. The contraction is the result of reduced exportable supplies anticipated in key exporter Thailand, combined with foreseen drops in exports by the Russian Federation and other European countries. India’s exports are also anticipated to be slightly down from the record highs of last year. On the import side, lower imports by the United States of America and India are expected to more than compensate for an increase in purchases by China, the world’s largest sugar importer. In Indonesia, imports are also anticipated to drop slightly from the previous year, although demand is expected to remain strong, driven by the beverage and food processing industries.

After falling to multiyear lows in April 2020, international prices of sugar generally increased in the past year, reaching in May their highest level since early 2017. The hike in prices was prompted by continued concerns over tighter global supplies in 2020/21, following production declines in key producing countries, and sustained import demand from Asia. The weakening of the US dollar against the currencies of key sugar exporting countries, combined with the rally in crude oil prices has put further upward pressure on sugar prices. However, prospects of large exportable supplies and a recovery in global production have so far prevented larger price surges.

Contact:

Elmamoun Amrouk

Fabio Palmeri

MEAT AND MEAT PRODUCTS

World meat output in 2021 is forecast to expand by 2.2 percent, to 346 million tonnes, reflecting an anticipated rebound in meat production in China, with notable expansions in Brazil, Viet Nam, the United States of America and the European Union, partially offset by likely contractions in Australia, the Philippines and Argentina.

The anticipated meat production growth in China reflects likely output expansions across all meat types, especially pig meat, driven by large investments in enhancing meat value chains and biosafety. Seemingly swift recovery from ASF-induced output contraction is also anticipated in Viet Nam. Although narrowed due to rising production, the large pig meat deficit persists in China, inducing production expansions in all animal production systems, including in key supplier regions, especially Brazil and the European Union. Production expansion in Europe and North America is also supported by slowly reviving food services sales in line with successful COVID-19 vaccinations, much improved sanitary conditions, and government assistance provided to the livestock sector under COVID-19 market stabilization efforts. By contrast, meat production is likely to fall in Australia, underpinned by high herd rebuilding demand, and in Argentina, on lower cattle supplies. In parts of Africa, Asia and Latin America and the Caribbean, meat value chains remained under strain due to continued COVID-19 market restrictions, coupled with rising feed costs, limited cattle supplies or droughts.

World trade in meat products in 2021 is forecast to reach 42 million tonnes (carcass weight equivalent), nearly unchanged from 2020, as expected expansions in bovine and poultry meat trade are likely to be almost entirely offset by likely declines in pig and ovine meat trade. The overall global meat trade is forecast to be driven by China, with its total meat purchases exceeding 11 million tonnes, induced by the continued large meat supply deficit and demand for replenishing the strategic stocks, despite rising domestic production.

International meat prices rose from January to May, reflecting solid import demand, especially from East Asia and the Middle East, amid limited expansion in global export supplies despite recovering production in key producing regions.

Contact:

Upali Galketi Aratchilage

MILK AND MILK PRODUCTS

FAO’s current forecasts point to expansions in production and trade in milk and milk products in 2021, despite the likely dampening effects of the COVID-19 pandemic on output and trading activities in parts of the world. Global milk output in 2021 is forecast at 921 million tonnes, an increase of 1.6 percent from 2020, with Asia accounting for the highest volume, followed by North America, Europe, South America, Oceania, Central America and the Caribbean, and Africa. Increases in dairy cattle numbers in India and Pakistan and expanding large-scale farms in China sustain Asia’s milk output growth. Increasing dairy cattle and milk yields, together with improvements to farming technology, underpin the likely output expansions in most countries in the Americas. Favourable weather and pasture improvements could lessen the rising costs of feed, lifting milk production in the European Union and Oceania.

World trade in dairy products is forecast at 88 million tonnes (in milk equivalents) in 2021, a rise of 2.6 percent from 2020, with a higher import concentration in Asia, especially China. Strong economic growth prospects for 2021 and the real appreciation of the Yuan that would increase per capita consumption and expand the consumer base are behind much of the anticipated import demand growth in China. Brazil, Mexico, Indonesia and Malaysia, among others, are also expected to import more milk products. Nevertheless, widespread import curtailments elsewhere are likely, stemming from continued COVID-19 market disruptions and associated economic downturns. With the anticipated increase in dairy import demand and the implied product mix and changes in trade directions, dairy exports are forecast to increase significantly from the European Union, the United States of America, New Zealand and Australia.

Contact:

Upali Galketi Aratchilage

FISH AND FISHERY PRODUCTS

As vaccine roll-out programmes continue across the world, fisheries and aquaculture businesses are now faced with a transformed market landscape that offers both opportunities and continuing challenges. For both fishers and aquaculture operators, a weak market environment and a range of operational difficulties affecting labour, financing, input procurement and logistics all contributed to output contraction in 2020. Tight supply is expected to continue in 2021 for several key species, including cephalopods, pangasius and salmon, although global fish production is expected to return to positive growth. The majority of producers have been quick to adapt to the new circumstances, and the outlook for traditional suppliers to the restaurant sector is steadily improving as restrictions ease.

All nodes of the fishery and aquaculture value chains have been fundamentally affected by the economic and social upheavals that have taken place since initial lockdowns began. Heavy financial losses have been incurred, but the pandemic has also given rise to new market opportunities. Newly developed distribution channels, an increase in products designed for home consumption and operational adaptations are likely to remain key features of the industry in the years to come. For several species, the pivot towards retail during the pandemic has opened up previously untapped customer segments.

Stakeholders are anticipating a significant demand boost as the reopening of food services supplements the newly strengthened retail business, making increases in fish prices likely for the rest of 2021. However, for some categories such as small pelagics and canned tuna, the return of food services may put a dampener on the market growth observed in 2020. Stricter sanitary requirements and inspection protocols have already increased logistical costs for exporters, particularly those exporting to China. Total trade in fish products is forecast to increase only marginally in 2021 in volume and value terms, due to the lingering effects of the pandemic and other trade-related challenges concerning the industry. These include the remaining tariffs on fisheries and aquaculture products traded between the United States of America and China, and the delays and administrative obstacles faced by traders in the United Kingdom of Great Britain and Northern Ireland as the phased process of the country’s exit from the European Union continues.

Contact:

Felix Dent

Audun Lem

Stefania Vannuccini

WHEAT

PRICES

International wheat prices higher than last year

International wheat prices rose quickly at the start of the 2020/21 season, increasing for six consecutive months between August 2020 and January 2021, reaching a seven-year high by May 2021. This increase mostly reflected brisk trade activity to meet strong demand at the start of the season amid crop condition concerns, including in parts of Argentina, Europe and the United States of America (United States), as well as tightening export availabilities, especially in the European Union. Strong rises in international maize prices, and the resulting shift in feed demand to wheat, along with uncertainty regarding the impact of an export quota and tax implemented by the Russian Federation, also added upward pressure on wheat prices. While international wheat prices dampened towards the end of May in response to generally good production prospects for 2021 and a decline in maize prices, for the month as a whole, the IGC Wheat Price Index, a trade-weighted price measure of major export quotations, was still 28.5 percent higher on a yearly basis. The benchmark US wheat, No.2 Hard Red Winter (f.o.b. Gulf), which sets the benchmark price for global wheat markets, averaged USD 299 per tonne in May, up 34 percent year-on-year.

Reflecting these trends, wheat futures also rose in May 2021 with the September Chicago Board of Trade soft red winter futures averaging USD 259 per tonne, up 5.3 percent from April and 37 percent higher than the same month last year. More detailed analysis of the futures markets can be found in the Market indicators section of this report.

PRODUCTION

World wheat production to hit a new record in 2021

Global wheat production is forecast at 785.8 million tonnes in 2021, the highest level on record and an increase of 1.4 percent (11.0 million tonnes) compared with the outturn in 2020.

The positive global production outlook is mainly related to expected year-on-year production gains in Europe, particularly in the European Union, where production is forecast to recover to 134.0 million tonnes, up 7.0 percent from last year’s weather-stricken harvest. The increase in 2021 reflects both a price-driven expansion in the wheat planted area and a foreseen upturn in yields, owing to generally beneficial weather conditions, despite a recent cold spell in April. Wheat production in the United Kingdom of Great Britain and Northern Ireland (the United Kingdom) is also forecast to rebound sharply to 14.5 million tonnes in 2021, predominantly due to an increase in plantings. In addition, a larger proportion of wheat crops was reported to be in good-to-excellent conditions in 2021 compared with the previous year, implying an increased likelihood of improved yield levels. In Ukraine, wheat production is forecast to increase by 10.5 percent to 27.5 million tonnes in 2021, driven by both larger plantings and expected higher yields. By contrast, wheat production in the Russian Federation is foreseen to fall by 4.4 million tonnes to 81.5 million tonnes in 2021, despite a record area sown, as less-than-ideal weather conditions have diminished yield prospects; nevertheless, the 2021 wheat output is still foreseen to exceed the previous five-year average.

In North America, total wheat production in the United States is forecast to increase to 51 million tonnes, 2.5 percent higher on a yearly basis. The foreseen modest growth is primarily based on a price-driven expansion in plantings, the first in three years, mainly related to larger winter sowings that are expected to more than compensate for a likely contraction in the spring acreage. Notwithstanding the adverse impact of recent freezing temperatures in several states in the Plains and Midwest, yields are also forecast to increase in 2021, further bolstering the production outlook. By contrast, wheat production is forecast to decline in Canada to 31.1 million tonnes in 2021, resting on a contraction in plantings and lower yields, following the highs of 2020.

In Asia, wheat production in India is officially forecast at a record 109.2 million tonnes in 2021, driven by a large area sown to wheat, as farmers have been incentivized by continued government support policies and remunerative prices. Similarly, in Pakistan, record high domestic prices have encouraged farmers to increase sowings, and given the overall conducive weather conditions that are supporting good yield prospects, production is expected to increase by 3.8 percent year-on-year to 26.2 million tonnes in 2021. In China[1], wheat production in 2021 is pegged at 136.4 million tonnes, moderately higher on a yearly basis, reflecting overall beneficial weather conditions. Production outlooks for wheat in Near East Asian countries are less favourable, as abnormal dryness has curbed yield prospects, thereby lowering production forecasts for several countries, compared with the previous year, including for the leading producer Turkey.

Wheat production across North Africa is expected to recover strongly compared with the previous year’s drought-reduced outturns. The wheat harvest in Morocco is forecast at 7.2 million tonnes in 2021, nearly three times the 2020 level, underpinned by a beneficial distribution of seasonal rains. Tunisia is also expected to harvest a larger wheat crop in 2021. However, in Algeria, poor rains in the minor-producing wheat areas have cut back overall prospects and, consequently, a below-average output is forecast for this year.

In the Southern Hemisphere countries, planting of the 2021 wheat crop is under way. In Australia, production is forecast to decline from the 2020 record output, but to remain above average in 2021. The expected yearly reduction is anchored in a likely return to trend yields following the highs registered in 2020, with competitive wheat prices and prevailing good soil moisture levels expected to help maintain a similar-sized planted area in 2021. In South America, reflecting highly favourable price prospects that are expected to encourage an expansion in sowings, combined with a likely increase in yields following the low levels of 2020, Argentina’s wheat production is forecast at an above-average level in 2021. Larger plantings in Brazil are also expected to support a small production upturn in 2021.

TRADE

Slight increase in wheat trade foreseen in 2021/22

Early forecasts for world wheat trade in 2021/22 (July/ June) point to a marginal increase of 0.5 percent (1.0 million tonnes) from the 2020/21 level, reaching a new record of 187.2 million tonnes. The small increase would largely reflect expected increased imports by Asia.

In Asia, wheat imports are forecast to increase by 2.1 percent in 2021/22 to 99.4 million tonnes. After nearly doubling its wheat imports year-on-year in 2020/21, China is expected to further increase its wheat purchases in 2021/22 by 1 million tonnes, becoming the largest wheat importer in Asia and the second largest in the world. Driven by high feed demand and wheat’s price competitiveness relative to maize, this increase would bring China’s wheat import forecast to 11 million tonnes in 2021/22. Larger imports in 2021/22 are also forecast for the Islamic Republic of Iran (up by 1 million tonnes) on account of increased demand, as well as for Afghanistan (up by 800 000 tonnes) and Iraq (up by 1 million tonnes) to compensate for reduced domestic production forecasts. Wheat purchases by Indonesia and Turkey, now lagging China as the second and third largest importers in Asia, respectively, are likely to increase marginally year-on-year. By contrast, following a year of exceptionally high imports incentivized by the suspension of the wheat import duty by the Government to replenish stocks, and in expectation of a bigger wheat harvest in 2021, Pakistan’s wheat imports could fall by as much as 2.5 million tonnes to 1.0 million tonnes.

At around 50 million tonnes, aggregate wheat imports in Africa in 2021/22 points to a decline of 3.7 percent compared with 2020/21. Accounting for the bulk of this decline, imports by Morocco are expected to fall by 2.3 million tonnes from last year’s record level, as domestic supplies are set to recover, resting on a probable triple increase in domestic production this year. Furthermore, imports are likely to be deterred by the reinstatement of wheat import duties in mid-May 2021, which had been suspended since January 2020. By contrast, a reduced production forecast and tightening stocks are expected to boost imports by Algeria by 1.1 million tonnes in 2021/22, to 7.6 million tonnes. Wheat imports by Egypt, the world’s largest wheat importer, are also projected to rise in 2021/22, albeit marginally, to a record 13.3 million tonnes. While production is forecast to remain steady, the higher projected imports by Egypt are mostly to help with stock build-up following a drawdown in 2020/21. In Nigeria, the third-largest importer in Africa, wheat imports could fall marginally from last year’s record as a result of larger opening stocks. The Central Bank of Nigeria has recently indicated its plan to close the US dollar funding for wheat imports in an effort to reduce the country’s imports by 60 percent over the next two years.

In Latin America and the Caribbean, total wheat imports in 2021/22 are forecast to remain near the 2020/21 level of 23.7 million tonnes. Import demand is expected to be generally steady year-on-year in Brazil and Mexico, the region’s largest and second largest wheat importers, at 6.5 million tonnes and 5.0 million tonnes, respectively, with adequate supplies to meet demand.

Imports in Europe in 2021/22 are forecast at 9.4 million tonnes, down marginally from 2020/21. Accounting for the biggest share, imports by the European Union are likely to remain unchanged year-on-year at 5.0 million tonnes, with increased utilization, higher exports and replenishing stocks expected to be balanced by a strong rebound in production. Elsewhere in Europe, a likely strong increase in wheat production in the United Kingdom is expected to reduce the country’s imports.

Regarding exports, sales by the Russian Federation – the world’s leading wheat exporter – are anticipated to remain unchanged at 39.0 million tonnes as large domestic supplies and competitive export prices are seen offsetting the impact of a floating export tax imposed in June 2021. In Argentina, despite increased information and registration requirements, in place as of April 2021, exports are forecast to increase by 37 percent in 2021/22 to 13.0 million tonnes on expectation of higher production, as well as competitive export prices due to a weaker currency relative to the US dollar. A rebound in production is also expected to boost wheat shipments from the European Union by 9 percent to 29.5 million tonnes, and in Ukraine by 5 percent to 17.0 million tonnes. By contrast, expected declines in production are anticipated to reduce shipments from Australia and Canada by 5 percent and 19 percent, respectively, compared with their export volumes in 2020/21. Exports from the United States are also forecast to decline in 2021/22, by 3 percent, as a result of strong domestic demand tightening export availabilities.

UTILIZATION

Higher feed use to boost total wheat utilization in 2021/22

Global wheat utilization in 2021/22 is forecast to increase by 2.5 percent (19.1 million tonnes) from the 2020/21 estimated level, to reach an all-time high of 778.6 million tonnes, with year-on-year increases expected in food, feed and industrial uses. Leading the expected growth in wheat consumption, global feed use of wheat is forecast to rise considerably, by 7.5 percent (10.8 million tonnes) from the 2020/21 level to a record 155.5 million tonnes in 2021/22, marking the greatest annual increase since 2011/12. After falling in 2020/21, feed use of wheat in the European Union, the biggest market for feed wheat, is expected to rebound in 2021/22, increasing by 9.0 percent, with an anticipated rebound in wheat production increasing domestic supplies and lowering prices. A likely narrow wheat-to-maize price differential in the first half of 2021/22 is also seen to support a strong rise in feed use of wheat in the United States, pointing to a predicted 70 percent growth in wheat feed utilization, taking it to its highest level since 2013/14. Competitive prices of wheat relative to maize are expected to boost feed use of wheat in the United Kingdom and several countries in South America, as well as in China, now the world’s second largest market for feed wheat, where feed demand continues to rise. At 531 million tonnes, representing nearly 70 percent of the expected total wheat utilization, wheat for direct human consumption is forecast to increase by 1.2 percent (6.3 million tonnes) in 2021/22. At this level, per capita wheat consumption would remain nearly unchanged at the global level (at 67.4 kg per annum), as well as for developing countries (at 62.4 kg per annum), but it could rise slightly in developed countries, from 92.6 in 2020/21 to 93.0 kg per annum in 2021/22. Total industrial use of wheat is also projected to increase in 2021/22, marking a rebound after two consecutive years of decline. Most of this growth is seen in the European Union, driven by greater ethanol production, in the United Kingdom, due to a rise in ethanol and starch production, and in India, as a result of higher expected starch production.

STOCKS

Global wheat inventories could rise for a third consecutive season

Based on the preliminary forecasts for 2021 production and 2021/22 utilization, world wheat stocks are forecast to increase by 2.6 percent (7.7million tonnes), to reach a new all-time high of 299 million tonnes by the close of seasons in 2022. The expected year-on-year increase would mark the third consecutive annual rise in global wheat stocks. In combination with the expected growth in utilization, the forecast for global stocks points to a world wheat stocks-to-use ratio of 38.0 percent in 2021/22, up marginally from 37.4 percent in 2020/21 and a four-year high. The largest increase in inventories is forecast to occur in China, where higher production and record imports could push inventories up 3.4 percent above opening levels to just over 134 million tonnes, accounting for approximately 45 percent of world wheat stocks in 2021/22. Excluding China, global stocks are forecast to increase by 2.1 percent above opening levels, supported by foreseen increases in the European Union, India, Morocco and Ukraine, as a result of higher expected domestic production, as well as in Australia due to high carryover stocks and reduced exports. Suggesting a slightly tighter market supply, the ratio of major wheat exporters’ closing stocks to their total disappearance (defined as domestic utilization plus exports), which provides a good measure of availability in global markets, is forecast at 17.1 percent, mildly up from 16.5 percent in 2020/21, but still below the past five-year average. Among the major exporters, offsetting the expected inventory buildups in the European Union and Ukraine, strong demand and low opening stocks (following a below-average output in 2020/21) are seen pushing stocks down in the United States by 11.2 percent (2.7 million tonnes) to their lowest level since 2014/15. With an expected decline in production and a second consecutive year of near-record exports, wheat inventories in the Russian Federation are also forecast to contract year-on-year, by 8.9 percent (900 000 thousand tonnes).

[1] China in this section is restricted to the mainland of China.

COARSE GRAINS*

PRICES

International prices of major coarse grains remain above last year’s levels

Tightening global supplies and strong import demand drove up international prices of coarse grains in almost every month of the 2020/21 (June/July) season. After falling to a three-year low in May 2020, international prices of coarse grains rose sharply for the first eight months of the season, reaching in February 2021 their highest point since June 2013. Continued downward revisions to supplies in the United States amid robust export demand sustained the rise in international maize prices. China[1] was a dominating market driver with its unprecedented volume of coarse grain imports, up 182 percent year-on-year, accounting for nearly all the growth in world coarse grain trade in 2020/21. A temporary suspension of maize export registrations by Argentina in early 2021 and spillover effects from strong increases in soybean prices also added to the upward price momentum. Although maize prices began to fall towards the end of May 2021, as preliminary 2021 production prospects indicated a likely sizeable increase in global production, they remained elevated on account of an expected further contraction in export availabilities and global inventory levels in the coming season.

Leading the increase in international export prices, the benchmark US maize prices (yellow, No. 2, f.o.b.) averaged USD 304 per tonne in May 2021, up by 111 percent from May 2020. Similarly, despite the seasonal increase in supplies from the new harvest, Argentina (up River, f.o.b.) maize prices were up in May by 86 percent year-on-year. In line with maize price trends, international prices of barley and sorghum remained above their values of a year ago, influenced by strong feed demand, especially from China.

Maize futures prices also surged, reflecting tightening export availabilities, especially in the United States, rising purchases by China, and expectations of continued strong global demand based on projected economic recovery from the COVID-19 pandemic in many countries. The Chicago Board of Trade (CBOT) maize futures for delivery in December 2021, which is the benchmark delivery month for the new US crop, peaked to an 8-year high by mid-May. Despite a slightly weaker price sentiment in late May on improved production prospects, CBOT futures averaged 283 per tonne for the month, still up 90 percent from May 2020. More detailed analysis of the futures markets can be found in the Market Indicators section of this report.

PRODUCTION

Record output forecast for 2021

Global production of coarse grains is forecast at a record level of 1 516 million tonnes in 2021, 36 million tonnes (2.5 percent) above the previous year’s output. Expected increases in maize and, to a lesser extent, sorghum production are seen more than outweighing a decline in the world barley outturn.

World maize production is forecast at 1 198 million tonnes in 2021, up 3.7 percent on a yearly basis. The bulk of this year’s growth is expected in the United States, where the maize output is forecast at 384 million tonnes, 6.6 percent above the outturn in 2020. The positive outlook is underpinned by expectations of a modest expansion in plantings and a likely return to above-average yields following last year’s lows. A sharp upswing in maize prices since the release of the initial planting estimate in March could, however, spur a greater increase in sowings that would further bolster production prospects; field observations in May already indicated that plantings were progressing at a faster rate than average. In Canada, production is forecast to increase moderately in 2021 on a larger planted area and a likely upturn in yields.

