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FAO. 2021. Food Outlook – Biannual Report on Global Food Markets. Food Outlook, November 2021. Rome. https://doi.org/10.4060/cb7491en

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Contents

MARKETS AT A GLANCE

Wheat

Coarse grains

Rice

Oilcrops, oils and meals

Sugar

Meat and meat products

Milk and milk products

Fish and fishery products

SPECIAL FEATURE

Rising input prices add unwanted pressure on the already fragile global food economy

MAJOR POLICY DEVELOPMENTS

Grains

Rice

Oilcrops

Meat

Dairy

STATISTICAL TABLES

MARKET INDICATORS

Futures markets

Ocean freight rates

Food import bill

The FAO price indices

Food Outlook is published twice a year, normally in June and November. The June report contains a more detailed market analysis while the November report only provides summary market assessments (Markets at a Glance).

ACKNOWLEDGEMENTS

The Food Outlook report is a product of the Food and Agriculture Organization of the United Nations 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, Emanuele Mazzini, 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.

WHEAT

An expected decline in global production against rising demand is seen tightening the global wheat market further in 2021/22, as evidenced by the multiyear high price levels maintained since the start of the year.

At 770.4 million tonnes, FAO’s 2021 global wheat production forecast now points to a 0.8 percent decline from the 2020 record primarily attributed to lower outputs expected in Canada, the Russian Federation and the United States of America (the United States), as well as several countries in the Near East.

Total wheat utilization is expected to reach nearly 779 million tonnes in 2021/22, 2.2 percent higher than in 2020/21. Global food consumption of wheat is seen rising in tandem with population growth, while strong growth in feed use is anticipated, especially in the European Union, but also in China, India, the United Kingdom of Great Britain and Northern Ireland and the United States, mostly due to higher production and firm feed demand.

With overall utilization forecast to exceed world production, global wheat inventories are set to fall by 2.2 percent below their opening level to 282.1 million tonnes. The forecast drawdown is mostly concentrated among major exporters, especially Canada, the Russian Federation and the United States, on lower harvest prospects. Consequently, the ratio of major wheat exporters’ closing stocks to their total disappearance (defined as domestic utilization plus exports) is expected to fall to 12.5 percent, its lowest level in more than two decades, indicating tighter global market conditions and keeping prices 29.1 percent higher in the period from January to October 2021compared to the corresponding period in 2020.

World wheat trade is forecast to expand by 1.8 percent in 2021/22 (July/June), reaching a new record of 192.3 million tonnes, underpinned by larger imports anticipated for Afghanistan, Iraq, the Islamic Republic of Iran and Turkey, to compensate for reduced production, as well as for Egypt, to replenish stocks. Among exporters, increased availability is seen boosting shipments from Argentina, Australia, the European Union and Ukraine, outweighing anticipated declines in sales from Canada, the Russian Federation and the United States, where supplies are forecast to be tighter than in the previous season.

For additional analyses and updates, see:

FAO Cereal Supply and Demand Brief
http://www.fao.org/worldfoodsituation

Crop Prospects and Food Situation
http://www.fao.org/giews/reports/crop-prospects

AMIS Market Monitor
http://www.amis-outlook.org/amis-monitoring

Contact:

Erin Collier

Jonathan Pound (Production)

COARSE GRAINS

At an all-time high of almost 1 505 million tonnes, FAO’s global coarse grains production forecast for 2021 stands 1.5 percent higher than the 2020 level. World maize production is set to rise to a new record in 2021, reflecting larger outputs expected in China, Ukraine and the United States of America (the United States), which outweigh a foreseen decline in Brazil’s output. Sorghum production is also forecast to increase, while global barley output is expected to decline.

Total utilization of coarse grains is forecast to grow by 1.6 percent in 2021/22, largely on foreseen higher maize utilization supported by anticipated robust feed demand in Brazil and China, greater use of maize for feed in Canada, and higher maize-based ethanol production in Brazil and the United States as economic recovery pushes up crude oil demand and prices. Sorghum utilization is also forecast to increase on higher food consumption and feed use. By contrast, reduced production is expected to curb feed and industrial uses of barley.

After declining for three consecutive seasons, global coarse grain inventories by the end of seasons in 2022 are predicted to remain near their opening levels. An anticipated rise in maize stocks, mostly in China and the United States, is seen countering a drawdown of global barley inventories. Overall, the world coarse grain stocks-to-use ratio is forecast to drop slightly in 2021/22, to 22.3 percent, still pointing to a relatively comfortable market situation.