In Europe, the maize production forecast for the European Union is pegged at 71.6 million tonnes in 2021, nearly 10 percent above last year’s level. Despite unconducive weather that slowed plantings, a yearly upturn in the area sown is forecast due to good price prospects, which together with an expected increase in yields underpin the current positive production outlook. Harvests in Bulgaria and Romania are forecast to recover strongly from the weather-reduced levels in 2020, accounting for the largest proportion of the foreseen aggregate production increase among European Union countries. In Ukraine, with high maize prices expected, at the minimum, to ensure a similar sized planted area relative to the level in 2020, and yields returning to above-average levels following the lows in 2020, maize production is foreseen to climb to 35 million tonnes, up 16 percent from the previous year. The maize harvest in the Russian Federation is forecast to remain broadly unchanged at 14 million tonnes in 2021.

In Asia, maize production in China, by far the largest producer on the continent, is forecast to increase by 3.6 percent to 270 million tonnes, as farmers respond positively to the high prices and the government support policies by increasing plantings. Elsewhere in Asia, maize outputs in 2021 are foreseen to remain mostly unchanged on a yearly basis and generally above the five-year averages.

In South America, where harvesting of the 2021 maize crop has begun, prospects point to another bumper regional output. In Argentina, despite high maize prices, increasing costs of production have curbed producer profit margins, and this has caused a modest contraction in the area sown; nonetheless, the maize acreage is still set to remain near the record high of 2020. Incorporating a foreseen upturn in yields, production in Argentina is forecast at 58 million tonnes in 2021, unchanged on a yearly basis. In Brazil, total maize production is forecast to decline slightly to 100 million tonnes in 2021, albeit remaining at a level above the five-year average. Despite an estimated record area planted, instigated by high grain prices, dry weather conditions during the minor and main seasons have dented yield expectations, which accounts for the anticipated production decrease this year.

In Africa, the 2021 maize crops are being harvested in countries south of the Equator. South Africa, the continent’s leading producer, is forecast to harvest a crop of 16.7 million tonnes, just short of the record output of 2017. The large output primarily reflects a price-driven expansion in sowings and expectations of above-average yields, due to almost ideal weather conditions throughout the season. Production in neighbouring countries is also forecast at high levels, notably in Zimbabwe, where the output is expected to recover substantially following two years of drought-reduced outturns to reach 2.7 million tonnes. Planting of the 2021 maize crop is ongoing in West Africa and East Africa.

The forecast for global barley production in 2021 stands at 157.2 million tonnes, 1.8 percent (nearly 3 million tonnes) below last year’s record. This outlook primarily reflects an expected decline in Australia’s harvest, where reduced trade prospects are expected to instigate a reduction in plantings. The lower output in Australia is anticipated to more than outweigh expected production increases in Canada, the European Union and Morocco.

World sorghum production is forecast at 62.6 million tonnes in 2021, 2.6 percent above the previous year’s average level. Large outputs are projected in Australia and the United States, where high prices and robust trade prospects are set to encourage area expansions.

TRADE

Coarse grains trade seen remaining stable in 2021/22

Following a year of robust growth, world trade of coarse grains in 2021/22 (July/June) is expected to remain generally close to the 2020/21 estimated record level of 234 million tonnes. Larger shipments of maize and sorghum are seen balancing a reduction in global barley trade in 2021/22.

Global maize trade is forecast to expand only marginally, by 0.6 percent (1.1 million tonnes), in 2021/22 (July/June), reaching 189 million tonnes. For the second consecutive season, the greatest increase in demand is expected to come from China. After quadrupling its imports year-on-year in 2020/21 and rising from the ninth largest importer to the world’s top maize importer, China is forecast to further increase its maize purchases from international markets by 9.1 percent (2 million tonnes) in 2021/22, to 24 million tonnes. Rising demand for animal feed and industrial use, as well as efforts to replenish stocks, on top of high domestic prices, are seen sustaining China’s maize import levels well above the 7.2 million tonne tariff-rate-quota for 2021. Turkey is also expected to increase its maize imports by as much as 48 percent (1.2 million tonnes), following a dip in 2020/21, to compensate for this year’s anticipated reduced production. Despite a rise in production, the European Union could increase imports by 7.4 percent (1.1 million tonnes) from 2020/21 levels to meet domestic demand and replenish inventories, which fell to low levels in the previous season. Tight stocks as a result of reduced production and rising consumption are seen pushing Mexico’s imports up by 6.1 percent (1 million tonnes) in 2021/22. By contrast, adequate domestic supplies with a reduced export forecast for Brazil are expected to reduce imports by 50 percent (1 million tonnes). The Islamic Republic of Iran is also expected to make smaller purchases in 2021/22 on account of high carryover stocks following last year’s record import volumes.

On the export side, larger maize shipments are forecast for Ukraine, up 24.4 percent (5.5 million tonnes) from 2021/22, reaching 28 million tonnes, due to an expected production recovery. Maize exports by Argentina are also expected to rise in 2021/22 to a new record level of 35.2 million tonnes, up 3.5 percent (1.2 million tonnes) year-on-year, supported by a near-record production forecast and competitive currency. Weighing against these increases, sales from Brazil are forecast to decline by 15.6 percent (5.7 million tonnes) from last year’s level, falling to a three-year low of 30.8 million tonnes in 2021/22 as a result of reduced production. Low carryover stocks and expectations of higher industrial and, to a lesser extent, feed consumption levels than in 2020/21 are seen slightly lowering shipments from the United States by 1.1 percent (750 thousand tonnes) to 68 million tonnes in 2021/22. Despite this decline, however, the United States would maintain its position as the world’s top maize exporter.

Similar to maize trade, global trade in sorghum is forecast to expand in 2021/22 (July/June), by 26.2 percent (2.4 million tonnes), to 11.4 million tonnes, driven almost exclusively by a foreseen 29-percent (2 million tonne) increase in China’s purchases to meet higher expected feed use demand following official guidelines encouraging greater use of sorghum, and other coarse grains, in feed rations. Mexico is also seen increasing sorghum purchases in 2021/22, by 500 000, to compensate for an expected fall in production. This greater global import demand is likely to be mostly met by increased shipments from the United States, which are forecast to rise by 21.5 percent (1.6 million tonnes) in 2021/22.

By contrast, global barley trade in 2020/21 (July/June) is expected to fall from the 2020/21 level by 8.5 percent (2.8 million tonnes) to 30.3 million tonnes. A predicted drop in purchases by Morocco of 700 000 tonnes (63.6 percent), on account of a large expected increase in production, is the main driver behind the anticipated contraction in global trade. Greater use of locally produced animal feed and a decline in the barley import subsidy are also expected to result in lower barley imports by Saudi Arabia. Imports by China in 2020/21 could fall by 4.6 percent (500 000 tonnes), but would still remain at an elevated level of more than 10 million tonnes, maintaining China’s position as the world’s largest importer of barley. On the export side, a sizeable drop in barley production may also reduce shipments from Australia in 2021/22, by as much as 23 percent (1.5 million tonnes). The Russian Federation is also forecast to reduce shipments year-on-year by 16.7 percent (1 million tonnes) due to slightly lower production prospects and tighter stocks following a record export level in 2020/21. Shipments will likely be further limited by the floating tax imposed on barley exports from the start of June 2021.

UTILIZATION

Total utilization of coarse grains reaching a new peak in 2021/22

World utilization of coarse grains is forecast to increase by 1.4 percent (21.1 million tonnes) in 2021/22 to a new record of 1 527 million tonnes. The increase is largely due to greater expected growth in industrial use as economies begin to recover from the COVID-19 pandemic, followed by increased global feed use. Among the major coarse grains, global utilization of maize is forecast to increase the most year-on-year, up 2.1 percent (25 million tonnes) to 1 209 million tonnes, followed by total sorghum utilization, up 2.1 percent (1.3 million tonnes) to 63.4 million tonnes, while the use of barley is seen falling by 1.1 percent (1.7 million tonnes) to 156.8 million tonnes.

Total industrial use of coarse grains is forecast to register a strong growth in 2021/22. The increase from 2020/21 reflects an expected greater industrial use of maize, marking a second year of recovery from its fall in 2019/20 caused by the dampening effects of COVID-19 restrictions on ethanol demand. In the United States, which accounts for nearly half of global industrial use of maize, higher ethanol demand with increased gasoline consumption as the economy recovers is seen boosting industrial use of maize by nearly 7 percent. In China, industrial use of maize is forecast to increase by just over 3 percent, mostly on greater starch production. An expected increase in ethanol production is also seen lifting industrial use of maize in Brazil by around 7 percent.

World feed use of coarse grains is also forecast to expand in 2021/22, albeit at a slower pace than in the past nine years of growth, rising by only 0.8 percent (7.1 million tonnes) to reach 895 million tonnes. The bulk of the foreseen increase is attributable to maize feed use, which is forecast to rise by 1.3 percent to 717 million tonnes, with greater use expected in all of the top four maize feed consumers: China, Brazil, the European Union and the United States. Accounting for nearly 30 percent of global maize feed utilization and the world’s largest user of maize for feed, China is forecast to increase its use of maize for feed by 2.6 percent in 2021/22 to meet its rising feed demand with its swine herd now nearly fully recovered to its pre-African Swine Fever level. Increases in the use of maize for animal feed are also forecast for Brazil, the European Union and the United States. Global feed use of sorghum is expected to increase for a third consecutive season in 2021/22 by 9.5 percent, mostly on account of an anticipated rise of 1.8 million tonnes in China, the top global sorghum feed consumer. Feed use of sorghum is also expected to rise in Argentina. By contrast, global feed use of barley is forecast to decrease by 1.7 percent (1.9 million tonnes) in 2021/22, on weaker demand anticipated in the United Kingdom of Great Britain and Northern Ireland (down 15 percent), as well as in Saudi Arabia (down 10 percent), where grazing conditions are good and the diminishing barley import subsidy is expected to lead to greater use of locally produced animal feed.

At 226 million tonnes, world food consumption of coarse grains in 2021/22 is forecast to expand by 0.6 percent (1.4 million tonnes) from 2020/21, maintaining a steady level of global per caput consumption. The forecast growth is concentrated almost exclusively in developing countries, primarily in Africa, Asia and, to a lesser extent, Central America, and is almost entirely accounted for by increased consumption of maize, which is forecast to rise by 1.0 percent in 2021/22, mostly in Africa.

STOCKS

Coarse grains stocks likely to tighten further in 2021/22

World stocks of coarse grains by the close of seasons in 2022 are forecast to fall by 1.7 percent (5.7 million tonnes) below their opening levels, reaching an eight-year low of 328.2 million tonnes. This would mark the fourth consecutive season that global coarse grains fall below their opening levels. In combination with the forecast rise in utilization, the expected contraction in stocks would lower the world-stocks-to-use ratio of coarse grains further, from 21.9 percent in 2020/21 to 20.8 percent in 2021/22, the lowest level since 2012/13. However, the ratio of major exporters’ closing stocks to their total disappearance (defined as domestic utilization plus exports) is set to increase, albeit slightly, from 11.4 percent in 2020/21 to 12.1 percent in 2021/22, indicating slightly improved global availability from a trade perspective. The anticipated decline in coarse grain stocks is almost entirely attributed to a further drawdown of global maize inventories, which are forecast to fall by 2.7 percent (7.2 million tonnes) in 2021/22, largely stemming from an expected 8 percent (10.4 million tonnes) fall in maize inventories in China, despite record imports. On top of rising consumption and low carryover stocks, slightly reduced production is also seen lowering Mexico’s maize inventories by 25 percent (1 million). By contrast, maize stocks in the European Union are forecast to recover in 2021/22, by 23.4 percent (2.8 million tonnes), after a sharp decline last year, due to a record production forecast and increased imports. Maize inventories in the United States are also expected to recover slightly in 2021/22, rising by 3.4 percent (1.2 million tonnes), on account of a projected near-record production this year and smaller exports. However, at 33 million tonnes, maize stocks in the United States would still be well below average.

Global barley stocks are forecast to rise by 5.6 percent (1.8 million tonnes) year-on-year, mostly on likely increases in inventories in Canada, rising 140 percent (700 000 tonnes), and the EU, up 12.9 percent (1 million tonnes), as a result of increased production expectations. By contrast, sorghum inventories are likely to contract slightly, down 4.2 percent (340 000 tonnes) in 2021/22, almost exclusively on smaller stocks foreseen in several African countries.

[1] China in this section is restricted to the mainland of China.

RICE

PRICES

May prices little changed from December 2020 levels, but below their year-earlier highs

Contrasting trends across origins and market segments have kept the May 2021 value of the FAO All Rice Price Index at 110.6 points, down just 0.7 percent from December 2020 levels, but 4.5 percent below the five- and-a-half-year highs the Index touched in May 2020. As measured by their respective sub-indices, declines have primarily concerned aromatic and glutinous prices, which have continued to reel under the pressure of across-the-board harvest improvements in exporting countries, as well as weak demand, especially for Basmati rice from Near Eastern buyers. By contrast, output concerns in California due to limited water supplies for irrigation have propelled a 12.0 percent increase in Japonica prices since the start of the year. Quotations of the most widely traded Indica varieties have been more mixed. In the first months of the year, they drew support from the return of important buyers to the market, namely Bangladesh and Nigeria, although competition for markets, especially with India, tended to cap gains in most Asian suppliers. Quotations have since subsided in all the major Asian exporters. Fresh crop harvests in Thailand and Viet Nam influenced these declines, as did currency movements and efforts by traders to attract new sales, which have been held back by container shortages and soaring shipping costs. Prices in the United States of America (United States) have been the only exception to this recent easing Indica trend, having taken an upturn in April, amid expectations of farmers in the US Delta shifting to cultivation of more profitable crops, namely maize and soybeans.

PRODUCTION

Global production to grow further in 2021, albeit at a slackened pace

Although countries located along and south of the Equator have already harvested their 2021 main crops, the 2021 season is still in its early stages in the Northern Hemisphere, where the first crop of the season has only just entered the planting stage. Assuming normal growing conditions, FAO forecasts global rice production in 2021 to reach 519.1 million tonnes (milled basis). This level would imply a 1.0 percent annual expansion to a new record high. At the same time, it suggests a likely deceleration in the pace of global output growth, as expectations of sustained strong advances in plantings, such as those witnessed in 2020, are restrained by increases in the prices of basic inputs, such as fertilizers and fuel, as well as uncertainties surrounding the resurgence of COVID-19 outbreaks in South and Southeast Asia and heightened competition by other crops.

In Asia, where the 2021 harvest is seen rising by 1.1 percent year-on-year to 465.4 million tonnes, the combined impact of these factors may be allayed by the continuance of government assistance programmes targeting the sector and often taking the form of input subsidies, producer price support measures, or broader initiatives seeking to enable the continuation of agricultural activities during lockdowns. For instance, in China[1], downcast prospects in northeastern Japonica producing provinces, due to heightened competition with maize, are tempered by the prevailing strength of local Indica prices, reinforced by another increase in government purchase prices for this type of rice. These could support a 1.0 percent overall production expansion in 2021 to 146.6 million tonnes. In India, which is seen replicating the 2020 record performance with a 123.1 million tonne harvest, prospects are underpinned by official forecasts of a normal monsoon performance, which coupled with strong public purchases of rice under the minimum support price system, may keep the area under paddy at comparatively high levels. After two successive years of weather-induced output drops, production is also forecast to recover in Indonesia, aided by a much improved performance of the seasonal rains, alongside official input and irrigation expansion schemes, which since last year have been furthered by plans to open wetlands and peatlands for paddy cultivation. Provided more normal growing conditions prevail over the season, high prices could also support production expansions in Bangladesh and Thailand, with an additional boost in the former expected to result from official efforts to promote mechanization and expand coverage under hybrid varieties. Most other Asian producing countries are similarly seen stepping up production in 2021, or keeping it close to the abundant levels seen in 2020. Exceptions to this trend could be Japan, where poor price prospects may stimulate greater participation in state programmes encouraging a shift away from rice cultivation, as well as Afghanistan, Taiwan Province of China, the Islamic Republic of Iran, Iraq and Myanmar, where poor water supplies for irrigation or high input prices may depress plantings.

In Africa, current prospects point to the 2021 harvest growing by 1.0 percent year-on-year to 25.6 million tonnes. Gains are anticipated to be concentrated in the western parts of the continent, especially Nigeria, but also in Côte d’Ivoire, Ghana and Senegal, mirroring expectations of yield recoveries from the 2020 weather-affected outcomes and an accelerated pace of area expansions spurred by strong domestic prices and ongoing input assistance programmes. Output expectations are more downcast elsewhere on the continent. For instance, Egypt could see its 2021 harvest contract by 3.7 percent to 4.3 million tonnes as reduced profit margins, in the context of intensified efforts to enforce water-saving cultivation limits, should encourage producers to shift to greater cotton cultivation. Prospects of reduced profitability are also dampening output expectations for the United Republic of Tanzania, as are a delayed and poor start to the seasonal rains in Madagascar. This scenario is likely, even if rainfall improvements occurring since the start of 2021, coupled with a reduced incidence of storm damage, may help mitigate production losses in the latter country.

In Latin America and the Caribbean, prospects for 2021 production growing beyond the 18.7 million tonnes harvested in 2020 were dampened by unseasonable dryness and short water supplies for irrigation, often associated with La Niña conditions. These limited the ability of producers in Argentina, Brazil and Uruguay to respond to attractive producer prices by expanding plantings or caused area under paddy to fall, as was the case of Paraguay and Peru. Nevertheless, conducive temperatures and good sunshine conditions provided respite, supporting some production gains in Argentina, Uruguay and especially Brazil. These increases may help to offset anticipated contractions in Colombia, prompted by producer price falls and efforts to reduce surplus production, in Cuba, Haiti and Venezuela (Bolivarian Republic of), due to heightened shortages of basic inputs, and in Bolivia (Plurinational State of) due to erratic rains. Meanwhile, various Central American and Caribbean countries, such as Costa Rica, the Dominican Republic and Honduras, could recover losses incurred in 2020 following successive storms, with gains also expected in Mexico, driven by planting incentives provided by guaranteed producer prices.

In the other regions, the outlook points to a marginal output increase in Europe, as gains in the European Union, driven by improved water supplies in Portugal and fewer weather disruptions in Italy, are offset by a likely contraction in the Russian Federation, where producers may respond to rising water and fertilizer costs by reducing plantings. Prospects are also negative for the United States, which may harvest 11 percent less than in 2020, or some 6.5 million tonnes, as producers in the Delta substitute rice with maize and soybeans and limited water supplies curb plantings in California. By contrast, attractive profit margins and improved water allocations have permitted plantings in Australia to undergo an eightfold increase from the 12-year low that they touched in 2020 due to drought. Australian production is therefore set to increase from a mere 35 200 tonnes last year to 305 000 tonnes in 2021.

TRADE

As Asian and African imports underpin 2021 trade expansion, India’s global market share could top 33 percent

After staging a 2.8 percent annual recovery in 2020, international trade in rice is expected to continue growing, with a total 48.0 million tonnes anticipated to be traded globally during the course of 2021 (January-December), up 5.6 percent from 2020. On the import side, growth prospects come in the context of increases in domestic prices in various countries, which have spurred interest in more affordably priced rice from abroad. In Asia, which looks set to drive the year’s forecast trade expansion, this has especially been the case of Bangladesh, where following the approval of duty remissions and efforts to refurbish state stockpiles through imports, 2021 purchases may surge to a 4-year high of 1.8 million tonnes. Price differentials have also enticed global rice suppliers such as Viet Nam and China to step up 2021 purchases, part of which are destined for the feed and industrial sectors. These gains come alongside expectations of greater deliveries to Iraq, associated with the resumption of public purchases from abroad for the country’s rationing system, and to African countries, spearheaded by Côte d’Ivoire, Senegal and Nigeria. In Nigeria, gains are expected to be facilitated by the December lifting of border closures. Together, greater imports from these countries may compensate for anticipated reductions by Afghanistan, Nepal and Saudi Arabia, and for historically low purchases by Indonesia, where higher domestic public procurement may rule out the need for state imports in 2021. The import outlook is more downcast outside Asia and Africa, amid expectations of diminished broken rice shipments to the European Union and of Basmati rice to the Unites States. In Latin America and the Caribbean, improved harvests in various Central American and Caribbean countries, together with the weakness of the real in Brazil, may also translate into a slowdown in the region’s 2021 purchases.

The past year’s dynamic international trade in rice has occurred notwithstanding the COVID-19 pandemic, which posed numerous logistical challenges to the execution of deliveries, including reduced milling and port operations at suppliers’ end, which have been more recently compounded by container shortages and soaring freight rates. The cost implications of these factors for importers have tended to amplify interest in affordably priced rice, particularity from India, where ample exportable availabilities coupled with official initiatives, such as the opening of the Kakinada deep-water and Paradip ports to rice exports, have also helped to expedite deliveries. Although the latest wave of COVID-19 outbreaks has not been without repercussions on rice milling and transport in India, assuming a gradual improvement in logistics, the competitive advantage endowed by these factors are forecast to lift India’s exports to a fresh peak of 16.2 million tonnes. This would position India’s share in the global export market at 34 percent, up from 32 percent in 2020 and from 13 percent a decade earlier. Although heightened competition for markets may limit their sales expansion, improved harvests are also expected to enable some export recoveries in Thailand, the United States and Viet Nam in 2021, with demand from China and competitive prices providing a more decisive boost to shipments by Pakistan. By contrast, lingering supply tightness may undermine deliveries by Argentina, Brazil, Paraguay and Uruguay, whereas forecast reductions for Myanmar are linked to disruptions in transport, communication and banking channels associated with political turmoil in the country, which have hindered the progress of seaborne shipments.

Although still tentative at this stage, global trade in rice in 2022 is forecast to remain close to the 2021 level, at 47.9 million tonnes. Given the prospects of overall abundant 2021 harvests, various Asian countries, such as China, Malaysia and Viet Nam, may be in a position to cut reliance on imports next year. Bangladesh is foremost among these, as refurbished stockpiles and reduced price pressure may encourage officials to reinstate border protective measures, thus returning imports by the country to the near negligeable volumes registered in 2019 and 2020. This is likely to be the case even through strong domestic demand is expected to keep imports by African countries on an expansionary trend, while lower harvests raise Near Eastern purchases. Among exporters, ample and affordable exportable availabilities are envisaged to enable India to keep shipments largely unvaried in 2022, while greater Indica availabilities are anticipated to enable Thailand to improve its competitive edge in this market. These tendencies are predicted to affect deliveries by Viet Nam the most, although Brazil, Cambodia, Pakistan and the United States are also seen shipping less in 2022.

UTILIZATION

Food use to remain the driving force of global use expansion, but continued growth in feed use also expected

Based on preliminary expectations for 2021 crops, FAO tentatively forecasts global rice utilization in 2021/22 to exceed its year-earlier level by 1.4 percent, to reach a new peak of 520.6 million tonnes (milled basis). Food use is anticipated to account for 82 percent of this volume and drive the forecast utilization growth by staging a 5.6 million tonne annual expansion to 427.1 million tonnes. This increase would be sufficient to keep pace with projected world population growth, thus keeping global per capita food intake largely stable at 54.2 kg per person. The relative stability largely mirrors expectations of per caput food use in Asia remaining close to 8-year highs of 77.3 kg per person, as reductions in some Far Eastern consumers due to long-term dietary shifts away from rice consumption take place alongside gains elsewhere, supported by ample supplies and the continuation of public distribution programmes. In the other regions, average rice intake is forecast to remain little changed year-to-year, or even to accelerate its pace of expansion, as is anticipated to be the case of Latin America and the Caribbean and of Africa.

On the other hand, combined volumes destined for seed, non-food industrial uses and post-harvest losses will likely stabilize at around 74.2 million tonnes in 2021/22. As for uses of rice for animal feed,[2] these normally constitute a small share (close to 3 percent) of global rice use, but increases in grain and soybean prices occurring since late 2020 have stimulated greater interest in diverting surplus rice to commercial animal feed production. This is especially the case in Far Eastern countries, such as China, where the bulk of global feed use of rice concentrates and, where traditionally, use of rice for feed has been largely confined to the on-farm context. While these factors may keep feed use upbeat in the short term, it remains to be seen whether the appeal of rice as a commercial feed ingredient will endure thereafter, given the current positive expectations for the usually more cost-effective maize and wheat crops in China and beyond. As a result, global feed use of rice in 2021/22 is forecast at 19.3 million tonnes, which, while implying a 10 percent annual rise, would still represent only 4 percent of total expected utilization over the season.

WORLD RICE STOCKS

Global inventories to stage a modest rise in 2021/22, as continued drawdowns in China are expected to temper gains

Since reaching an all-time high of 186.1 million tonnes in 2018/19, global rice reserves have seen scant increases, if not fallen, largely because of production setbacks in traditional rice importing countries and inventory cuts in China. Nevertheless, global reserves have remained at ample levels, underpinned by accumulations elsewhere, especially in India due to growing procurement of rice under the minimum support price system. These tendencies are expected to extend into the upcoming season, with world rice stocks at the close of 2021/22 marketing years forecast at 184.6 million tonnes, just 0.4 percent above their opening levels, but still the second highest level on record.

Indeed, developments in the feed and livestock sector in China raise expectations of rice releases from public granaries continuing to target the feed sector in 2021/22, which could result in reserves in the country falling for the third successive season to a 5-year low of around 100 million tonnes. At the same time, much uncertainty surrounds these developments going forward, with the cost-effectiveness of rice as a feedstuff in the country likely to remain dictated by developments in alternative feed markets and policy decisions regarding the pricing of stock releases and the size of domestic public procurement and of state stockpiles.

Carryover expectations are more buoyant for other countries, largely mirroring efforts by various Far Eastern countries to reconstitute state reserves through domestic procurement and/or imports. This is the case of Indonesia, Sri Lanka and especially Bangladesh. In the wake of a bumper 2021 harvest and a rebound in imports, Bangladesh is envisaged to expand reserves by 10 percent to 6.6 million tonnes. Although still short of the highs registered in 2015/16, carryovers are also predicted to register some recoveries in Brazil and the Republic of Korea, with an upturn in output and imports similarly leading to some replenishments in Nigeria.

Combined, the five major rice exporters are predicted to end their 2021/22 seasons with 48.5 million tonnes in store, up 4.9 percent from their opening levels, the highest level since 2013/14.[3] Within the group, only Pakistan and the United States are envisaged to necessitate drawdowns in the face of little, if not negative, output growth and fairly sizeable export volumes. Nevertheless, these cuts may be overshadowed by further stock build-ups in India and Thailand. As a result, the major exporters’ stock-to- disappearance ratio is seen rising from 24.9 percent in 2020/21 to 26.0 percent in 2021/22.[4]

[1] China in this section is restricted to the mainland of China.

[2] FAO’s rice supply and demand balance sheets are expressed on a milled rice basis. For feed use, this implies that the rice balance only accounts for volumes fed to animals in the form of paddy and husked rice (both in milled equivalent), or milled rice (including fully broken supplies). Rice husks and bran are not considered in the balance sheet.

[3] India, Pakistan, Thailand, the United States and Viet Nam.

[4] Defined as the sum of domestic utilization and exports.

OILCROPS, OILS AND MEALS[1]

PRICES[2]

In 2020/21, prices of oilseeds and derived products climbed to multiyear highs

After embarking on an upward trajectory in mid-2020, international prices of oilseeds and derived products continued rising steadily into the 2020/21 season (October/ September), despite uncertainties concerning the impact of COVID-19 on global demand. Underpinned by a tightening supply-demand outlook, in May 2021 FAO’s price indices for oilseeds, oilmeals and vegetable oils were markedly above their respective year-earlier levels.

FAO’s price index for oilseeds has increased uninterruptedly since June 2020, climbing to multiyear highs. The steady rise mainly reflects firming international soybean values, linked primarily to sustained imports by China[3], as the country has continued restocking its pig herds following past outbreaks of African swine fever (ASF). Furthermore, during the first half of 2020/21, protracted dry weather threatened South America’s soybean crops, resulting in another poor harvest in Argentina. More recently, evidence of robust global crushing demand and reports of below-average temperatures and low soil moisture levels at the onset of the 2021/22 campaign in the United States of America (United States) lent additional support to world soy prices. Meanwhile, international rapeseed and sunflower-seed quotations also climbed to multiyear highs on account of global supply tightness.

As for oilmeals, FAO’s price index showed prolonged strength entering the 2020/21 season, reflecting both rising feed demand in China, tied to the country’s pig restocking efforts, and limited exportable soymeal supplies from Argentina, due to a slow pace of crushings. Since February 2021, however, international oilmeal values have started to falter on seasonal pressure stemming from the arrival of new crop supplies in South America, as well as reports of fresh ASF cases in China, which raised doubts about the country’s prospective feed demand.

FAO’s vegetable oil index has increased sharply since June 2020 – following a pronounced decline in early 2020, when the COVID-19 outbreak weighed on global demand. By May 2021, the price index stood twice as high as its corresponding 2020 value. The exceptional strength of the index primarily reflected record-high palm oil prices due to protracted supply tightness, as below-potential outputs in major producing countries coincided with reviving global import demand. At the same time, soyoil values were supported by tightening global supplies amid prospects of firming demand, including from biodiesel producers, while rapeseed and sunflower oil prices were underpinned by, respectively, recovering demand from both the biodiesel and food sectors in the European Union (EU) and dwindling export availabilities in leading producing countries.

OILSEEDS

Oilseed production to rebound in 2020/21

Falling short of the record-high output recorded in Following a marked drop in 2019/20, total oilseed production is expected to recover in 2020/21, reaching 610.1 million tonnes. The increase primarily stems from a rebound in harvested areas and, to a lesser extent, higher yields in key growing countries. More specifically, a rise in global soybean and rapeseed production is expected to more than offset a reduction in world sunflower seed output.

Global soybean production is pegged at 363.4 million tonnes, recovering from last season’s pronounced decline and slightly below the all-time high recorded in 2018/19. In the Northern Hemisphere, 2020/21 production is set to increase across major producing countries. Production in the United States is reported at 112.5 million tonnes, mostly reflecting a rebound in plantings, while yields also recovered on generally favourable weather conditions. In China, soybean output rose for a seventh consecutive season, as plantings expanded further amid continued supportive policy measures. Production in India also registered a sharp recovery, propelled by gains in both yields and harvested area. In the Southern Hemisphere, where harvesting is about to conclude, mixed results are expected. Despite suboptimal growing conditions, Brazil is set to harvest a record crop, driven by both a further expansion in plantings due to attractive margins and continued yield improvements, whereas production in Argentina is seen declining further as a result of both below-average plantings and unusually dry weather conditions linked to La Niña.

As for rapeseed, global production is projected to rebound modestly. The output of the European Union[4] fell for a third consecutive season,as productivity gains were offset by continued area contractions. Production in Canada dropped to a five-year low, as dry conditions during the growing season resulted in a decline in yields, while plantings also decreased. By contrast, Australia reported a steep production rebound, stemming from gains in both area and yields.

In the case of sunflower seed, global output is set to drop to a three-year low, reflecting contractions in Ukraine, the Russian Federation and the European Union – the world’s leading producers. Although plantings expanded across the region, these were insufficient to compensate for sharply lower yields resulting from detrimental weather conditions in pockets of major growing regions.

OILS AND FATS[5]

World oils/fats production set to recover in 2020/2021

The above crop forecasts are expected to translate into a year-on-year increase in the production of oils/fats to 241.2 million tonnes, only slightly below the all-time high recorded in 2018/19. With regard to individual oils, gains in palm, soy and, to a lesser extent, rapeseed, palm kernel and copra oils are expected to more than offset an anticipated drop in sunflower oil output. As for palm oil, global output is forecast to recover from the exceptional decline registered in 2020, although a below-potential production is expected due to a number of constraints. In Indonesia, while COVID-19 has had a negligible impact on palm oil production, the growing number of aged (less productive) oil palm trees, combined with reduced expansion in harvested area, is expected to slow the sector’s growth. In Malaysia, besides facing similar issues, plantations are also suffering from protracted labour force shortages – a problem accentuated by COVID-19-related measures that restrict the movement of migrant workers. In the case of sunflower oil, the expected sizeable decline in global output is largely tied to reduced harvests notably in the Black Sea region.

Global supplies of oils/fats, which comprise 2019/20 carry-out stocks, are forecast to increase fractionally year-on-year. Domestic availabilities are expected to rise in Indonesia, the United States and Brazil, as production gains are anticipated to more than offset low opening stocks. By contrast, supplies in Argentina and the European Union are seen declining for a second consecutive season, tied to contractions in both production and carry-in stocks.

Global oils/fats consumption to grow marginally in 2020/21

While income losses associated with the ongoing COVID-19 pandemic continue to weigh on global demand for oils/fats, 2020/21 world consumption is forecast to recover marginally from the exceptional decline observed in 2019/20.

Growth would be driven by palm and soy oil, while utilization of sunflower oil and, to a lesser extent, cottonseed oil may contract, based on reduced availabilities. As a group, developing countries in Asia, notably China and Indonesia, would be key drivers of global consumption growth, whereas India’s consumption is expected to stagnate at last season’s reduced level, due to successive lockdown measures to contain the spread of COVID-19. Elsewhere, utilization in the United States would rebound moderately, while consumption is forecast to grow at a below-average rate in Brazil and to fall markedly in the European Union, in part due to sluggish uptake from biodiesel producers.

In several countries, rallying international vegetable oil prices could ration demand for both food and non-food uses. Particularly, uptake from the biodiesel sector has been affected by continued large price gaps between mineral oil and major vegetable oils. While discretionary blending would remain at minimal levels as a result of the reduced competitiveness of biodiesel, growth in mandatory blending is also set to slow. For instance, in Indonesia, the planned shift in the national admixture rate from 30 percent to 40 percent has been postponed from 2021 to 2022 at the earliest. Likewise, the implementation of Malaysia’s higher blending mandates for palm oil-based diesel is yet to be fully realized, while authorities in Argentina and Brazil have decided to temporarily lower their respective blending requirements.

Global inventories of oils/fats likely dropping to multiyear lows

With the expectations of global production falling short of utilization, world ending stocks (including the oil contained in stored oilseeds) in 2020/21 are tentatively pegged at an 11-year low of 30.6 million tonnes. Commodity-wise, inventories of soy, rapeseed and sunflower oils are all expected to fall, outweighing a partial recovery in palm oil stocks. Among the main stockholding countries, inventory drawdowns are forecast for the United States, Canada, Argentina and the European Union, whereas China is expected to expand its stocks, while inventories in Indonesia and Malaysia are also anticipated to increase after both countries destocked for two consecutive seasons.

Based on these forecasts, the global stocks-to-use ratio for oils/fats would decline for a third consecutive season, dropping to a multiyear low, while the stocks-to-disappearance ratio for the major exporting countries should also record a similar decline. 6,7

Expansion in global oils/fats trade could remain subdued

After last season’s subdued growth, international trade in oils/fats is forecast to increase by no more than 1 percent in 2020/21, reaching 135.8 million tonnes (including the oil contained in traded oilseeds). The anticipated growth is mainly tied to a rebound in palm oil transactions, stemming from improved global production and recovering demand. World trade in soy and rapeseed oils is also expected to increase, whereas that in sunflower oil could drop substantially, reflecting sharply reduced sunflower seed production. The market share of palm oil is set to return to around 40 percent, confirming the oil’s leading position.

On the import side, growth is expected to be concentrated in Asia, notably China, in order to meet the rising domestic consumption, although purchases from India are seen declining marginally, tied to forecasts of stagnating national uptake amid the protracted COVID-19 crisis. Similarly, in the European Union, lower utilization is anticipated to contribute to a contraction in import demand.

Regarding exports, oils/fats shipments by Indonesia and the United States are set to expand, underpinned by rising supplies in both countries. In Indonesia, however, the revision of the export levy scheme for palm oil – aimed at boosting fundraising in support of the country’s biodiesel programme – may contain the country’s export growth. On the other hand, consignments from Ukraine, the Russian Federation and Brazil are anticipated to contract.

MEALS AND CAKES[8]

Global meals/cakes production to contract strongly in 2020/21

Following a marked contraction in the preceding season, 2020/21 is expected to register a partial recovery in the global production of meals/cakes to 157.6 million tonnes (expressed in protein equivalent). As for individual meals, an anticipated increase in soy and rapeseed meal production is expected to outweigh reductions in sunflower-seed and cottonseed meals.

Likewise, global meals/cakes supplies are forecast to grow moderately by 2.1 percent, as expected gains in total meal production are somewhat offset by lower carry-in stocks, as in the case of Brazil and the United States. In China and India, nevertheless, a rebound in domestic availabilities appears likely due to both higher outputs and opening stocks. By contrast, in Argentina, the European Union and Canada, production declines as well as lower carry-in inventories should lead to a second successive drop in domestic supplies.

Global meals/cakes consumption to continue growing at a below-average rate

After growing at below-average rates for two consecutive seasons, expansion in global meals/cakes utilization is forecast to remain subdued in 2020/21, tied to the limited growth in world supplies and mixed outlooks for animal feed uptake.

Growth in global consumption is expected to be led by China, where, following major ASF outbreaks, the rebuilding of domestic hog inventories is expected to continue, notwithstanding the detection of new cases, while the poultry and aquaculture sectors are also growing at a steady pace. On the other hand, in the United States, demand from livestock sectors could stagnate, as production margins tend to shrink amid rising feed costs, while meal utilization in the European Union is anticipated to decline for a second consecutive year, due to COVID-19-related lockdowns and persisting supply tightness.

Global meals/cakes inventories set to contract further

As in 2019/20, with consumption of meals/cakes forecast to exceed global production, world end-of-season stocks (including the meal contained in seed stocks) are expected to contract significantly in 2020/21, possibly declining to a 7-year low of 25.9 million tonnes (expressed in protein equivalent). Inventories of soy, rapeseed and sunflower-seed meals are all set to fall significantly year-on-year.

Much of the drawdown is expected to take place in the United States, where the concurrence of reduced carry-in stocks and an anticipated sharp rise in exports could lead to the release of two-thirds of the country’s inventories. In the meantime, stocks in Argentina, Canada and the European Union are also forecast to decline, reflecting reductions in both carry-in inventories and domestic production, whereas further stock accumulation is expected in China, tied to continued growth in imports.

Based on the above forecasts, both the global stocks-to-use ratio and the stocks-to-disappearance ratio for the major exporters would decline for a second consecutive season to multiyear lows, which tallies with the rise in meal prices observed since mid-2020.[9]

Global meals/cakes trade could expand marginally

In 2020/21, international trade in meals/cakes (including the meal contained in traded oilseeds) is forecast to expand marginally – in sharp contrast with the previous season’s surge. The slowdown primarily reflects an expected weak growth in soymeal transactions, which would be partially offset by a substantial contraction in sunflower-seed meal shipments.

On the import side, the anticipated global growth primarily hinges on continued expansion in China’s purchases to support the ongoing rebuilding of domestic hog herds. Conversely, imports by the European Union are expected to contract on waning domestic demand tied to COVID-19, while stagnating or declining purchases by some Southeast Asian nations are in part attributed to lingering ASF issues.

As for exports, shipments by the United States are anticipated to expand strongly, possibly reaching an all-time high, facilitated by a sizeable rebound in production. By contrast, shipments from Brazil and Argentina will likely decline, thus allowing the United States to regain market share. In Argentina, in addition to a poor soybean harvest and reserved farmer selling, export availabilities have also suffered from logistical problems caused by repeated strikes of port workers. Elsewhere, consignments from Ukraine and the Russian Federation are expected to contract, due to sharply reduced domestic sunflower seed supplies.

EARLY PRODUCTION OUTLOOK FOR 2021/22

With the 2020/21 season still ongoing, it is early to make concrete world supply and demand forecasts for 2021/22. At present, only limited information regarding the new crops is available for selected Northern Hemisphere countries, where plantings are currently under way, while in the Southern Hemisphere, sowings will only commence in the last quarter of 2021. With oilseed prices ranging at multi-year highs, total plantings will likely continue expanding, which, combined with expectations of robust yield gains assuming normal growing conditions, should result in global oilseed output possibly achieving a new record in 2021/22.

With regard to individual crops, global soybean, rapeseed, groundnut, palm kernel and copra production could rise to all-time highs, while production of sunflower seed and cottonseed could rebound from their reduced 2020/21 levels. The anticipated increase in global soybean production largely hinges on expectations of higher plantings in Brazil and the United States due to attractive profit margins, while a rebound in productivity levels would facilitate a sizeable output recovery in Argentina. By contrast, plantings in China are seen declining for the first time since 2013/14, as farmers are expected to switch to maize because of appealing prices and more attractive subsidies. As for rapeseed, the continuing growth in global production would be driven by a further expansion in plantings and, to a lesser extent, higher yields, especially in Canada, the European Union and China. An above-average crop is also anticipated in Australia, although a repeat of last season’s record harvest is unlikely, with yields assumed to revert to average levels. In the case of sunflower seed, global production is forecast to rebound sharply from the reduced level registered in 2020/21, possibly climbing to a record high on account of yield recoveries in Ukraine, the Russian Federation and the European Union. While global groundnut, cottonseed and copra production may see yield-driven growth, higher palm kernel output would be aided by a marginal expansion in area.

The above highly tentative crop forecasts, together with modest palm oil production growth prospects, would translate into sizeable year-on-year increases in outputs of both oils and meals. Meanwhile, growth in global utilization of oilcrop products is expected to resume, albeit probably below the average rate recorded in the pre-COVID-19 period. With global oils/meals output anticipated to exceed world consumption, a moderate stock replenishment could be expected for both oils and meals. If this were to materialize, the resulting stock-to-use ratios would rebound slightly from the multiyear lows expected for the current season. However, the ratios would be likely to remain below the levels observed in recent years, pointing to a continuation of a rather tight market situation. As usual, this outlook remains subject to a number of uncertainties, notably with regard to weather conditions in key growing regions, the evolution of the COVID-19 pandemic and vaccination campaigns, and national policy measures that could affect global trade flows of oilseeds and derived products, as well as the implementation of biodiesel admixture mandates.

[1]Almost the entire volume of oilcrops harvested worldwide is crushed to obtain oils and fats for human nutrition or industrial purposes, and to obtain cakes and meals that are used as feed ingredients. Therefore, rather than referring to oilseeds, the analysis of the market situation is mainly undertaken in terms of oils/fats and cakes/meals. Production data for oils and meals are derived from domestic production of the relevant oilseeds in a specific year, i.e. they do not reflect the outcome of actual oilseed crushing in a given country and period. Regarding oilseed trade, situations where oilseeds are produced in one country but crushed in another are reflected in national oil/meal consumption figures. It is important to note that data on trade in oils (meals) refer to the sum of trade in oils (meals) plus the oil (meal) equivalent of oilseeds traded. Similarly, stock figures for oils (meals) refer to the sum of oil (meal) stocks plus the oil (meal) equivalent of oilseed inventories.

[2]For details on prices and corresponding indices see statistical appendix, table 24.

[3]China in this section is restricted to the mainland of China.

[4]Please note that from the 2020/21 season onwards the European Union (EU) is defined as EU27 rather than EU28, to take account of Brexit.

[5]This section refers to oils of all origins, which – in addition to products derived from the oilcrops discussed under the section on oilseeds – include palm oil, marine oils and animal fats.

[6]Disappearance is defined as domestic utilization plus exports.

[7]The group of major exporting countries consists of Argentina, Brazil, Canada, Indonesia, Malaysia, Ukraine and the United States.

[8]This section refers to meals of all origins. In addition to products derived from the oilcrops discussed under the section on oilseeds, fishmeal and meals of animal origin are included.

[9]The group of major exporting countries consists of Argentina, Brazil, Canada, India, Indonesia, Malaysia, Paraguay, the Russian Federation, Ukraine, the United States and Uruguay.

SUGAR

PRICES

International sugar prices surge to multiyear highs

Since the release of the last issue of the Food Outlook report in November 2020, international sugar prices, as measured by the International Sugar Agreement’s daily prices for raw sugar, have generally increased, continuing the upward trend that started in May of last year. Quotations increased from US 14.1 cents per pound (USD 310.4 per tonne) in December 2020 to reach US 16.2 cents per pound (USD 356.9 per tonne) in February 2021, the highest level since April 2017. After retreating in March, prices rebounded in April and May, when they reached a new multi-year high of US 17.3 cents per pound (USD 380.5 per tonne), about 60 percent above their levels in May 2020.

Tighter global supplies in 2020/21, following production declines in key producing countries, have exerted continued upward pressure on prices. Further support has been provided by the global economic recovery, boosting consumption, as the sector is sensitive to economic performance, given that the bulk of demand comes from the food and beverages industries. Despite a slight contraction in global imports, sustained demand from traditional importers in Asia, particularly China[1] and Indonesia, have contributed to the increase in prices. The weakening of the US dollar against the currencies of key sugar exporting countries and the rally in crude oil prices in the past year have also contributed to the upward pressure on sugar price quotations. However, the upward pressure on prices was somewhat limited by prospects of large exports from India, despite logistical constraints hampering trade flows. Early indications pointing to a global production recovery in 2021/22 also prevented further price surges.

The prospect for healthier global economy in 2021, along with firm, if not firmer energy prices, are likely to persist as supportive factors in the sugar market. In addition, international sugar prices are largely influenced by movements in the Brazilian currency, which affect producer selling decisions. In 2020, the Brazilian real depreciated significantly against the US dollar, spurring exports, while it showed significant volatility in the past months, depreciating in the first quarter of 2021 but rebounding in April and May. Finally, current economic conditions point to higher profitability for Brazilian millers when using sugarcane for sugar rather than domestic ethanol production, and this could pressure sugar prices in international markets.

PRODUCTION[1]

World sugar production to decline for the third consecutive season in 2020/21

World sugar production in 2020/21 (October/September) is forecast by FAO at 170.3 million tonnes, down 1.6 million tonnes, or another 1.0 percent, from the already reduced level of 2019/20. The anticipated contraction, which results in a global shortfall of 1.7 million tonnes, mostly reflects expectations of production declines in Brazil, the European Union, the Russian Federation and Thailand.

In South America, latest indications point to a production decline in 2020/21, mainly reflecting reduced output in Brazil, the world’s largest producer and exporter of sugar, due to drier-than-normal weather conditions affecting crops in key growing areas. A shift to more profitable crops, namely maize and soybeans, also contributed to the decline in output. Production is forecast to fall to 37.5 million tonnes, 6 percent down from 2019/20. However, Brazil’s sugar output is also influenced by changes in the ethanol parity price – the price of raw sugar below which it becomes more profitable to produce ethanol instead of sugar. Based on current market conditions, FAO estimates the parity price to be below the current level of international raw sugar prices, indicating the higher profitability of producing sugar compared to ethanol. In the key producing area of São Paulo, around 43.6 percent of the sugarcane harvest was used to produce sugar since the start of the season, against 43.7 percent in 2019/20. Elsewhere in South America, sugar production is anticipated to increase in Argentina, while it is forecast to remain relatively stable in Colombia, the region’s second largest producer.

In Central America and the Caribbean, 2020/21 sugar production in Mexico is forecast to recover from the drought-reduced level in 2019/20, on account of improved weather conditions. By contrast, in Guatemala, sugar output is expected to decline for the second consecutive year, due to a reduction in area and weather factors affecting yields. In Cuba, the Government continues to support the industry. Good weather conditions and attractive prices for export should also boost production, although input shortages and logistical constraints could affect the final output.

In Africa, total sugar production for 2020/21 is set to rise, mainly as a result of the significant output forecast in Egypt, the continent’s largest producer. The increase mostly rests on expected larger plantings of sugarbeet, supported by good procurement prices and government investments in the sector. Higher outturns are also expected in other countries, while in the region’s second largest producer, South Africa, production is forecast to decline for the second consecutive year. The contraction follows a combination of lower crop yields and a stagnant area, amid increases in input costs. In late 2020, the Government signed the Sugar Industry Masterplan, which seeks to ensure the sustainability and profitability of the country’s sugar sector.

In Asia, total sugar production in 2020/21 is forecast to rebound from the reduced level in the previous season. Most of the increase stems from a significant recovery expected in India, while output is also set to increase in China, Indonesia, Pakistan and Turkey. By contrast, a further reduction is anticipated in Thailand, where production is forecast to decline to a multiyear low of 7.8 million tonnes. The decline is driven by prolonged dry weather conditions and the shift to more profitable crops, notably rice and cassava. In India, the world’s second largest sugar producer, production is forecast at 31 million tonnes, 13 percent up from the drought-reduced level in 2019/20. The sharp recovery is the result of conducive weather conditions, with abundant monsoon rains and adequate water levels in reservoirs, boosting plantings and crop yields in the key growing areas of Maharashtra and Karnataka. In addition, the Fair and Remunerative Price of sugarcane payable by sugar mills for the 2020/21 season was increased by 3.6 percent on an annual basis. In China, the ongoing expansion of the beet industry, which triggered an increase in acreage and beneficial precipitation in the key cane growing region of Guangxi, is expected to lead to an increase in production in 2020/21. Output is also set to expand in Turkey, on account of favourable weather conditions, and in Pakistan, as a result of larger plantings, spurred by higher domestic prices, compared to alternative crops. Indonesia’s sugar output is forecast to rise from the 2019/20 level following beneficial rain and a slight expansion in area, with new mills contributing to improved production capacity.

In Europe, the latest forecast points to a near 20-percent fall in production due to a sharp drop in output in the European Union and the Russian Federation. Latest official estimates for the European Union point to a cutback of more than 10 percent in sugar production in 2020/21, marking the third consecutive year of falling production. The drop was underpinned by a near 4-percent yearly decline in beet area, mainly due to low domestic prices affecting profitability and prolonged dry weather conditions and widespread damage from the Beet Yellow Virus (BYV), particularly in France, which are expected to cause a 7 percent decline in yields. In the United Kingdom of Great Britain and Northern Ireland (United Kingdom), production in 2020/21 is anticipated to fall by 24 percent to 900 000 tonnes. Despite an increase in plantings, crop yields are forecast to drop significantly, due to a combination of adverse weather conditions and BYV infection. In the Russian Federation, production in 2020/21 is expected to be sharply down from last year’s bumper crop, on account of a likely weather-induced decline in yields and a significantly reduced acreage, due to low domestic prices. Similarly, sugar production in Ukraine is set to decline for the third consecutive year, as the planted area has shrunk further in reaction to low prices and yields are lower.

In the rest of the world, production in the United States of America (United States) is forecast to recover from last year’s reduced level, following larger beet and cane harvests, which benefited from good weather conditions and a slight expansion in area. In Australia, 2020/21 sugar production is anticipated to increase only slightly from the reduced level of 2019/20, driven by higher yields.

UTILIZATION

Consumption anticipated to rebound in 2020/21

Global sugar consumption is forecast to reach 172.0 million tonnes in 2020/21, up 3.2 million tonnes, or 1.9 percent, from 2019/20. The increase mostly stems from the expected recovery in the global economy, after the downturn in the past season because of the COVID-19 pandemic. According to the April 2021 issue of the World Economic Outlook of the International Monetary Fund (IMF), the global economy is expected to grow by 6 percent in 2021 after an estimated contraction of -3.3 percent in 2020. Economic growth usually increases derived demand for sugar, as beverages and food processing sectors – which account for the bulk of aggregate sugar use – are positively influenced by favourable economic conditions. India, the world’s largest sugar consumer, and African countries are expected to drive the global increase in sugar consumption. However, tighter global supplies and higher world and domestic sugar prices are foreseen to limit further increases in per capita sugar intake in 2020/21. In Brazil, domestic prices of sugar in April 2021 were 40 percent above those registered in the corresponding month last year, after sharp increases in the second half of 2020. Similarly, in the Russian Federation, domestic prices increased substantially in the second half of 2020 and despite some decline later in the year, in early 2021 they remained well above their year-earlier levels. In an attempt to curb sugar prices, the Government recently extended until 1 June 2021 the price ceilings introduced in December 2020. It also removed the USD 340 per tonne tax on imports of up to 350 000 tonnes of white sugar between 15 May and 30 September 2021. Under current prospects, world per capita sugar consumption is estimated at 22.1 kg, about 1 percent above the level in 2019/20. In developing countries, aggregate sugar use is anticipated to expand from 127 million tonnes to 130.5 million tonnes, equivalent to 76 percent of the world’s total use. In the generally saturated markets of the developed countries, consumption is foreseen to remain broadly stable.

However, elements of uncertainty underpin the prospects for sugar consumption. Current forecasts will depend on the future development of the health crisis across the world and the challenges that the global recovery faces. While greater progress with vaccinations is likely to boost recovery prospects and thus sugar consumption, the spread of new virus variants, combined with continued or new containment measures, may dampen it. This is the case of India, where the situation has recently aggravated and new movement restrictions have been imposed. In addition, the extent of the overall global recovery also depends on the policy actions implemented at country level to avert the health crisis and boost economic activity. Finally, the developments in world and domestic sugar prices, combined with movements in the value of currencies with respect to the US dollar, will be the major driving factors for the level of sugar consumption.

TRADE

World sugar trade to contract slightly in 2020/21

The FAO forecast for world trade in sugar in 2020/21 (October/September) is currently pegged at 60.4 million tonnes, 3 percent down from the previous season. The anticipated contraction is the result of reduced exportable supplies in key exporters in Asia and Europe, which more than offset foreseen greater shipments from Latin America and the Caribbean.

Brazil’s exports in 2020/21 are foreseen to expand by 11 percent from the previous season’s level prompted by sizeable sugar supplies, despite the lower production expected in 2020/21. The country is set to account for about 48 percent of world exports in 2020/21. The bulk of Brazilian sales is in raw form, which in the current season have been shipped mainly to Algeria, Bangladesh, China and Indonesia. The final volume of Brazilian exports will depend on the quantity of sugarcane processed into ethanol, with current market conditions pointing to the higher profitability of producing sugar. In addition, currency movements will affect producer selling decisions. The Brazilian real appreciated in April and May, and any further appreciation of the currency against the US dollar could affect exports.

Following the further contraction in output and depletion of inventories, Thailand is set to lose its rank as the world’s second largest sugar exporter, with shipments forecast to total 4.7 million tonnes in 2020/21, a near 40 percent drop from the already reduced level last year. Around 60 percent of Thailand’s exports are expected to be shipped in raw form to neighbouring countries, including Cambodia, Indonesia and Viet Nam.

India is expected to surpass Thailand and become the world’s second largest sugar exporter, with sales foreseen reaching 5.8 million tonnes in 2020/21. Large exportable supplies are the result of abundant domestic availabilities combined with government export subsidies approved in December 2020, amounting to INR 3 500 billion (USD 480 million) for the export of up to 6 million tonnes of sugar. However, logistical constraints are likely to restrain shipments, which may not reach the record volume shipped in the past season. In addition, this year’s export subsidies are lower than those of the previous season. A final decision from the World Trade Organization (WTO) with respect to India’s export subsidy programme as a factor of distortion to world sugar trade is not expected before the end of second quarter of 2021. Deliveries from Australia, the world’s fourth largest raw sugar exporter, are forecast to increase modestly to 3.4 million tonnes in 2020/21, triggered by slightly larger output. Nearly 80 percent of the sugar produced in Australia is exported, mostly in raw form, with traditional markets being Indonesia, Japan and the Republic of Korea, although in the current season, large volumes are also being exported to Bangladesh.

Exports by Guatemala, the second largest sugar exporter in Latin America and the Caribbean, are foreseen to fall by 8 percent in 2020/21, due a decline in domestic production. By contrast, sales by Mexico and Cuba are anticipated to expand significantly, reflecting larger domestic availabilities. European Union sugar exports are likely to retreat for the third consecutive year in 2020/21 and fall by more than 20 percent year-on-year, on the back of successive declines in production.

On the import side, purchases by Asian countries are forecast to decrease by 2 percent in 2020/21, compared to 2019/20, reflecting lower imports by India, Indonesia, the Philippines and Viet Nam, which are expected to more than offset larger purchases by China. Imports by India are forecast to drop markedly on account of large domestic availabilities. A slight decline is also anticipated in key importer Indonesia, although purchases are foreseen to remain strong overall, sustained by robust domestic demand from the beverage and food processing industries. By contrast, China is expected to consolidate its position as the world’s largest sugar importer, with purchases anticipated to expand in 2020/21, spurred by sustained domestic demand and following the expiry of the safeguard duty on out-of-quota sugar imports in May 2020. In the first six months of the season, imports of sugar by China were more than double the volume imported in the corresponding period in 2019/20.

In Europe, imports by the European Union are forecast to expand compared to the previous season, on the back of the consecutive reductions in domestic sugar production. Similarly, imports by the United Kingdom are expected to be larger than in the previous year. Nonetheless, the outlook remains tentative, as following Brexit, trade between the European Union and the United Kingdom is likely to be affected by the introduction of the Rules of Origin (RoO). These only allow duty-free access to sugar that is produced domestically, and not to sugar processed from imported raw sugar, which mainly consists of raw sugarcane both in the United Kingdom and the EU. The application of the RoO is likely to have a stronger impact on trade flows out of the United Kingdom compared to the EU, given that around one-quarter of the United Kingdom’s refined sugar output is produced from imported raw sugarcane, while in the EU, the share of sugar processed from imported raw sugarcane represents only about 5 percent of the total. In addition, official data show that from October to April 2021, preferential duty-free imports to the European Union and the United Kingdom from Everything-but-Arms and Economic Partnership Agreement countries were lower compared to the same period of last year. Imports under tariff rate quotas are expected to remain broadly stable, while the WTO’s CXL quotas may be used by European Union importers.[2] In the Russian Federation, imports are anticipated to expand by 10 percent in 2020/21 in view of the expected sharp drop in domestic production.

In the rest of the world, imports by the United States are set to fall significantly and amount to 2.9 million tonnes, down 22 percent from last year, reflecting higher domestic sugar production, while imports by African countries are expected to continue to expand, driven by expectations of strong internal demand.

[1]China in this section is restricted to the mainland of China.

[1]Sugar production figures refer to centrifugal sugar derived from sugarcane or sugarbeet, expressed in raw equivalents. Data relate to the October/September season.

[2]CXL quotas result from a compensation agreement following the 1995 European Union enlargement to account for traditional sugar imports from Austria, Finland and Sweden. The countries of origin of the sugar are mainly Brazil and Cuba.

MEAT AND MEAT PRODUCTS

PRICES

Solid demand from East Asia strengthen international meat prices

International meat prices in May, measured by the FAO Meat Price Index, were up by 9.0 points (9.4 percent) from January 2021, with pig meat prices registering the sharpest increase (11.3 percent), followed by poultry meat (9.3 percent), bovine meat (8.6 percent) and ovine meat (6.7 percent).

International meat prices rose from January to May, reflecting solid global meat import demand induced by the continued meat deficit in East Asia, mainly China^1 but also Viet Nam, despite the expanding domestic production in key producing regions. Furthermore, demand for replenishing the strategic pig meat stock in China, which was depleted due to various interventions by the Government to keep a lid on domestic prices, also added to the high meat import demand. Meanwhile, meat imports by some countries in the Middle East and North Africa region rose, driven by increasing petroleum prices, rising demand from the hospitality industry and high interest for halal-certified meat. The slowly recovering food services sales and associated intermediate demand in the Americas also contributed to the rise in meat import demand.

On the supply side, exports continued to increase from key global suppliers, especially Brazil and the European Union. Brazil’s exports continued to rise, supported by increased national production, coupled with somewhat muted growth in internal demand. The depreciation of national currencies also added to the export strength, but export growth remained limited because of lower cattle herd numbers. Exports from the European Union also expanded, benefitting from market access gained by Spain in China, although Germany remained barred from that market over ASF concerns. Meanwhile, in North America, an increase in internal demand constrained export supplies, whereas, in Oceania, bovine and ovine meat exports remained limited due to lower cattle supplies for slaughter amid high herd rebuilding demand. Export supplies from parts of Africa, Asia and Latin America and the Caribbean were also limited, owing to meat processing constraints caused by rising COVID-19 infections, despite significant improvements to sanitary conditions in meat processing plants. Highly pathogenic avian influenza (HPAI) outbreaks also restrained poultry meat exports from Africa and Europe.

In summary, international meat prices rose from January to May, principally underpinned by inadequate expansion in global meat supplies amid solid import demand, especially from East Asia and the Middle East.

OVERALL PRODUCTION AND TRADE

World meat output to expand in 2021

World meat output in 2021 is forecast to expand by 2.2 percent, to 346 million tonnes, primarily driven by a sharp rebound in meat production in China, with notable expansions in Brazil, Viet Nam, the United States of America (United States) and the European Union, partially offset by anticipated declines in Australia, the Philippines and Argentina. In China, overall meat production is forecast to exceed 83 million tonnes, 5 million tonnes or 6.5 percent, more than last year, with all meat types registering increases. Pig meat is forecast to account for over 80 percent of the overall meat production expansion in China, facilitated by high investments in the pig meat value chain and efforts to control the spread of the African swine fever (ASF) virus. Notwithstanding the anticipated expansion, China’s total meat production is forecast to remain 5.7 million tonnes below the level in 2018 before ASF began spreading widely, inducing import purchases and supporting production expansions in key producing regions, especially Brazil and the European Union. Seemingly swift recovery from ASF-induced production contractions is also anticipated in Viet Nam.

East Asia’s large pig meat deficit is likely to spill over into other meat production systems, particularly the poultry meat sector, driven by its relative affordability amid higher demand from households, affected by economic downturns, job losses, reduced remittances or shrunken tourism-related incomes. A part of the anticipated increase in meat output is also attributable to the slowly resuming demand from hotels, restaurants, and institutional food services, partially offset by likely declines in home-cooking demand and retail sales. However, food deliveries and purchases through E-commerce channels are likely to continue for the foreseeable future in regions where such services have become popular, including in China, the European Union and North America, sustaining meat production growth. Government assistance provided to minimize COVID-19-induced production and demand fluctuations, including resources allocated for purchasing and distributing livestock products, debt forgiveness, strengthening livestock value chains, direct aid to producers and flexibility for applying national competition laws, may sustain meat production stability in many countries. While some countries, including the European Union and the United States, have extended the assistance programmes until the end of 2021, meat production systems in parts of Africa, Asia and Latin America and the Caribbean remain exposed to market disturbances, probably leading to sub-optimal production levels. Meanwhile, rising feed costs also constrain meat production expansions, with more substantial impacts in regions facing droughts and hence limited roughage available. While logistical bottlenecks and port backlogs have subsided, the limited availability of containers limits the east-west meat trade.

By contrast, notable production declines are likely in Australia due to the limited supply of animals for slaughter because of the ongoing herd rebuilding demand and lower cattle herd, and in the Philippines, owing to the continued impacts of ASF outbreaks. In Argentina, a reduction in bovine meat production is likely due to limited cattle supplies for slaughter.

Global trade likely to stagnate in 2021

World trade in meat products is forecast to reach 42 million tonnes (carcass weight equivalent) in 2021, marking a stagnation, as anticipated import declines primarily concentrated in China, the United States of America (United States), the United Kingdom of Great Britain and Northern Ireland (the United Kingdom), South Africa and the Russian Federation are likely to offset widespread import expansions, most notably in the Philippines, the Republic of Korea, Saudi Arabia, Japan and the United Arab Emirates.

In China, although the total import volume in 2021 is forecast to remain as high as 11 million tonnes, this year’s imports are likely to be 250 000 tonnes, or 2.2 percent, lower than last year, reflecting a much improved domestic supply situation with production increases across all meat types and sharply lower domestic prices. In the United States, rising domestic supplies are likely to reduce import demand, and the United Kingdom is facing logistical challenges to trade with the European Union, despite postponing sanitary and phytosanitary checks and controls, reducing meat imports in 2021. In South Africa, the increased tariff on poultry meat imports is mainly behind the anticipated decline in meat imports, while in the Russian Federation, increased domestic availabilities and limited internal demand may lower import purchases. Among the other countries with higher imports, notable expansions are expected in the Philippines and the Republic of Korea due to likely declines in domestic outputs, while in Saudi Arabia, Japan, United Arab Emirates and Mexico, increases are mainly attributed to the possible revival of food services sales. In Saudi Arabia and the United Arab Emirates, rising petroleum prices, an anticipated increase in tourism and higher inbound movement of expatriate workers would raise imports.

Regarding exports, the likely revival of food services sales due to the relaxation of physical distancing requirements could increase demand for meat products, especially in countries with higher COVID-19 vaccination rates, enabling meat exporting countries to ship more meat products. Brazil, the United States and Thailand are among those that may benefit from higher import demand, given their exportable surpluses and competitive prices. Brazil and the United States received market access through export licenses and permits from China and Viet Nam, enabling higher meat sales. The record of animal disease-free status is helping Brazil to secure access to more markets, whereas Uruguay is forecast to ship more meat, especially high-quality beef products, to China, the United States and Canada. The Russian Federation has secured market access in China and Viet Nam, allowing more shipments in 2021.

In most countries where meat export contractions are foreseen, especially Argentina, Australia and New Zealand, the anticipated declines are due to limited export availabilities, stemming from lower cattle supplies. A slight decline in exports from the European Union is expected due to import curtailments by some trading partners, although exports to high-value markets such as Canada and Japan should increase following recent trade agreements.

POULTRY MEAT

Production to grow at a steady pace

Global poultry meat output in 2021 is forecast to expand by 1.3 percent to 135 million tonnes, mainly driven by gains in China, Brazil and the European Union, with moderate expansions anticipated worldwide.

China’s higher production stems primarily from increased consumer demand, including those looking for affordable meat to replace expensive red meat products. Significant investments that went to the sector, especially to build large-scale farms and processing operations, are also supporting production growth in China. In Brazil, solid foreign demand, especially from East Asia and the Middle East, drives production growth, but less buoyant internal demand is likely to constrain the pace of expansion. A possible relaxation of travel and physical distancing restrictions may induce higher meat production in the European Union, although rising feed costs and efforts to reduce excess use of nutrients (especially nitrogen and phosphorous) may constrain production growth.

Production increases are anticipated worldwide due to high demand for relatively affordable meat, especially where household incomes continue to be lower than the pre-COVID-19 levels, impacted by economic downturns, loss of employment, reduced remittances and shrunken tourism-related incomes.

Moderate expansion is likely

World poultry meat exports are forecast to expand moderately, growing by 0.9 percent to 15.6 million tonnes in 2021, which would mark the sixth year of uninterrupted expansion. Increased imports by Saudi Arabia, United Arab Emirates, Ukraine, Japan, Mexico and the European Union are foreseen to drive this expansion, which is likely to be partially offset by declines in purchases by China, South Africa, the Russian Federation and the United Kingdom.

In Saudi Arabia and the United Arab Emirates, the possible revival of tourism and an increase in inbound workers could lead to higher poultry imports, given that the hotels, restaurants and foreign workers consume about 60 percent of imported meat products. Imports by Japan are likely to recover from last year’s drop, reflecting increases in consumer demand amid somewhat strengthening prices of locally produced poultry products. Elsewhere, lower household income may drive consumers to purchase poultry meat, which is more affordable, triggering higher imports. In countries where poultry meat imports are likely to fall, including China, South Africa and the Russian Federation, the declines are likely to be precipitated by rising national production, outpacing growth in consumer demand. In South Africa, besides higher production, the increased tariff on poultry meat may depress imports. Meanwhile, still limited food services sales limit poultry meat imports by the United Kingdom.

Brazil, Thailand and the European Union are likely to supply much of the increased global demand for poultry meat. Brazil is benefiting from its competitive poultry export prices, the HPAI-free status, and its capacity to supply halal-certified meat products demanded by some countries in the Middle East, East Asia, and Africa. Moreover, the relaxation of some restrictions, allowing more food services to function, including extended hours of restaurants opening in the European Union and Japan, may increase demand for ready-to-eat poultry products, supplied mainly by Thailand. Exports from the European Union may recover moderately, benefitting from higher demand from some African countries and Ukraine. However, significant headwinds remain, including the threat of additional anti-dumping duties in South Africa and likely export bans due to HPAI outbreaks. By contrast, poultry exports by the United Kingdom, the United States, Ukraine, Republic of Korea and Belarus are anticipated to decline. These anticipated drops stem from economic downturns, combined with increases in domestic production in key trading partners, slimmer profit margins and HPAI outbreaks.

BOVINE MEAT

High growth among three large producers to lift production

World bovine meat production is forecast to register a partial recovery in 2021, growing by 1.2 percent from 2020 to 72 million tonnes. The favourable outlook reflects significantly high growth anticipated in the United States, Brazil and China, with moderate expansions in Mexico, Uruguay, Canada, Pakistan, Colombia and South Africa, but partially offset by likely contractions in Australia, Argentina, the European Union and the United Kingdom.

In the United States, demand for meat products is expected to be stronger than last year as the economy is recovering from the year-long pandemic’s impact, possibly leading to a faster recovery in food services sales. In Brazil, an increase in output is likely due to rising cattle supplies, and carcass weight, especially cattle in feedlots and farms that use improved genetics and animal feed. However, the ongoing drought, rising input costs, coupled with COVID-19 market restrictions, may reduce profit margins and limit production. In China, production is likely to increase, driven by rising cattle numbers and selling off the cattle retained last year in anticipation of high bovine meat prices. Government support and the relaxation of some environmental regulations may also support production expansion. In Mexico, Uruguay, and Colombia, solid global import demand underpins the expected expansion, while strong internal demand may induce production growth in Canada.

By contrast, lower bovine meat production is forecast for Australia, Argentina, the European Union, the United Kingdom and New Zealand. In Australia and New Zealand, limited cattle supplies due primarily to drought-induced off-take in previous years, which brought herd numbers to historic lows, are behind the declines in production. Moreover, recent good rains have fostered the retention of animals for restocking, limiting cattle supplies in the immediate future. Lower slaughter inventory and rising production costs are causing Argentina’s bovine meat output to fall below the 2020 level, while in the European Union, the decline stems mainly from low herd numbers.

Import demand is recovering

World bovine meat exports are forecast to hover around 12 million tonnes in 2021, up 1.1 percent year-on-year, driven mainly by more robust import demand from China, the Islamic Republic of Iran, the United Kingdom, the Republic of Korea, and the United Arab Emirates.

In China, despite the likely increase in production in 2021, imports are likely to increase due to the anticipated expansion in demand for ready-to-cook products and quick service delivery and the likely swapping of pig meat with bovine meat by some consumers given the narrowing gap between prices of the two red meat types. Furthermore, better economic prospects and the real appreciation of the Yuan are also likely to induce more bovine meat imports. In the Republic of Korea, an increase in consumer demand, further stimulated by import duty reductions, is likely to lead to more imports. The United Arab Emirates may also increase imports, given the potential for higher tourist arrivals and inbound workers. By contrast, imports by the United States, Canada, Indonesia and the Russian Federation are likely to fall, principally due to higher domestic supplies and softer internal demand, although a partial recovery is still possible.

On the export side, Brazil, the United States, Uruguay and Canada are forecast to meet much of the projected increase in global import demand in 2021. A sharp increase in demand from China is mainly behind the expected export expansions of many of the countries mentioned above, with country-specific supply conditions determining the volumes. In Brazil, bovine meat exports benefit from the country’s competitive prices and increased export availabilities. In the United States, exports to China could increase at the expense of other destinations, benefitting from the trade agreement signed in 2019. In the European Union, exports of high-value meat products are likely to increase, benefiting from trade agreements with Canada and Japan, although they may drop to other destinations. By contrast, bovine meat exports by Australia, Argentina and New Zealand are forecast to fall significantly. The import ban imposed by China and production constraints would reduce shipments from Australia, while supply limitations may limit New Zealand’s overall exports. In Argentina, besides lower production, the 30-day export ban, imposed on 17 May to contain beef price increases in domestic markets, is likely to reduce exports further.

PIG MEAT

Faster recovery of production in China is likely

Recovering from two years of decline, world pig meat output is forecast to expand by 4.2 percent, to 114 million tonnes in 2021, but still falling 6.5 million tonnes (5.4 percent) below the level in 2018, when ASF began rapidly spreading in East Asia, especially China. Much of the expected global expansion would be due to likely output expansion in China, with moderate increases in Viet Nam, the European Union, the Russian Federation, Brazil and Mexico, albeit partially offset by declines anticipated in the Philippines, Republic of Korea and the United States.

The current production growth trends indicate that China’s pig meat production in 2021 would reach about 85 percent of its pre-ASF level, totalling 46 million tonnes, up by nearly 10 percent from 2020. The relatively rapid recovery stems principally from massive investments in expanding hog breeding, production and slaughter, as well as subsidized loans and biosafety improvements in farms and processing operations. More recently, China also set up a regional control system for ASF and other animal diseases. Meanwhile, in Viet Nam, higher investments in the swine production value chain are behind the anticipated faster recovery, although sporadic ASF outbreaks continue to recur. In some European Union member countries, especially Spain, production growth is driven by investments in improving production facilities, animal welfare and sustainability. In the Russian Federation, high import demand from East Asia and bilateral market access agreements encourage a production expansion.

The possible decline in pig meat output in the Philippines would be mainly due to the continued adverse impact of ASF outbreaks. Meanwhile, in the Republic of Korea and the United States, the foreseen drops reflect deliberate reductions of sow inventory and breeding sows to curb production in anticipation of limited demand.

Asia’s import volume remains high, but growth may falter

World pig meat exports are forecast at 12.8 million tonnes in 2021, down 0.6 percent from 2020, primarily due to expectations of a fall in imports by China, along with moderate import drops by the United Kingdom, Viet Nam and Canada. By contrast, noticeably higher purchases are forecast for the Philippines, Republic of Korea, the United States, Mexico and Japan.

In China, pig meat imports are forecast at 5.3 million tonnes in 2021, down almost 8 percent year-on-year, primarily due to a likely increase in domestic production and high inventories. Despite this anticipated drop, China’s total pig meat imports would account for 42 percent of total global import demand in 2021. In Viet Nam, the likely production growth amid subdued demand is expected to discourage imports, although the total annual imports in 2021 could still exceed 200 000 tonnes. Pressured by ample domestic supplies and lower food services demand, the United Kingdom is likely to import less pig meat in 2021 than in 2020. By contrast, in the Philippines, the recent government decision to reduce tariffs on pig meat imports and increase tariff rate quota from 54 000 to over 250 000 tonnes would lead to a significant rise in pig meat imports in 2021. Meanwhile, the Republic of Korea may step up purchases to meet higher demand from the food services sector. In the United States, continued strong consumer demand and a probable stagnation in domestic production would encourage higher imports, primarily from Canada, the European Union and Mexico.

With an anticipated reduction in world pig meat imports in 2021, exports are forecast to fall from the European Union, the United Kingdom, Chile and Canada. However, the United States, Brazil and the Russian Federation may register higher sales, mainly destined to East Asian markets, especially China, Viet Nam and the Philippines, reflecting higher demand because of the continuing ASF-induced supply deficit in pig meat and market access received through export licenses and permits.

OVINE MEAT

Continued growth in China

World ovine meat output is forecast to expand by slightly more than 1 percent in 2021, to 16 million tonnes. China is likely to account for much of this expansion, with production in Australia also foreseen to expand moderately. By contrast, production declines are forecast for the United Kingdom, New Zealand, the European Union and some countries in Africa.

Ovine meat output in China, the world’s largest producer, accounting for 30 percent of global production, is expected to grow by 1.8 percent, to more than 5 million tonnes, primarily resulting from production increases by small-scale producers, responding to high ovine meat prices. Following a 13 percent decline last year, Australia’s ovine meat output is predicted to rebound by 6 percent to 695 000 tonnes, helped by a rise in the national herd, attributed to improvements in seasonal conditions, although supplies are likely to remain tight, as producers continue to retain their core breeding stock and ewe lambs.

In the United Kingdom, the expected decline in production stems from a lower breeding flock last year, whereas, in New Zealand, the anticipated drop is mainly due to a lower lamb crop and a higher off-take of ewes during the drought in 2020.

Trade to contract again amid tight supplies

World trade in ovine meat is forecast to contract by 0.8 percent in 2021, to just over 1 million tonnes, partly due to supply constraints in New Zealand, which is partially offset by an expected rise in exports from Australia on the back of rising production. Supply limitations would also limit ovine meat exports from the United Kingdom. A moderate increase in China is expected on the import side, partially offset by likely declines in the United States and the European Union. Ovine meat purchases by nearly all countries in the Middle East that import sizeable volumes under normal conditions are expected to fall, primarily due to sourcing challenges.

MILK AND MILK PRODUCTS

PRICES

Rising international dairy prices since the start of the year

International dairy prices in May, measured by the FAO Dairy Price Index, were up by 9.6 points (8.6 percent) since January 2021, with whole milk powder (WMP) prices registering the sharpest increase (20.9 percent), followed by butter (15.4 percent), skim milk powder (SMP) (11.3 percent) and cheese (1.6 percent).

Solid import demand from Asia, mainly China[1], primarily underpinned the increase in international dairy prices between January and May this year. In China, the fast pace of economic growth and the real appreciation of the Yuan induced a surge in consumption and widen consumer base, leading to higher dairy imports. In addition, the rapid recovery in the national pig herd led China to purchase more whey powder. In many dairy importing countries, more home cooking and baking during lockdowns increased retail sales of milk products such as butter and cheese, partially offsetting lower food services sales. Import purchases by some countries in the Middle East and North Africa also increased, reflecting the strengthening petroleum prices, the likely revival of economic activities and tourism and an increase in inbound movement of expatriate workers. In recent months, demand for spot supplies from Oceania rose sharply due to concerns over short-term sourcing challenges amid limited container availability in Europe and North America, providing further support to international prices.

Tight spot supplies in some of the world’s largest dairy exporting regions provided further price support during the first five months of the year. In Oceania, the January heatwave in Australia and the March to April dry weather in New Zealand aggravated the seasonally declining milk production, tightening export supplies and driving up dairy prices, especially for butter and WMP. In Europe, milk production fell slightly below last year’s levels between January and February, while in mid-March and the first half of April, extreme cold spells in parts of Europe made trucking more difficult, further restraining milk deliveries to processing centres. As a result, producers focused their supplies on buyers with long-term contracts or internal sales, limiting spot supplies and supporting export prices of butter and milk powders. In summary, international dairy prices rose from January to May, reflecting solid import demand amid tight spot supplies from leading dairy exporting regions.

MILK PRODUCTION

World milk output to increase in 2021

World milk production is forecast to reach 921 million tonnes in 2021, rising by 1.6 percent from 2020, as a result of expected output expansions in all geographical areas, with Asia accounting for the highest volume, followed by North America, Europe, South America, Oceania, Central America and the Caribbean and Africa.

In Asia, milk output in 2021 is pegged at 388 million tonnes, up 2.5 percent from 2020, with more than 80 percent of the projected expansion originating in India, China, Pakistan and Turkey, in order of volume expansion.[1] In India, rising dairy cattle numbers and milk yields, coupled with favourable monsoon rains and fodder availability, are foreseen to result in milk output reaching 199 million tonnes, up 2.2 percent year-on-year. However, the rapidly deteriorating COVID-19 infection situation in India may pose a challenge to the pace of expansion, given hurdles to collecting milk from farms scattered over vast areas. China’s milk production will likely reach 38 million tonnes, up 6.1 percent from 2020, underpinned by a rise in milk yields of large-scale, intensive farms, which increasingly use advanced genetics, mechanical milking and mix feed rations and feed quality management techniques. Above all, rising consumer trust in local milk due to stringent enforcement of quality requirements and the establishment of a supply traceability system may also help production expansions. Underpinned by rising dairy cattle numbers, Pakistan’s milk production is likely to expand at a record annual pace of 3 percent, elevating total output to 59 million tonnes in 2021. Milk production expansions are possible in several other countries in Asia, including Kazakhstan, Uzbekistan, the Islamic Republic of Iran and Japan, buoyed by rising consumer demand and government assistance for stabilising markets and modernising dairy farms.

In Europe, total milk output is forecast to increase by 0.6 percent to 237 million tonnes in 2021, with the highest increase anticipated in the European Union, followed by the Russian Federation and Belarus. Strong milk yield growth and favourable spring and summer weather supporting farm-grown feed and good quality grass are likely to support milk output expansion in the European Union, despite declining dairy cattle numbers and cold weather earlier in the year, which constrained milk production and deliveries. Current low milk pay prices and increases in feed costs may also hold some producers from expanding production. High milk yields on new farms, better farmgate prices and state-supported loans at lower interest rates encourage milk output expansion in the Russian Federation. Furthermore, rising consumer trust, following the introduction of a milk quality management system, including tracing and removing products that defy regulatory requirements from the market and an electronic certification system, is likely to continue to boost milk consumption and production. In Belarus, farm management improvements, increased use of better-quality feed and solid demand from neighbouring countries, mainly the Russian Federation, supporting production growth. By contrast, Ukraine’s output is forecast to fall, reflecting declining dairy cattle numbers and farm profitability amid increasing feed costs and weak import demand.

In North America, milk output is set to reach 113 million tonnes in 2021, up 1.9 percent year-on-year, with nearly all the volume increase originating in the United States of America (United States). Much of the anticipated increase in milk production in the United States is attributable to higher dairy cattle numbers and milk yields. The second stage of the Coronavirus Food Assistance Program 2, starting from 5 April 2021, is likely to keep farmgate milk prices steady, while the national COVID-19 vaccination drive may lead to increased sales through the food services sector, boosting milk production. Canada’s milk production is likely to increase slightly, given the butter support price increase, effective 1 February 2021, and possible increases in internal and external demand, especially for butter and SMP.

In South America, milk production is forecast to rise by 1.1 percent to 83.5 million in 2021, with much of the projected increase due to higher outputs expected in Brazil, Colombia and Argentina. Brazil’s milk output could increase by 1 percent, a slower pace than the 2.1 percent annual growth registered last year, to nearly 37 million tonnes, on a slight increase in dairy cattle numbers and high milk yields, especially on large-scale dairy farms. However, milk production in 2021 is challenged by dry weather conditions, especially in the country’s southeastern and central-western regions, and rising production costs due to high prices of animal feed, especially maize, which would hamper feed usage and encourage cow slaughter. In Colombia, milk output is likely to expand, supported by the government decision to increase milk pay prices by 3.5 percent from March 2021. In Argentina, milk production is rising, sustained by potentially high foreign sales and competitive prices on offer, given the country’s currency depreciation. As an early indication of production prospects, Argentina’s farmgate prices hovered above last year’s levels until April 2021. Elsewhere in South America, milk production in Uruguay is likely to rise on favourable rainfall and pasture conditions, but growing production costs may affect the pace of expansion. Milk production is forecast to expand slightly in Chile, helped by possible improvements in demand.

In Oceania, milk output is forecast to increase by 1.2 percent in 2021, nearly the same rate as last year, to 31.5 million tonnes. In Australia, milk output could exceed 9 million tonnes, up 1.2 percent from 2020, reflecting improvements in pasture and fodder availability, following recent rains, and increased feed availability, due to a record grain harvest. Government assistance to drought-affected farming households and more relaxed COVID-19 containment measures are expected to contribute to stability in production. Still, labour shortages, farm exits, and fewer dairy cattle numbers and lower milk yields may weigh on production prospects. Following a slight increase in 2020, New Zealand’s milk output is forecast to rise in 2021 by 1.2 percent, to 22 million tonnes, due to increasing productivity, compensating for declining dairy cattle. Moreover, increased milk pay prices and reduced need for feed amid improved pastures, coupled with government freight support under COVID-19 assistance, would increase milk margins and production.

In Central America and the Caribbean, milk production could reach 19 million tonnes, up 1.8 percent year-on-year, primarily driven by better production prospects in the region’s largest milk producer, Mexico. Improvements in farming technology and genetics and increased animal feed production are seen as the main factors behind Mexico’s expected milk production growth. However, this continued trend rests on the revival of economic activities and job growth. Elsewhere, favourable weather conditions tend to support milk output expansions.

Milk output in Africa is forecast to reach 49 million tonnes, similar to 2020, underpinned by a likely rise in production in Algeria, among others, offsetting anticipated output contractions in several countries, especially South Africa. In Algeria, milk production is forecast to rise due to government efforts since 2020 to encourage farm modernisation and increase the use of locally produced milk in the food processing industry. By contrast, in South Africa, milk production may decline due to rising feed costs amid low milk pay prices.

WORLD TRADE IN DAIRY PRODUCTS

World dairy trade is heading for another expansion in 2021

World exports of dairy products in 2021 are forecast at 88 million tonnes (in milk equivalents),[2] up 2.6 percent from 2020, driven by anticipated larger imports by China, Brazil, Mexico, Indonesia and Malaysia. Strong economic growth prospects for 2021 and the real appreciation of the Yuan that would increase per capita consumption and expand the consumer base are behind much of the import demand growth in China. In Brazil and Mexico, while consumer demand for fresh milk and products remains somewhat subdued, demand for packaged and processed products is driving higher imports. In the Middle East and North Africa, rising petroleum prices, the likely revival of economic activities and tourism and an expected rise in inbound expatriate workers are mainly behind the anticipated increase in dairy imports in many countries. The potential revival of transhipment trade underpins probable import expansions in Malaysia and supports high trade volumes in Saudi Arabia.

By contrast, dairy imports by the United Kingdom of Great Britain and Northern Ireland (United Kingdom), Australia, the United Arab Emirates, the European Union and the Russian Federation, among many others, are forecast to decline. The anticipated contraction by the United Kingdom reflects market uncertainty stemming from port delays and regulatory controls at European Union-United Kingdom customs following Brexit and lower food services demand due to continued market restrictions. In Australia, the European Union and the Russian Federation, expected growth in domestic availabilities, in line with production expansions and lower demand from food services sales, may reduce dairy imports. Elsewhere, dairy imports are forecast to decline, including in Thailand, Viet Nam and Sri Lanka, underpinned by economic downturns, virtually non-existent tourism revenues, and weakened remittances from migrant workers.

On the export side, much of the expected rise in global demand for dairy products in 2021 is likely to be supplied by the European Union, the United States, New Zealand, Australia and Belarus. Several countries are emerging as dairy exporters — namely India, the Islamic Republic of Iran, Turkey, Mexico and the Russian Federation — induced by rising output and a likely decline in internal demand.

By volume of quantities, global exports of cheese are forecast to expand the most, with a 2.7 percent growth in 2021, followed by SMP (1.9 percent) and WMP (0.9 percent), but those of butter may fall slightly (0.5 percent).

Whole milk powder

High imports from Asia and the Middle East to lift world WMP trade in 2021

World WMP exports are forecast to approach 2.8 million tonnes in 2021, up 0.9 percent from 2020, primarily due to anticipated import expansions by China, Brazil, the Russian Federation, Saudi Arabia and Malaysia. After an 8.5 percent dip in 2020, China’s WMP imports are forecast to rise by 5.2 percent to 770 000 tonnes in 2021, reflecting growing demand from the food processing industry, supported by rising household incomes. While China’s production growth remains slow, high demand from some consumer groups and the food processing industry is likely to drive Brazil’s WMP imports to more than 98 000 tonnes, 22 percent more than last year. WMP imports may recover partially in the Russian Federation, helped by a possible upturn in domestic supplies, although volumes could remain below historical highs. Increasing petroleum prices may stimulate WMP imports by the Middle East and North Africa region, especially Saudi Arabia, Oman, Nigeria and Iraq. The potential revival of the transhipment business may spur WMP imports by Malaysia. However, due to likely increases in domestic milk production, lower food services sales, or both, coupled with economic downturns, WMP imports may fall significantly in Australia, United Arab Emirates, and to a lesser extent in Algeria.

Underpinned by rising milk production and below-average internal demand, New Zealand, Argentina, Australia, Mexico, Uruguay, Belarus and the United States are expected to supply much of the increased global import demand for WMP.

Skim milk powder

International SMP trade may rise in 2021

World SMP exports are forecast to reach 2.6 million tonnes in 2021, up 1.9 percent from 2020, resulting from foreseen increases in purchases, mainly by China, Mexico, the Philippines, Malaysia, Algeria and Indonesia, albeit partially offset by widespread import curtailments, especially by Viet Nam, Thailand, Kazakhstan, Egypt and the Russian Federation. In China, a faster pace of economic growth and the real appreciation of the Yuan against the US dollar, coupled with growing demand for pastry and bakery products and reprocessed dairy and other beverages, are behind the anticipated upturn in SMP imports, projected to rise by 9 percent to 396 000 tonnes. Mexico’s anticipated SMP import expansion reflects the revival of the food processing sector, which went through a challenging year in 2020. Meanwhile, burgeoning domestic supply shortages may continue to spur higher SMP imports by Indonesia. By contrast, formidable market disruptions and economic downturns may lead to noticeable slumps in SMP purchases by Viet Nam, Thailand, Kazakhstan and Egypt.

Concerning exports, the European Union, India, New Zealand, the United States and South Africa are forecast to supply much of the anticipated increase in global SMP import demand in 2021. Although the European Union had a slightly slow start to production, annual SMP production and exports are forecast to rise, given the high profitability of producing butter-SMP mix under the current prices and solid global demand. Meanwhile, possible strengthening of SMP prices may reduce the existing gap between high production costs and export prices, enabling India to increase SMP shipments, mainly targeting neighbouring countries. In the United States, rising production and competitive prices should lead to higher SMP exports. By contrast, particularly sharp declines in SMP exports are forecast for Canada, the United Kingdom, Belarus and Saudi Arabia.

Butter

Butter exports to decline slightly

World butter exports are forecast at 1.1 million tonnes in 2021, down 0.5 percent from 2020, caused by expected increases in imports by China, Mexico, Saudi Arabia, the United States and the Philippines, offset by likely contractions in the Russian Federation, the United Kingdom, the United Arab Emirates and Australia. Induced by growing demand for bakery and pastry products, while national production remains insufficient to meet domestic requirements, China’s butter imports could exceed 154 000 tonnes, a record volume by historical standards. Despite reeling under the twin crises of unemployment and the COVID-19 pandemic, partial economic recovery in Mexico is likely to lift butter imports, though still not reaching the pre-pandemic levels. Butter imports are forecast to expand in 2021 in Saudi Arabia on accelerated growth in global energy demand and higher oil prices, whereas in the United States, a moderate increase in food services sales and steady retail sales may lead to higher butter imports. By contrast, reinforced by increases in national production, the Russian Federation, the United Kingdom and Australia may reduce their imports. New Zealand, the European Union, Australia, and India are forecast to meet the bulk of the expected global demand for butter. New Zealand’s butter exports may increase to 433 000 tonnes, rising by 1.7 percent in 2021, benefiting from buoyant demand from Asian markets, mainly China. A possible increase in imports by East Asian and Middle Eastern markets may enable the European Union to sustain butter export growth at nearly 2 percent, with a total of 321 000 tonnes. Australia’s butter export growth prospects are positive due to the increasing demand from China and other Southeast Asian countries. By contrast, exports from Belarus and the United Kingdom may fall, reflecting lower imports from the Russian Federation in the case of the former and Brexit-related trade setbacks in that of the latter.

Cheese

Asian imports continue to drive the global cheese trade

World cheese exports in 2021 are forecast at 3.5 million tonnes, up 2.7 percent from 2020, marking the sixth consecutive year of expansion, driven by strong import demand by China, the Russian Federation, Iraq, the Republic of Korea, Japan, Saudi Arabia and Mexico, overweighing anticipated contractions in the United Kingdom and Australia. In China, fast-expanding food services sales, western-style restaurants and bakery products are behind the 18-percent foreseen increase in imports. Following significant increases last year, the Russian Federation and Iraq are on track to import more cheese in 2021. Given the growing popularity of cheese, as well as tariff reductions or larger tariff rate quotas, the Republic of Korea and Japan are forecast to purchase more cheese products this year. The anticipated partial economic recovery may re-energise the food processing sector and some food services sales in Mexico, inducing higher cheese imports. By contrast, the higher national output may depress cheese imports by Australia. At the same time, unresolved trade regulatory issues and border control measures with the European Union are impeding cheese imports by the United Kingdom.

Much of the increased global demand for cheese is forecast to be supplied by the European Union, Belarus, Australia, the Islamic Republic of Iran, New Zealand, and the United States, with possible declines in exports by the United Kingdom and Argentina.

[1] Countries are listed in the order of the anticipated expansion of the volume of quantity throughout this chapter, unless otherwise stated.

[2] This includes exports of butter, casein, cheese, fresh milk, milk cream, skim milk, skim milk powder, whole milk powder, whey powder, whole condensed evaporated milk and yoghurt, expressed in milk equivalents, calculated using standard conversion factors.

FISH AND FISHERY PRODUCTS

THE SECTOR EMERGES FROM THE PANDEMIC MORE RESILIENT THOUGH OPERATIONAL DIFFICULTIES CONTINUE

For fisheries and aquaculture businesses, the pandemic has had a pronounced impact on all nodes of the value chains, while simultaneously being the catalyst for some far-reaching changes that in many cases are likely to be permanent.

For producers, the problems associated with a market environment characterized by low prices, processing difficulties and poor demand have been compounded by various operational challenges. Restrictions on the movement of people, together with reduced availability of credit, difficulties obtaining the necessary inputs, logistical issues and the introduction of various sanitary measures all contributed to a contraction of production in 2020. A similar tight supply is expected in 2021 for several key species.

At the same time, products, logistics, sales channels, marketing strategies and consumer behaviour have all been fundamentally affected by the economic and social turmoil that has taken place since the initial lockdowns in early 2020. Although these changes have been accompanied by heavy financial losses in many cases, they have also created a more resilient seafood sector and extensive new market opportunities. Newly developed distribution channels, products oriented towards home consumption, and operational adaptations are likely to remain key features of the industry, increasing the ability of businesses to respond to future crises of a similar nature and opening new routes for innovation.

Now, with vaccine roll-out programmes well under way in several key markets, stakeholders are anticipating a significant boost once food service demand recovers to supplement the newly strengthened retail business. Price increases are likely for several species as a result, although the economic damage inflicted has been substantial and it is not yet evident what the long-term effects will be. Stricter sanitary requirements and inspection protocols have already increased logistical costs for some suppliers, particularly those exporting to the Chinese market. There are also other trade-related challenges concerning the industry in 2021, such as the remaining tariffs on fisheries and aquaculture products traded between the United States of America (United States) and China[1], and the long delays and administrative difficulties affecting seafood traders in the United Kingdom of Great Britain and Northern Ireland (United Kingdom) as the country moves into the final phases of its exit from the EU.

In 2021, container shipments by ship have continued to experience delays and higher costs due to congestion in major ports, reduced shipping schedules and a limited availability of containers.

SHRIMP

Supplies of farmed shrimp in India will be lower year-on-year during the first half of 2021, as surging COVID-19 caseloads are taking their toll on the sector. Industry forecasts are for a decline of as much as 20–30 percent in the 2021 harvest compared with 2020. Several other producer countries have seen aquaculture activities slow significantly following a resurgence in virus cases and subsequent lockdown measures. However, the positive production outlook still holds for Indonesia and Viet Nam. Meanwhile, Ecuador continues to lead the global supply of farmed shrimp in 2021, despite facing its own pandemic-related challenges. Ecuador’s shrimp exports during Quarter 1 (Q1) of 2021 exceeded last year’s volume in the same period, particularly to the United States and China, although total shrimp imports by China contracted during this period. The US shrimp market has been relatively strong in 2021, boosted by the 4.3 percent year-on-year rise in Q1 gross domestic product and improving employment numbers. Over the January–March period, US imports were already 10 percent ahead of the same period in 2020, with increased supplies from Indonesia, Ecuador, Viet Nam and Thailand. This trend is likely to persist throughout 2021 if prices remain stable.

TUNA

The three-month Fish Aggregating Device fishing closure in the Western and Central Pacific will be in force during July–September 2021 and raw material supplies from that region will be lower during this period. Based on current inventories, however, supplies of canned tuna are expected to be stable in 2021. During the summer, improved tourist numbers and a long-awaited return to outdoor dining will likely translate into a sharp uptick in restaurant sector sales in the large North American and European Union markets. In the case of canned products, recovery of food service demand will be partially at the expense of the strong retail sales observed over the course of the pandemic. In fact, a return to relative normality is likely to be a net loss for the preserved tuna segment, which is already evidenced by a drop in US imports of canned tuna in the first quarter of 2021.

GROUNDFISH

Supplies of pollock were down early in 2021 compared with the same period in 2020, as catches were lower than expected. Meanwhile, cod supplies from the Barents Sea have been strong, but the pandemic has hampered transport and market access. In terms of trade, the EU’s access to the Svalbard region is subject to heated discussions between the European Union and Norway, translating into uncertain supplies to European Union markets. Norway’s loss of its Marine Stewardship Council (MSC) certification for cod is also affecting trade, as exporters have to look for alternative markets for non-MSC cod, which is likely to affect price developments. The appreciation of the Norwegian krone is another driver of price trends, making Norwegian groundfish more expensive from the importer perspective. Meanwhile, trade relations between the United States and China remain somewhat strained, despite some optimism for improvement in the medium term. On the market side, retail and home delivery sales of groundfish have increased and this may become a permanent trend.

CEPHALOPODS

Supplies of octopus are expected to be flat year-on-year in 2021, with quotas for Morocco increasing by 19 percent, but dropping by 50 percent in Mexico. Meanwhile, demand is generally increasing in major markets. However, the demand outlook in Europe depends to a large extent on whether tourism restarts in the Mediterranean region in time for the peak summer season. The economic overhang from the pandemic has also affected purchasing power, although this is more evident in the case of squid and cuttlefish than octopus. For many other fisheries products, there has been an increase in retail sales and a sharp decline in restaurant sales, but for cephalopods this change has been less pronounced.

PANGASIUS

While considerable difficulties remain, the general consensus of the pangasius industry is that the worst effects of the pandemic are now past, and the outlook for the remainder of 2021 is more positive. Following a sharp reduction in farming activities in 2020, the concern now is that the boom-and-bust cycle that has characterized the pangasius sector in recent years will enter the boom phase as returning demand pulls against tight supply and lifts prices. New sanitary and documentation requirements affecting Viet Nam’s trade with China have introduced additional costs and constraints, and potentially represent an opportunity for Chinese domestic producers, but indications for other markets are more favourable. In particular, the recently established free trade agreement between Viet Nam and the European Union will see the EU’s duties on pangasius products gradually reduced and likely allow for expansion in this key market.

TILAPIA

Positive output growth is expected to resume for the global farmed tilapia sector in 2021, although there is some discrepancy in forecasts for Chinese production. Whereas some analysts had predicted an increase in production as the market recovery continues, more recent reports point to a further contraction this year due to rising production costs and a particularly cold winter, affecting fish survival rates in Guangdong. The US market will remain challenging from the Chinese perspective, as long as the import tariff remains in place. However, the domestic market interest from retail and food service buyers should be sufficient to keep prices from falling too far back after spiking in early 2021.

SEABASS AND SEABREAM

Greek production is forecast to increase by around 12 percent in 2021, while Turkish bass and bream production is expected to drop by an estimated 10–15 percent. This equates to a continuation of the tight supply situation of 2020, which combined with the anticipated recovery in food service demand in Europe, should lift prices in the major markets in 2021. As expansion resumes, the industry as a whole will need to ensure that a stable supply growth trajectory is maintained to ensure consistent profitability and to prevent a repeat of the damaging price swings that have characterized the sector for many years.

SALMON

In Chile, regulatory limits on smolt stocking, a surplus of large fish and the frozen inventories built up over the course of 2020 have all contributed to the forecast decline in farmed Atlantic salmon output in 2021. The magnitude of the contraction is not yet clear, but estimates range from 10–20 percent, concentrated towards the second half of the year. In Europe, Norwegian supply is expected to increase by around 3–5 percent, with a similar growth forecast in the United Kingdom. For overall global farmed Atlantic salmon production, the outlook is for flat or marginal growth. This should see prices lift somewhat, but they are not expected to return to the exceptionally high levels achieved in recent years. On the demand side, the outlook is dependent firstly on the speed with which people return to restaurant dining and other pre-pandemic consumption patterns, and secondly on how long the changes that have taken place throughout the lockdown period will persist. Certainly, innovations in e-commerce sales, convenience products and delivery platforms are here to stay, and the salmon market should be more resilient in the longer term as a result. Aside from issues related to COVID-19, European Union buyers, the Scottish industry and the UK Government will be actively seeking to smooth out the multitude of problems being faced at the newly created EU-United Kingdom border, with some stakeholders concerned that requirements yet to be introduced would see the situation worsen.

SMALL PELAGICS

Supplies of small pelagics are expected to be strong in 2021. Herring and mackerel supplies are up, and the capelin fishery around Iceland has returned. The economic downturn associated with the pandemic has generally increased consumer demand for small pelagic fish, which tend to be less expensive than competing products, but overall, international trade has been mixed. Chinese imports of frozen mackerel have declined, while Russian exports of frozen herring have been increasing. The Russian embargo on food imports from some Western countries, including major fish exporters such as Norway, remains in place and is not likely to be lifted any time soon. Exports of sardines from Morocco to Europe are up significantly, reflecting the shift in buyer preference towards inexpensive fish. In Asia, while consumer preferences appear to be relatively stable for small pelagic fish, demand for capelin roe is strong and interest in Atlantic mackerel is increasing in countries such as Thailand and Taiwan Province of China.

FISHMEAL AND FISH OIL

Even though the COVID-19 pandemic is still dragging on the global economy, the fishmeal and fish oil industry has weathered the associated challenges relatively successfully. In Peru, the Government has implemented a number of preventative measures to sustain normal operations. The quota for the first anchovy fishing season in the north-central area of Peru in 2021 was recently announced, with an allowable catch totaling 2.5 million tonnes, which will ensure a stable supply until roughly the end of this year. The reopening of the Chinese economy, combined with its upcoming aquaculture season and the recovery of its hog farming sector, will boost demand for fishmeal and fish oil. At the same time, easing restrictions in Europe and the United States in line with vaccine roll-out programmes will contribute to a stable market balance. Stable prices for fishmeal and fish oil are forecast to continue in 2021.

CRAB

The supply outlook for crab in 2021 is varied. In Alaska, the snow crab season started late, in contrast with the Canadian province of Newfoundland and Labrador, where processors are facing challenges dealing with high catch volumes. Demand has been growing strongly in North America and China, and this trend should continue in line with the gradual post-pandemic economic recovery. Retail demand and corresponding prices have been boosted by the shift in consumer preferences due to widespread lockdowns.

BIVALVES

Despite the ongoing pandemic crisis, the outlook for bivalves is positive. Ongoing vaccine roll-out is likely to translate into a rebound in bivalve production, a recovery of demand and a return to the positive business climate that had characterized the sector in the years prior to the pandemic. The pent-up desire of consumers to return to restaurant dining after a long lockdown period is already evident in countries where restrictions are being eased. Prices are likely to rise, as demand pulls against limited supply.

LOBSTER

North American supplies of lobster have been constrained due to catch limits and regulations relating to the protection of right whales, as well as discussions around the maximum harvest size of lobsters. As a result, supplies are expected to remain tight. As with other commodities, lobster sales during the pandemic shifted from food service to retail and home delivery channels, which command considerably lower end-user prices compared with distribution through restaurants. In terms of trade, relations between the United States and China are still strained, although improvement is likely. Australian supplies of lobster to China have been severely affected by the relationship between the two countries, and this is likely to raise prices.

[1] China in this section is restricted to the mainland of China.

Surging trade, record import bills and rising food prices: how the international food system kept a lid on a global health crisis

Contributed by:

Josef Schmidhuber

Bing Qiao

With the benefit of new data published on global trade flows, spanning the COVID-19 pandemic – from its onset to the first quarter of 2021 – this special feature provides a quantitative “reality check” on the status of global trade, both at the total merchandise level and at the food and agriculture sector level.

Why it matters? At the onset of the pandemic, considerable alarm was raised at the prospect of the global food system significantly contracting in the wake of collapsing international supply chains as well as demand faltering due to the recessionary impacts of the pandemic. Even today, alarmist views linger on, continuing to cast doubt on the resilience of food systems to the effects of COVID-19. This Special Feature seeks to allay these fears, by presenting data-driven evidence and corroborative analysis.

The Special Feature is divided into two parts, with each drilling-down into the dimensions of trade and those factors that have shaped these dimensions, and which continue to do so. In setting the stage, the first part examines the degree to which global trade has held up – its overall resilience – to the initial shock of the COVID-19 outbreak, and how that trade is responding, as the effects of the pandemic continue to reverberate. The second part looks at trends in food import bills, particularly examining on whether record rises in bills are driven by higher value (i.e., prices) or higher volume (i.e., demand). Emphasis is placed on economically vulnerable countries, since they are most exposed to rising import expenditures, especially in their fiscal and macroeconomic capacity to meet higher expenditures. With international food prices currently gaining rapid momentum that is contributing to higher import costs, attention is also paid on the merits of price indicators, in capturing the true scale and scope of the price rises from an importers’ perspective.

Resilience and resurgence – a portrayal of international trade developments amid the pandemic

Shortly after the outbreak of the COVID-19 pandemic, the outlook for global trade appeared bleak. The predictions by authoritative agencies indicated a contraction in global total merchandise trade (TMT) exceeding that of the precipitous fall during the deep global financial crisis of 2008–2009 and a slow recovery path drawn out over many years.1,2 Trade in food and agriculture was not expected to escape the weight of the pandemic, with contractions foreseen at the time to reach or even exceed those predicted for TMT, followed by a similarly protracted recovery.

More than one year further into the pandemic, have these predictions materialized? With the benefit of quantitative evidence from post-outbreak trade data,[3] this section seeks to assess how global trade has actually fared. With food and agricultural trade benchmarked against TMT, emphasis is placed on identifying the factors driving changes in regional and product flows, on what could be the trajectory for trade for the remainder of 2021, and finally, on the importance of changes in the share of agriculture in total merchandise imports as an early warning indicator.

The big picture – what we can expect

Based on evidence to date, the picture for TMT is one of a sharp contraction and an equally sharp recovery. The initial pandemic-induced contraction in TMT was remarkably shallow and short-lived, and characterized by an exceptionally narrow I-shaped rebound. In both value (measured in current US dollars) and volume terms (values in constant prices of 2015),[4] TMT has already exceeded prepandemic levels and has embarked on a rapid expansion path that portends further growth (see Figures A1 and A2). This is supported by the fact that for the first half of 2021 compared with the same period in 2020, growth in total merchandise trade has nearly returned to its pre-COVID-19 trajectory, which amounts to an extraordinary development in view of the slump in real overall economic activity.[5] Beyond the initial outbreak, successive waves of the pandemic that have taken their toll in many major import destinations, the retrenchment in global trade is firmly anticipated to be much shallower, and the recovery much faster than model-based approaches foresaw.[6]

While global merchandise trade remained remarkably resilient to the impacts [logistical (supply) and economic (demand)] of the COVID-19 outbreak, of all the sectors, trade in agricultural products emerged as the most robust to the effects of the pandemic. This is exemplified in Figures A3 and A4, where it is seen that at the onset of the pandemic, i.e. in the second and third quarters (Q2 and Q3) of 2020, the (nominal) value of global agricultural imports and exports did not falter, and similarly, there was no discernible slowdown in values at the product level. However, a mild consolidation was observed for traded volumes. During Q4 of 2020, driven by a gradual edging up in trade prices of agricultural products on the back of accelerating recovery of the global economy, a strong expansion in agricultural trade in both nominal values and volumes was observed. Moving in to 2021, the pace in the growth of volumes has begun to moderate mostly on continued upward price momentum and higher freight costs.

Why has trade in food and agriculture been so resilient to the effects of COVID-19?

Numerous reasons can be put forward for the strong resilience of agricultural trade to COVID-19-related shocks. Some of these apply in general, while others are specific to the circumstances of the pandemic. The general reasons point to the low-income elasticities of demand (i.e. import demand less susceptible to income changes) for food and agricultural products, at least at global level. At country level, considerable contractions in demand for internationally traded products are of course possible, and in fact are very real. More specifically to COVID-19, transport systems and supply chains appear more resilient than previously assumed, reflecting the dominance of bulk shipments for non-perishables, which are highly capital-intensive and labour-saving. Also specific to the COVID-19 pandemic is the fact that large commodity exporters in general, and the leading agricultural exporters in particular (e.g. Argentina, Brazil), experienced a sharp depreciation of their exchange rates, thereby sustaining their exports through improved competitiveness. By contrast, some of the most prominent agricultural importers (e.g. China) saw their exchange rates appreciate, speeding up the pace of their purchases in the international marketplace.

There is a growing body of research suggesting that most exporting countries use the US dollar as the currency of choice,[7] and that exchange rate changes therefore only affect trade with the United States of America. Trade with other countries is not affected (or at least less so); the trade data available for 2020 and 2021, however, do not support this finding. On the contrary, the data suggest that those countries (especially in Latin America) that saw a depreciation of their currencies relative to the US dollar in 2020 also saw a strong rise in their global exports, beyond the borders of the United States of America, both in values and volumes (see Figure 4b and Figures A5-A12). The effects of exchange rate changes on trade flows consequently warrant a deeper analysis.

Does resilience at global level translate to regions and countries?

Focusing on major trading countries, as reported in the TDM database, comparisons of changes in absolute terms (nominal values in US dollars) capture the importance of individual countries in the global context. By contrast, the assessment of percentage (relative) changes illustrates the degree of recovery/resilience from the perspective of an individual country.

Dissecting the global changes observed for TMT on an annual basis (2020 vs 2019) – see Figure 3 – indicates that many countries have undergone considerable absolute contractions in trade. The densely populated lower left quadrant suggests that merchandise imports and exports have contracted for the majority of countries. The countries that saw the largest contraction in TMT, measured in absolute values, include the United States of America, followed by France, Germany, India and United Kingdom of Great Britain and Northern Ireland. Given their importance in global trade, as well as the fact that these countries were profoundly affected by COVID-19, such contractions are not surprising and, at the same time, explain a good part of the global merchandise trade contraction. Very few countries saw either their exports or imports expand, while fewer experienced a rise in both. Those countries that did manage to expand trade were small economies depicted in the upper quadrants of Figure 3. The noticeable and near ubiquitous contraction in merchandise trade is fully consistent with, and arguably indicative of, the global economic contraction, notably the GDP contraction in high-income countries.

Furthermore, there are two distinct groups of countries that are unlikely to participate in the expansion process, either as far as trade or overall economic activity is concerned. The first group includes those countries with a significant exposure to commodities whose demand failed to recover, notably the exporters of hydrocarbons. The second group includes those with a large exposure to tourism, a substantial hospitality sector, or a large non-cargo surface transport sector, such as a large aviation industry. Some of these countries are exposed to all these channels of transmission affecting demand, most evidently the Gulf Cooperation Countries. On the basis of such economy structure, countries will unlikely to see a V-shaped recovery path, either for trade or for overall economic activity.

As shown in Figure 5, only a very small number of countries saw noticeable changes in agricultural trade activity in 2020 and most of these changes are explained by very few, but large-scale shifts for individual commodities. What is more, there are reasons to assume that these changes are not even related to the COVID-19 pandemic, or at best are indirectly related to the outbreak. On the export side, only Canada, Brazil, Indonesia, the Russian Federation and the United States of America saw significant changes in their exports, all of which drew a massive expansion in shipments in 2020. The counterpart to much of this trade is China, the world’s largest net importer of agricultural products, which vastly expanded its imports in 2020.

A number of factors may explain the rapid growth of China’s agricultural imports during the pandemic. Firstly, China was the first country affected by the COVID-19 outbreak and also among the first that managed to contain it. Secondly, China’s agricultural imports were subdued in 2019, reflecting ‘non-COVID-19 factors’ such as the outbreak of African Swine Fever (ASF) and the trade conflict with the United States of America. Thirdly, many Latin American exporters experienced sharp depreciations of exchange rates at the onset of the COVID-19 crisis, which boosted their competitiveness, and hence appeal to China, vis-à-vis North American exporters.[8]

Figure 5 also shows that there is a distinct group of countries that saw their agricultural trade decline after the COVID-19 outbreak. In the lower left quadrant of the scatterplot are those countries where both agricultural imports and exports shrank; interestingly, in many European Union member countries, including Belgium, France and Italy, and also the United Kingdom of Great Britain and Northern Ireland, both agricultural imports and exports contracted in the first half of 2020 (see annex Figures), then in the second half of the year recovered above the pre-crisis level.

While a comparison of the changes in absolute trade positions provides a useful basis for a clearer understanding of global flows, a comparison in percentage terms helps to analyse the shifts from the country perspective. For many individual countries, changes in trade positions are too small to affect global changes and are also swamped when analysing absolute changes. From their national perspective, however, changes can be important and have therefore been shown separately. Figures 4 and 6 capture the changes in percentages terms, again using a comparison between 2020 and 2019.

The takeaway messages that emerge from the above include:

• Large changes in absolute terms may be few and apply only to a very limited number of trading partners and even products (as is the case in agriculture), but the effects for an individual country, i.e. the percentage change relative to 2019, can be substantial.

• Changes in trade of major trading countries (measured in absolute terms) do not necessarily lead to a massive boost or contraction of their agricultural surpluses or deficits in percentage terms; e.g. China, the Russian Federation and Canada saw a noticeable expansion of their imports and exports in both absolute and relative terms.

• The distribution of countries with rising and shrinking agricultural imports and exports is largely unchanged. The overall distribution of imports and exports remained largely unaffected by the COVID-19 shock (as shown in Figure 6).

• Many small countries experienced sharp declines in imports, which may have been caused by ample domestic supplies and/or global logistic constraints. These cases would again warrant a more detailed investigation.

In addition, as these comparisons are annual – 2020 versus 2019 – they cannot fully capture impacts observed during the year. The country comparisons may therefore appear to be in contradiction with, or less significant than, the global developments depicted and discussed earlier. Recalling the rapid global recovery that characterized the second half (H2) of 2020 (see annex figures), there is compelling evidence to suggest that countries did partake in such recovery.

What about at the product level?

The impacts of COVID-19 also affected the commodity composition of agricultural trade in both the pandemic years of 2020 and 2021.[9] Tables 1 (exports) and 2 (imports) capture year-on-year changes for major country groups, from which a number of important developments have materialized, and are expected to do so in the future.

Changes in food and agricultural exports in 2020

At the global level, food and agricultural exports continued their trend expansion, rising by almost USD 52 billion (or 3.2 percent) from 2019 to 2020. The sustained increase of agricultural exports by developing countries contributed more than USD 21 billion to the global increase, with the remainder accounted for by developed countries. The steady annual growth, however, masks a notable swing that occurred within 2020, when a considerable contraction of agricultural exports marked the first half of 2020, but was followed by an even swifter recovery in the second half of the year.

Within the developing regions, Latin America saw an outright boom in additional exports of about USD 10 billion. This surge was underpinned by only a few commodities, above all by oilseeds and sugar products, followed by fruits and vegetables. Oilseed trade, mostly soybeans, registered a substantial increase, with exports from Latin America to China soaring, fuelled by a number of different factors largely unrelated to the COVID-19 pandemic. These include the protein meal needed to rebuild China’s pig inventory, which was ravaged by the outbreak of ASF. They were augmented by the extra requirements to maintain all other forms of meat production, notably poultry, eggs and aquaculture, which had grown in parallel to compensate for lower pork supplies.

In addition, China’s real exchange rate appreciated in 2020, while those of Latin American exporters generally depreciated, which on balance boosted exports from the region to China. Importantly, this included meat exports from Latin American suppliers to East Asia, which rose by nearly USD 7 billion in 2020, again mainly destined to cover China’s domestic deficits. Exports of food and agriculture from many developed countries, by contrast, shrank in the first half of 2020. A particularly notable case concerned shipments from the United States of America, which were heavily affected by the trade dispute with China.[10] However, as trade tensions between the two subsided in the second half of 2020, trade flows rebounded in tandem.

Changes in food and agricultural imports in 2020

At the global level, demand for fish and beverages declined considerably during the first six months of 2020, compared with the same period of last year, and had not recovered to pre-crisis level by the end of 2020. Alcoholic beverages that tend to command high prices, and are often levied with high import tariffs, were likely prone to import substitution. The same rationale applied to fishery products, which were also subject to high transport costs (namely, refrigeration), as well as delays in customs clearance at port entry due to COVID-19. Likewise in the case of exports, developing countries provided the mainstay in sustaining global inflows of food and agricultural products, countering faltering demand in developed countries. By implication, developing country exports to other developing nations adds credence to the growing importance of South-South trade in supporting global trade. That said, only a few product lines gained prominence in negating a (coincidental) COVID-19 trade contraction. Meat, as well as products in the oilseed complex, was notable in fuelling import demand in developing countries, especially shipments of these products from South America to China. Again, and as previously mentioned, these newfound flows were a result of a diversion of trade away from the United States of America in the first half of 2020, due to the evolving trade relations between the United States and China, and satisfying immediate demand for meat in China in the wake of the ASF outbreak.

Projected changes in food and agricultural trade in 2021

The data (TDM) reported so far in 2021 put the value of global agricultural trade (measured by exports) firmly on an upward trajectory, reaffirming the resilience of this sector to COVID-19 impacts. As shown in Table 1b, the annual increase in world exports from 2020 is projected at USD 137 billion or 8 percent – more than double the percentage increase of 2020 over 2019. The forecast growth in 2021 in percentage terms is distributed uniformly across all product groups, bar static growth in meat and sugar. In absolute terms, non-food (agricultural) items are expected to rise the most, followed by cereals, vegetables and fruits, and edible products in the oilseed complex. These products along with non-food items alone could account for USD 99 billion of the USD 138 billion projected rise in the value of global agricultural exports.

Developed countries are again foreseen to meet the rise in world demand in 2021, but much more so than was the case in 2020. Their share of the global export expansion in 2021 amounts to 57 percent, compared with a 59 percent share in the expansion last year. Notable changes among developing regions concern Latin American exporters, who in 2020 were instrumental in meeting international demand for oilseeds, as well as for sugar. While the upward trend in oilseeds exports continues, 2021 tells a different story for sugar, with exports forecast to fall markedly in value terms, and developed regions expected to assume this mantle.

Developing countries, especially those situated in East Asia, once more constitute the dominant import destinations for food and agricultural products in 2021. While absolute growth in food inflows to East Asia is expected to match the growth observed in 2020, changes in the composition of food imports is projected to change significantly in 2021. Underpinning this development would be the recovery of China’s livestock sector from ASF, to the extent that meat imports could amount to a small increase of just USD 4 billion in 2021, compared with a more noticeable surge of USD 15 billion in 2020. Compensating for the slowdown in meat imports are greater expenditures on beverages, fruits and vegetables, and vegetable oils.

More generally, with economic recovery expected to gather considerable pace in 2021, global demand for commodities that tend to be more income-elastic could significantly rebound, especially for beverages and fish. Last year’s sharp decline of USD 20 billion in import expenditures registered for both product groups combined could turn into positive territory in 2021, with an increase of USD 21 billion foreseen. However, growth in export revenues and import expenditures must be put in the context of sharply rising prices that have thus far characterized 2021, and as such may not reflect actual increases in demand (measured by import volumes). As evidenced in the next section of this special feature, food import volumes are expected to remain robust in 2021.

Shifting agricultural trade shares and relative prices: a typical manifestation of a global economic crisis

Rising food imports in total merchandise imports – an early warning indicator for a crisis

As food importing countries saw their export revenues dwindle in 2020, their import structure also changed. Lower foreign exchange availability in conjunction with lower overall economic activity resulted in a shift in imports away from income-elastic goods to sustain inflows of income-inelastic goods, notably food and agricultural products. Countries with rapidly deteriorating terms-of-trade were hardest hit; above all, the food import-dependent and oil and gas exporters of North Africa, such as Algeria, saw their agricultural imports rise rapidly relative to total merchandise imports. The share of agricultural imports in total imports not only rose sharply for individual countries, but these shifts were also strong enough to leave a mark at global level.

As shown in Figure 7, over the long run, the global share of agriculture in total trade exhibits a secular decline.[11] The ratio of agricultural to non-agricultural trade fell steadily from more than 33 percent in the early 1960s to 6.5 percent in 2007, its lowest level on record. Since 2007, the share edged up again to reach 8.5 percent in 2017, and further accelerated to reach almost 11 percent in the first half of 2020 (see Figure 8a). The longer view suggests that the share of agriculture in total trade has effectively doubled since 2007. While it may be premature to proclaim that this secular decline has come to a halt, or even reversed, the fact that the share is foreseen to rise strongly in 2021 does provide strong support.

Over and above the context of the current public health crisis, rapid increases in the share of food and agricultural imports in total merchandise imports (notwithstanding domestic production shortfalls) can serve as an early indicator or barometer for overall economic problems. In the event of a contraction in overall economic activity, imports of income-elastic goods tend to contract first and most significantly, whereas demand for income-inelastic goods, such as food and agricultural products, tend to remain relatively unaffected.

The same holds for individual countries. In Lebanon (see Figure 8b), for instance, that share rose prior to the COVID-19 pandemic, reflecting the country’s financial crisis (hyperinflation and capital flight) in late 2019 and early 2020. This was exacerbated by COVID-19, before the country moved back to its pre-crisis level by late-2020. Algeria, in common with many other food import-dependent countries, went through a similar process. Its food import share, however, rose again as of late 2020/ early 2021, reflecting sharply higher prices for the food items that it imports.

Agricultural exporters often benefit from global economic crises

Rising relative prices of agricultural to non-agricultural goods

The combination of rebounding prices for agricultural products and lower prices at, or even before the beginning of the crisis for manufactured goods, resulted in substantially higher relative prices for agricultural products. This upturn in relative prices appears not only substantial, but also abrupt compared with its smooth prior evolution, such that the shift translated into an outright spike in agricultural prices relative to prices of manufactured goods (see Figure 9). Indeed, from January 2020 to the same month in 2021, the overall change in agricultural prices relative to manufactured goods reached nearly 10 percent, one of the sharpest increases in the past 15 years.

Rising relative prices of agricultural to non-agricultural primary commodities

The most pronounced shift in relative prices appeared within the primary sector. Immediately apparent from Figure 10 is the fact that the rebound in relative prices for agricultural products was even more pronounced, culminating in May 2020. Given the higher interdependence of the primary sectors, notably the high energy dependence of agriculture, with both forward linkages (biofuels) and backward linkages (fertilizer, fuels, lubricants), the resulting upswing is telling.

[1] Economic Commission for Latin America, 2020. The effects of the coronavirus disease (COVID-19) pandemic on international trade and logistics, Special Report Number 6.

[2] https://unctad.org/en/PublicationsLibrary/ditcmisc2020d2_en.pdf.

[3] Trade data reported in this special feature may deviate from those shown in ‘Agricultural trade & policy responses during the first wave of the COVID-19 pandemic in 2020’ (www.fao.org/3/cb4553en/cb4553en.pdf). While both studies are based on the same primary data source (Trade Data Monitor), their underlying data processing methodologies differ. Importantly, all data presented in this document have been subjected to outlier detection and error correction procedures; they have also been supplemented by numerous imputation techniques, include unit value imputation and trade flow mirroring’

[4] Volumes are arguably a better indicator for the overall trade development, as they eliminate swings in prices and can function as a good barometer of overall economic activity driving trade and as a sound predictor of potential resource constraints, including shortages in transport vessels and containers.

[5] There are a number of factors that could have contributed to the recovery in total merchandise trade. Arguably the most important contribution has arisen from the various economic stimulus packages provided by many large economies, notably by high-income countries. A combination of general fiscal expansion, targeted unemployment benefits, and further monetary easing has kept consumer spending in high-income countries at relatively elevated levels, helping to avert a deeper demand shock following the supply shock exerted by the lockdown measures. The aggregate fiscal expansion of advanced economies since the pandemic started is estimated to have reached USD 15.9 trillion (USD 9.6 trillion on above the line measures (ATL) and 6.3 on below the line measures (BTL)), or 25.3 percent of the GDP (15.3 percent on ATL and 10 percent on BTL) of these countries, compared with USD 2.5 trillion or 7.9 percent of the GDP from emerging markets, and USD 52 billion or 2.3 percent of the GDP from LIDCs.

[6] E.g. World Trade Organization, 2020. Trade set to plunge as COVID-19 pandemic upends global economy. Geneva. (also available at www.wto.org/english/news_e/pres20_e/pr855_e.htm).

[7] Boz, E., Gopinath, G. & Plagborg-Møller, M, 2017. Global trade and the dollar. NBER Working Paper No. 23988; and Boz, E., Gopinath, G. & Plagborg-Møller, M. 2019. Dollar invoicing and the heterogeneity of exchange rate pass-through AEA papers and proceedings, Vol. 109. An overview of the rationale and the key arguments put forward by Boz et al. is provided in ‘Global trade’s dependence on dollars lessens its benefits’, The Economist, 29 August 2020.

[8] While in contrast with recent research presented by Boz et al., practically all countries experiencing currency depreciations saw increasing agricultural exports and contracting imports.

[9] The focus here is on food imports rather than total agricultural imports, to capture possible food security concerns.

[10] By June 2020, US exports of soybeans had fallen to a 16-year low (https://in.reuters.com/article/us-usa-grains-braun-idUKKBN23C0RB).

[11] The secular decline in the share of agricultural products is fully consistent with the longer-term deterioration in the terms-of-trade (TOT) for agriculture. As global incomes rose, demand for income-inelastic agricultural products increased less rapidly than demand for income-elastic manufactured goods, resulting in (i) declining TOT for agricultural exporters, and (ii) a declining share of agricultural products in total trade. It could be seen as a special case of the Prebish-Singer hypothesis, in which the analysis is limited to agricultural commodities rather than primary products more generally.

Annex figures

Food import bills

World food import bill set to reach new heights in 2021

The provisional forecast for the world food import bill in 2021 points to a record USD 1.715 trillion, which would suggest a rise of 12 percent from the previous year. The economic impacts of COVID-19 are not expected to hinder global demand for foodstuffs in 2021, nor did the pandemic curtail growth in the bill in 2020, the level of which stood as the previous record. Indeed, the year-on-year expansion of the bill in 2020 was mainly on account of a steadfast increase in imported volumes, especially those of staples; while in 2021, volumes are anticipated to remain robust, increased unit costs (international quotations and freight rates) are set to underpin overall growth in the world bill compared with last year (see Box).[1] The sustained demand for imported foodstuffs during the pandemic years also masks supply chain disruptions within countries that turned, and continue to turn, to the international marketplace to fulfil domestic requirements. For instance, when EU supply chains for citrus were disrupted at the beginning of the pandemic, Egypt was able to fill the supply gap and make major inroads into the EU market. Likewise, Kenya managed to step up exports of vegetables to the EU, when problems occurred due to COVID-19-related labour shortages in the vegetable sector.

Trends in import bills of food groups

The COVID-19 pandemic has exerted a pronounced income shock on the global economy, with negative growth rates experienced across all regions, albeit at different depths of decline and expected speeds and shapes of recovery. These income swings have left characteristic imprints on import demand across different food groups. The realized and foreseen changes in food import bills mainly reflect the diverging responsiveness of import demand to changes in income.

Against the backdrop of much higher international quotations predicted for 2021, as well as a strong upturn in world gross domestic product (GDP) growth, virtually all product bills are expected to increase in 2021. The largest absolute increases in the year are those foreseen for cereals (USD 37 billion), followed by vegetable oils (USD 33 billion), oilseeds (USD 31 billion) and fruits and vegetables (USD 24 billion). Combined, they would account for almost USD 126 billion of the USD 185 billion foreseen rise in the global bill in 2021 from last year. Again in 2020, these product groups dominated the dollar increase in the world bill of USD 48 billion from 2019, and were also supported by a substantial increase in international purchases of oilseeds. Such developments were to be expected, given the low-income responsiveness of staple foodstuffs. By contrast, purchases of fish products as well as beverages, which are typically sensitive to income changes, fell a collective USD 20 billion compared with 2019.

On a percentage basis, vegetable oils, cereals and oilseeds are noteworthy food groups that are set to be the most vibrant in terms of growth in 2021 (Figure 1). The consistency in the rise for most product bills at the global level was not shared in 2020. Changes in the bill of last year were diffuse, with percentage changes varying widely. At the extreme were vegetable oils and fish products, with import bills of the former rising by almost 14 percent, compared with a near 8 percent contraction in global fish purchases.

Do higher bills translate to more food delivered?

The aforementioned trends are not expected to be uniform across economic and geographical regions. With few exceptions over all food categories, developed regions, which dominate global food inflows, are expected to import less food in 2021 at a greater cost than in 2020, such that prices (and freight costs) are expected to fuel a net increase in the food import bill to the tune of USD 58 billion in 2021.

By contrast, and in spite of higher global quotations, developing countries are anticipated to purchase more food in all categories. Rising demand for cereals, vegetable oils, oilseeds, and fruits and vegetables are by far the greatest within-drivers of the predicted increase in the food import bill of developing regions in 2021, with volumes accounting for almost 60 percent of the USD 127 billion increase. Such demand by developing regions is expected to underpin the overall increase in the global food bill in 2021. The decomposition of food import bill changes for 2021 into volume and price effects is provided in Table 2a while the decomposition for 2020 is provided in Table 2b[2].

Likewise in 2020, the growth in demand for imported foodstuffs by developing countries contributed an overwhelming 80 percent of the annual rise in the world food import bill. Only a decline in purchases of fish products and beverages and a stagnation of coffee, tea, cocoa and spice inflows were registered in 2020. Growth in the developed region food import bill was again dominated by price effects, with across-the-board declines in volumes.

Vulnerable countries pay the price

Food import bills of economically disadvantaged groups of countries, such as Least Developed Countries (LDCs), Low-Income Food-Deficit Countries (LIFDCs) and countries situated in sub-Saharan Africa (SSA) are expected to rise in 2021 by varying degrees. The bills of LDCs are forecast to increase with 4 percent, while those of SSA and LIFDCs could increase by 11 and 20 percent, in tandem with the global increase. However, growth in these aggregate bills is dominated by increases in the unit costs of importing food. Worryingly, as shown in Table 2b, LDCs are foreseen to purchase barely the same total volumes of food but at a higher cost in 2021. Bills of cereals constitute one of the few product groups in which economically disadvantaged countries could benefit from greater import volumes at a lower unit cost. Purchases of vegetable oils – commodities that habitually rank second in terms of import dependency – are expected to decline considerably in volume terms for LDCs and SSA. A cursory examination of trends in GDP and food import bills (see Figure 2) reveals that bills have stagnated for LIFDCs and SSA during 2020. This is expected to explain lower demand by these country groups for livestock and sugar products, which are sensitive to changes in income.

A further worrying feature is that to the extent changes in import demand reflect changes in overall demand, the COVID-19 pandemic would have resulted in a shift from high- to low-value food products and most likely to a deterioration in the quality of diets. Indeed, the growth in international purchases of cereals by LDCS, LIFDCs and SSA, at the expense of more nutritionally diverse foodstuffs, bears testimony to this outcome.

With worsening macroeconomic fundamentals, the fiscal capacity of already vulnerable countries to import is becoming critical. Figures 4 to 6 highlight dimensions of selected LIFDCs, LDCs and countries in SSA, as well as other developing net food-importing countries, in their ability to import food. The selection of countries was based on criteria relating to exposure, such as high food import dependency ratios, large shares of food expenditure in GDP and large economic distances below median per capita world GDP.

As an example of these criteria, Figures 3a and 3b contrast food expenditure shares in GDP with per capita food import bills of countries in vulnerable regions, as well as those for developed countries. It is seen that food accounts for a relatively high percentage of GDP in vulnerable countries, averaging around one-third, but per capita food import bills reveal no tendency to correlate with the degree of food expenditure share, implying a high reliance on the ability of domestic production systems to deliver food.[3] With production shocks, or a lack of resource endowments to produce food, such countries will be exposed to the encumbrances of buying food from the international arena. By contrast, food expenditure shares in developed countries average about 10 percent, and it can be deduced from the figure that the lower the share, the higher the county’s per capita food import bill – or higher dependence on imported food vis-à-vis domestic food systems.

Turning to the dimensions of affordability, Figure 4a shows changes in international purchasing power of currencies, as measured by real exchange rates. It is seen that numerous net food importers have experienced sharp depreciations of their real exchange rates, undermining their ability to buy food from the international arena. At the same time, some agricultural exporters enjoyed even larger depreciations of their real exchange rates, making their produce more competitive internationally (Figure 4b). The well-established agricultural exporters from Latin America (Brazil, Chile or Uruguay) have particularly benefited from the decline in value of their valuta in 2020. While these countries also experienced higher inflation rates and therefore higher production costs, the depreciation of their nominal exchange rates exceeded the cost increase and boosted the competitiveness of their exports.

Figure 5 depicts the burden of importing food with respect to domestic foreign exchange reserves. Since international procurement is transacted in major convertible currencies, often the US dollar, sufficient foreign exchange reserves are a necessary prerequisite for countries to participate in trade. It is seen that for many vulnerable countries, food import bills consume a significant percentage of their foreign exchange earnings, as much as 90 percent of foreign exchange reserves in a particular instance. Such high shares expose countries to a potential failure to meet the cost of importing other necessities, such as energy and medical products.

In a similar vein, Figure 6 measures the share of a country’s food import bill in its total merchandise export earnings. In many cases, foreign exchange earnings from exports merely cover imported food needs, and in other instances, the cost of imported food far exceeds earnings from merchandise exports. In normal times, countries with a strong revenue stream from exporting services, notably tourism, are able to compensate for low proceeds from exporting merchandise goods. In times of COVID-19, however, many of these countries have been deprived of revenues from service exports, which puts them at an added risk of depleting their foreign exchange reserves. Among the most exposed countries are the Maldives, Cabo Verde and Sao Tome and Principe; in all three countries, the food import bill in 2020 exceeded revenues from total merchandise exports.

[1] Unlike trade in non-essential merchandise products, imports of food have largely been unaffected by the pandemic, hence leaving less pent-up demand to further boost food import volumes.

[2] Factor decomposition of changes in Food Import Bills (FIBus) in USD is calculated as follows:

[3] While per capita levels of food import bills appear low in vulnerable countries, compared with median per capita GDP, import bills may assume a share as high as 16 percent.

Statistical appendix tables

Appendix Table 1 (A & B): Cereal statistics

Appendix Table 2 (A & B): Wheat statistics

Appendix Table 3 (A & B): Coarse grains statistics

Appendix Table 4 (A & B): Maize statistics

Appendix Table 5 (A & B): Barley statistics

Appendix Table 6 (A & B): Sorghum statistics

Appendix Table 7 (A & B): Other Coarse grains statistics

Appendix Table 8 (A & B): Rice statistics

Appendix Table 9: Cereal supply and utilization in main exporting countries

Appendix Table 10: Total oilcrops statistics

Appendix Table 11: Total oils and fats statistics

Appendix Table 12: Total meals and cakes statistics

Appendix Table 13: Sugar statistics

Appendix Table 14: Total meat statistics

Appendix Table 15: Bovine meat statistics

Appendix Table 16: Ovine meat statistics

Appendix Table 17: Pigmeat statistics

Appendix Table 18: Poultry meat statistics

Appendix Table 19: Milk and milk products statistics

Appendix Table 20: Fish and fishery products statistics

Appendix Table 21: Selected international prices for wheat and coarse grains

Appendix Table 22: Wheat and maize futures prices

Appendix Table 23: Selected international prices for rice and price indices

Appendix Table 24: Selected international prices for oilcrop products and price indices

Appendix Table 25: Selected international prices for sugar and sugar price index

Appendix Table 26: Selected international prices for milk products and dairy price indices

Appendix Table 27: Selected international meat prices

Appendix Table 28: Selected international meat prices and FAO meat price index

Appendix Table 29: Fish price indices

Appendix Table 30: Selected international commodity prices

NOTES

GENERAL

• FAO estimates and forecasts are based on official and unofficial sources.

• Unless otherwise stated, all charts and tables refer to FAO data as source.

• Estimates of world imports and exports may not always match, mainly because shipments and deliveries do not necessarily occur in the same marketing year.

• Tonnes refer to metric tonnes.

• All totals are computed from unrounded data.

• Regional totals may include estimates for countries not listed. The countries shown in the tables were chosen based on their importance of either production or trade in each region.

• Estimates for China also include those for the Taiwan Province of China, Hong Kong SAR and Macao SAR, unless otherwise stated.

• Up to 2019/20 the European Union includes 28 member states. From 2020/21 the European Union includes 27 member states.

• ‘-’ means nil or negligible.

• Cereals include wheat, rice and coarse grains. Coarse grains include maize, barley, sorghum, millet, rye, oats and NES (not elsewhere specified).

Production

• Cereals: Data refer to the calendar year in which the whole harvest or bulk of harvest takes place.

Utilization

• Cereals: Data are on individual country’s marketing year basis.

Trade

• Trade between European Union member states is excluded, unless otherwise stated.

• Wheat: Trade data include wheat flour in wheat grain equivalent. The time reference period is July/June, unless otherwise stated.

• Coarse grains: The time reference period is July/June, unless otherwise stated.

• Rice, dairy and meat products: The time reference period is January/ December.

• Oilseeds, oils/fats and meals: The time reference period is October/ September, unless otherwise stated.

Stocks

• Cereals: Data refer to carry-overs at the close of national crop seasons ending in the year shown.

Price indices

• The FAO price indices are calculated using the Laspeyres formula; the weights used are based on the average export value of each commodity for the 2014–2016 period.

COUNTRY CLASSIFICATION

In the presentation of statistical material, references are made to special country groupings: Low-Income Food-Deficit Countries (LIFDCs), Least Developed Countries (LDCs). The LIFDCs include 51 countries that are net importers of basic foodstuffs with per caput income below the level used by the World Bank to determine eligibility for International Development Aid (IDA). The LDCs group currently includes 47 countries with low income as well as weak human resources and low level of economic diversification. The list is reviewed every three years by the Economic and Social Council of the United Nations.

DISCLAIMER

The designations employed and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations concerning the legal status of any country, territory, city or area or of its authorities or concerning the delimitation of its frontiers or boundaries.

Futures markets

Contributed by Ann Berg

Futures prices for wheat, maize and soybeans attained their highest levels in eight years during May as acute supply and demand imbalances, particularly in the US maize and soybean markets, became manifest. The price hikes, which began almost a year ago, demonstrated a rare intercrop year reversal of outlook from surplus to shortage, as weak demand estimates stemming from the pandemic and dismal farm prospects due to a projected oversupply proved highly inaccurate. China remained the dominant demand driver, importing massive quantities of soybeans and maize, while isolated weather problems in South America and export taxes elsewhere were also price supportive. Wheat values gained the least of the three commodities, but were underpinned by feed wheat substitution for maize in livestock rations in various regions, notably Asia. All three commodities experienced sharp corrections during the second half of May as reports of demand rationing, shipment deferral and US acreage expansion circulated among traders. In exogenous markets, the US dollar was relatively stable over the last 5 months, adjusting to a lower level after its approximate 10 percent slide from the 100 mark year-on-year (y/y). Crude oil prices, particularly the West Texas Intermediate contract, moved higher from a year-end level of USD 50 to USD 60 per barrel following an unexpectedly swift US economic recovery in the first quarter of 2021 (Q1 2021). Record volumes and extreme volatility in US equities markets – coinciding with historic fiscal stimulus measures – raised concerns about asset-class inflation across multiple sectors, including raw materials and basic commodities.

FORWARD CURVES

Forward curves for wheat, maize and soybeans reflected a reversal of fundamentals y/y. Following the economic restrictions issued by most countries in Q2 2020 due to the pandemic, forward curves fell into steep contango (upward sloping). Conversely, since the start of 2021, as export demand outpaced projections by more than 150 percent, amid successive reductions in 2020/21 crop estimates for maize and soybeans by the United States Department of Agriculture, these curves inverted into extreme backwardation (downward sloping). The maize forward curve between the May 2021 and December 2021 contracts (referred to as a spread) soared to USD 72, while the soybean May/November 2021 spread climbed to USD 84. Wheat curves inverted to a lesser extent, with the May/December 2021 spread reaching USD 9. High domestic cash basis levels testified to the stocks’ depletion in the United States of America.

VOLUMES

Trade volumes for the first five months of the year were surprisingly muted – given the outsized trough-to-peak price wave which normally attracts speculative interest. Although volumes exceeded those for the same period y/y, they remained below the record levels in 2018. Open interest, which reached its highest levels in mid-2018 for wheat and maize and in October 2020 for soybeans, uncharacteristically declined as prices soared to multiyear highs in May. Open interest in options increased y/y adding an extra 40 percent to maize and soybeans futures open interest, but less than 30 percent to that of wheat. In general, investment flows into agricultural futures were not commensurate with the massive increases in exports and prices, sharply contrasting with equity trade volumes, which more than doubled from the previous year..

VOLATILITY

Similar to volumes, volatility levels for wheat, maize and soybeans remained subdued in light of the prolonged price rally. Both implied (calculated by the level of option premiums on underlying futures contracts) and historical (based on 30 days) volatility levels for wheat and maize have remained range-bound between 20 and 30 for most of the past 12 months, except during May, when implied volatility briefly exceeded 50. Soybean volatility levels were slightly lower for the same 12-month period, ranging between 12 and 26. As a comparative reference, during the 2008 food crisis, volatility levels breached 60 and 70 levels.

INVESTMENT FLOWS

Managed money retreated to a neutral position in wheat over the past five months and maintained a bullish stance in soybeans, while extending its maize net long position to near-record levels in April. Commercials held their standard short positions for the three commodities, seemingly caught off-guard by the relentless price rises driven by unprecedented demand and downward crop revisions. Positions held by swaps dealers underwent mixed changes, declining in soybeans while increasing slightly in wheat and maize. These dealers, which offer products tracking prices of agricultural and other futures contracts, failed to attract the burgeoning trade among retail customers who embraced equities investing in response to direct stimulus measures.

Agricultural money managers, who have struggled with poor performances for years, showed a positive year-to-date return of 3.92 percent as of April 2021. They also reported a stellar 2020 return of 14.62 percent, their highest since 2004. The Deutsche Bank Agricultural Index Fund, which passively tracks 10 agricultural futures markets, including wheat, maize and soybeans, rose to 19.33 in early May, rebounding from its all-time low at USD 13.16 in June 2020.

Ocean freight rates

Contributed by the International Grains Council (IGC)

www.igc.int

OCEAN FREIGHT MARKET (NOV 2020 - MAY 2021)

The dry bulk freight complex, which hauls commodities such as grains, oilseeds, iron ore, cement, coal and fertilizer, has witnessed a steep increase in earnings during the past six months. The market entered the calendar year on a positive note amid signs of improving world economic conditions and growing trade optimism against the backdrop of COVID-19 vaccination programmes in many countries. Supply side developments offered additional support, with bulker fleet growth expected to decelerate markedly in 2021 because of a slowdown in newbuilding deliveries.

Although the shipping industry appeared to have adapted to new COVID-19-related rules, congestion and adverse weather affected activity at some origins, including Australia, Brazil and the United States, while low river levels and port worker strikes hampered operations in Argentina. The late-March six-day blockage of the Suez Canal was estimated to have had a limited impact on dry bulk freight rates, yet, more than 90 carriers were reported to have been delayed due to the incident.

Underpinned by sharp gains in all underlying vessel segments, the Baltic Dry Index (BDI) – a measure of timecharter values across major bulker categories – has more than doubled over the past six months and approached an 11-year peak in early-May. Reflecting a strong rebound from near all-time lows of last spring, when activity was suppressed by coronavirus-related uncertainty, the Index was up more than fivefold year-on-year as at end-May. However, movements over the period have been two-sided, with values retreating recently, while markets saw a spike in volatility during the first quarter of the year.

Voyage freight costs (include fuel, port charges and other associated costs) across main grains and oilseeds routes have also firmed markedly on surging vessel hire rates and recovering bunker prices. The IGC Grains and Oilseeds Freight Index (GOFI), which gauges nominal shipping costs on around 300 selected routes, climbed by 51 percent since late-November, to post a more than twofold annual increase as of end-May. Gains across constituent sub-Indices – showing key grains and oilseeds exporters – were led by Australia, where this season’s upturn in grains business boosted demand from charterers. Additionally, loadings at Western Australian ports faced delays following heavy rains in March and more recent tropical cyclone Seroja.

Over the period, sentiment in the Capesize sector – representing the largest bulk carriers – was mainly shaped by developments in the global iron ore market. The corresponding Baltic sub-Index rebounded from multi-month lows in early-December last year on resurgent iron ore activity out of Brazil and Australia, with broader support stemming from soaring world prices for that commodity and logistical issues at discharging ports in China.

After a dip in early-2021, partly tied to a holiday lull in Asia, the market subsequently renewed growth on strong market fundamentals, including robust iron ore demand from China, where steel production continued to expand despite rising raw material prices. Also drawing support from cyclone-induced disruption in Western Australia and increased interest for bauxite and coal deliveries in the Atlantic, average segment earnings climbed to more than a decade-high in early May. Although a retreat in iron ore prices and worries about China’s plans to strengthen commodity price controls weighed on timecharter values recently, the sub-Index has doubled since late-November, reaching 3,089 points, compared to just 27 points the year before.

After two-sided movements in late-2020, rates in the Panamax segment edged higher since the start of the year, buoyed by grains and oilseeds shipments from South America, the US Gulf and the northern Pacific. This coincided with fresh coal enquiries in Asia as cold spells boosted demand for heating and electricity in that region.

Growth in earnings gained momentum in February, with activity centred on front-haul deliveries out of the US Gulf and the Black Sea region, where exporters faced challenging wintry weather. Further underpinning came from firming mineral demand in the Baltic, where thin availability of ice class bulkers was noted. More recently, accelerating grains/oilseeds dispatches out of South America were a notable feature, with stiff competition for port capacity reported in Brazil as delayed soyabean arrivals overlapped with the sugar export season. At the US Gulf, a seasonal slowdown in soyabean shipments was countered by an upturn in maize loadings, most notably to China. Nominal journey costs from New Orleans to Dalian posted a net 41 percent increase over the period, to around USD 62 per tonne, a USD 4 premium to comparable deliveries from southern Brazil (Santos).

Despite a recent retreat, partly linked to plummeting Capesize rates, average segment earnings were 93 percent higher compared to late-November.

Segments for smaller carrying vessels – Supramax and Handysize – have also surged in recent months on good chartering activity across main loading areas. Both sectors witnessed a weak start to the year, but earnings charged higher in February, with upside linked to brisk fixing in the Americas, including for grains and oilseeds, as well as tight vessel supply in Europe/the Mediterranean and buoyant coal trading in Asia. Building tonnage at the US Gulf and softer rates in South America contributed to a downturn in April, but losses were reversed in the period since on fresh enquiries in both Basins and reduced vessel supply in the Pacific, as logistical bottlenecks in South America limited the flow of bulkers to that area.

FAO price indices[1]

The FAO Global Food Consumption Price Indices[2]

The FAO Global Food Consumption Price Indices (FGFCPIs) track monthly changes in international prices of a basket of food commodities. The FGFCPIs encompass the five food commodity groups comprised by the FAO Food Price Index (FFPI), further to including oilseeds and fish among their components. In addition to their comparatively broader commodity coverage, the FGFCPIs differ from the FFPI in that they weigh the individual commodity groups that compose them by their respective contribution to average global caloric intake (FGFCPI calorie-base) or to average protein uptake (FGFCPI protein-base) during 2014-2016 base period. These weights are derived from the FAO food balance sheets (http://www.fao.org/faostat/en/#data/FBS).

The Calorie-base FGFCPI interrupted a four-month downward streak in June 2020 and has risen uninterruptedly since then. In nominal terms, this year-long upward trajectory placed the May 2021 value of the FGFCPI-calories at 126.6 points, up 34 percent year-on-year and the highest the Index has been since February 2013. Compared to May 2020, prices of all other commodities covered by the Calorie-base Index have risen, with the exception of rice. However, because of their comparatively greater contribution to global energy intake, the rise in the Calorie-base FGFCPI has been primarily the result of the strength exhibited by wheat, vegetable oils and coarse grain prices.

The increase of the Protein-base FGFCPI has been somewhat less pronounced than of its calorie-based correspondent. In May 2021, the Protein-base Index stood at 119.7 points, 23 percent above its year-earlier value. To a certain degree, the more restrained climb reflects the comparatively more moderate year-to-year gains registered in quotations of commodities with higher protein content, such as meat, dairy and fish. Through May 2021, these have ranged from 5 to 28 percent, compared to 50 percent for grain prices and 124 percent for vegetable oils. This also mirrors the low contribution of vegetable oils, along with sugar, to global protein consumption. Since these commodities have been among those spearheading the rise of the export-value and calorie-based indices (vegetable oils in particular), this has resulted in the Protein-base FGFCPI departing from the patterns of the other two indices, especially since the onset of 2021.

The FAO Food Price Index[3]

The FAO Food Price Index (FFPI) averaged 127.1 points in May 2021, 5.8 points (4.8 percent) higher than in April and as much as 36.1 points (39.7 percent) above the same period last year. The May increase represented the biggest month-on-month gain since October 2010. It also marked the twelfth consecutive monthly rise in the value of the FFPI to its highest value since September 2011, bringing the Index only 7.6 percent below its peak value of 137.6 points registered in February 2011. The sharp increase in May reflected a surge in prices for oils, sugar and cereals along with firmer meat and dairy prices.

The FAO Cereal Price Index averaged 133.1 points in May, up 7.6 points (6.0 percent) from April and 35.7 points (36.6 percent) above its May 2020 value. Among the major cereals, international maize prices rose the most, gaining 12.9 points (8.8 percent) in May, reaching 75.6 points (89.3 percent) above their value last year and their highest level since January 2013. Downgraded production prospects for Brazil added pressure to already tight global supplies amidst sustained strong demand. However, towards the end of the month maize prices started to retreat, mostly in expectation of higher production prospects in the United States of America. International barley and sorghum prices also increased in May, rising by 5.4 percent and 3.6 percent, respectively. Following a surge in wheat prices in early May, improved crop conditions, particularly in the European Union and the United States of America, led to sharp price declines by the end of the month. However, wheat prices still averaged 8.0 points (6.8 percent) up from April and 27.7 points (28.5 percent) above May 2020. International rice prices held steady in May, with logistics and shipping costs keeping trading activity subdued through the month.

The FAO Vegetable Oil Price Index averaged 174.7 points in May, gaining 12.7 points (or 7.8 percent) month-on-month and marking a twelfth consecutive monthly rise. The continued strength of the index mainly reflects rising palm, soy and rapeseed oil values. International palm oil quotations remained on an upward trajectory in May and reached their highest level since February 2011, as slow production growth in Southeast Asian countries, together with rising global import demand, kept inventories in leading exporting nations at relatively low levels. As for soyoil, prospects of robust global demand, especially from the biodiesel sector, lent support to prices, while international rapeseed oil values were underpinned by continued global supply tightness.

The FAO Dairy Price Index averaged 120.8 points in May, up 1.7 points (1.5 percent) from April, marking one year of uninterrupted increases and lifting the value 26.4 points (28 percent) above its level of one year ago. However, the index is still 22.8 percent below its peak value reached in December 2013. In May, international quotations for skim milk powder rose the most, reflecting solid import demand amid limited spot supplies from the European Union, and those for whole milk powder increased on high import purchases, especially by China, despite New Zealand’s offer of large sales. Cheese quotations also strengthened, mostly due to lower supplies from the European Union amidst strong demand. By contrast, butter prices fell on increased export supplies from New Zealand, marking the end of an eleven-month long price rally.

The FAO Meat Price Index[4] averaged 105.0 points in May, up 2.3 points (2.2 percent) from April, registering the eighth monthly increase and lifting the index 10 percent above its level of one year ago, but still nearly 12 percent below its peak reached in August 2014. In May, price quotations for all meat types represented in the index rose, principally underpinned by a faster pace of import purchases by East Asian countries, mainly China. Tightening global supplies also provided price support across all meat products, reflecting multiple factors ranging from slaughter slowdowns in the cases of bovine and ovine meats to rising internal demand for poultry and pig meats in leading producer regions.

The FAO Sugar Price Index averaged 106.7 points in May, up 6.8 points (6.8 percent) from April, marking the second consecutive monthly increase and the highest level since March 2017. The rise in international sugar price quotations was mostly related to harvest delays and concerns over reduced crop yields in Brazil, the world’s largest sugar exporter, as the prolonged dry weather conditions impacted crop development. Additional support was provided by higher crude oil prices and a further strengthening of the Brazilian Real against the US dollar, which tends to restrain shipments from Brazil. Large export volumes from India, however, contributed to easing the price surge and prevented larger monthly price gains.

[1] All changes referred to in this section, in absolute or percentage terms, are calculated based on unrounded figures.

[2] The FAO Global Food Consumption Price Indices are published twice a year in Food Outlook.

[3] The FAO food price index and its sub-indices are updated on a monthly basis and are available on: http://www.fao.org/worldfoodsituation

[4] Unlike for other commodity groups, most prices utilized in the calculation of the FAO Meat Price Index are not available when the FAO Food Price Index is computed and published; therefore, the value of the Meat Price Index for the most recent months is derived from a mixture of projected and observed prices. This can, at times, require significant revisions in the final value of the FAO Meat Price Index which could in turn influence the value of the FAO Food Price Index.