World trade in coarse grains in 2021/22 (July/June) could register a 1.7 percent contraction from the 2020/21 record level. Global maize trade is forecast to decline mostly on expectations of smaller maize purchases by China and Viet Nam. On the export side, anticipated larger maize sales from Argentina and Ukraine are likely to only partially offset expected smaller shipments from Brazil and the United States. Barley trade could also decline, primarily on foreseen lower demand from China and Morocco. After rising more than 60 percent in 2020/21, coarse grain prices have risen only slightly since the start of the 2021/22 season, largely due to higher production and lower import demand, especially for maize, although they remain elevated.

For additional analyses and updates, see:

FAO Cereal Supply and Demand Brief
http://www.fao.org/worldfoodsituation

Crop Prospects and Food Situation
http://www.fao.org/giews/reports/crop-prospects

AMIS Market Monitor
http://www.amis-outlook.org/amis-monitoring

Contact:

Erin Collier

Jonathan Pound (Production)

RICE

Although the enduring challenges posed by the COVID-19 pandemic, alongside surges in agricultural input prices and uneven rains, are poised to decelerate the pace of production expansion, the 2021 season is still anticipated to end favourably overall. World rice production is forecast to reach 518.2 million tonnes (milled basis), up 0.9 percent from the 2020 record harvest. Much of the season’s positive outcome rests on Asia, where resilient plantings and a comparatively reduced incidence of floods and droughts bolster output prospects. Conducive growing conditions also improved output in Latin America and the Caribbean, as did ample irrigation water in Australia. Conversely, competition with other crops depressed prospects for the United States of America, while unfavourable weather and/or reduced producer margins mar the outlook for Africa and Europe.

Another record harvest is seen ensuring sufficient supplies for food use to continue expanding, while attractive prices retain interest in rice from the feed and industrial sectors. Therefore, global rice utilization is seen growing by 1.6 percent in 2021/22 to a peak of 518.8 million tonnes, while world rice stocks at the close of 2021/22 marketing seasons hover around a historical high of 187.6 million tonnes.

Despite an expected retrenchment in Asian import demand, international trade in rice is forecast to continue expanding in 2022, possibly reaching an all-time high of 51.3 million tonnes. Continued growth in African purchases would underpin this expansion, although imports from all other regions are envisaged to recover after being depressed by abundant domestic availabilities and supply chain disruptions in 2021. Among exporters, a rebound in Thailand’s shipments is seen abating the export performance of India and Viet Nam the most. However, competitive prices and efforts to expand into new markets could keep Indian deliveries in 2022 hefty.

Despite some recent signs of recovery, international rice prices have been generally subdued since May 2021, reflecting currency depreciations against the US dollar and efforts to attract fresh sales, held off by high freight costs and container shortages. This was reflected in the FAO All Rice Price Index, which stood at 99.9 points in October 2021, down 9.7 percent from May and 7.9 percent below its year-earlier level.

For additional analyses and updates, see:

FAO Rice Price Update
https://www.fao.org/markets-and-trade/commodities/rice/fao-rice-price-update/

Cereal Supply and Demand Brief
http://www.fao.org/worldfoodsituation/csdb/

AMIS Market Monitor
http://www.amis-outlook.org/amis-monitoring

Contact:

Shirley Mustafa

OILCROPS

Following a tight balance in 2020/21, preliminary forecasts for the 2021/22 season point to some improvements in the overall supply situation for oilseeds and derived products, although their respective end-season stocks could remain below average levels.

Global oilseed production in 2021/22 is forecast to climb to a new record, mainly driven by foreseen continued growth in soybean output. In the United States of America, a combination of higher plantings and yields is expected to lead to a further rise in soybean production, while Brazil’s anticipated record output would be largely underpinned by continued area expansion. In addition, world sunflower seed production is forecast to rebound sharply from the reduced level registered in 2020/21, primarily supported by anticipated output recoveries in the Black Sea region. By contrast, the global rapeseed harvest could drop to a multi-year low, as detrimental weather conditions have resulted in substantial production losses in Canada. As for palm oil, global production growth is anticipated to accelerate from the below-potential level in 2020/21, with Malaysia’s output expected to recover following two consecutive seasons of decline.

On the demand side, global utilization of oils/fats is heading for an increase in 2021/22 – albeit at a below-average rate, following stagnations registered over the past two seasons due to COVID-19-related factors that have affected both food and non-food sectors. In the meantime, world consumption of meals/cakes is poised to continue rising moderately, largely tied to expectations of a steady growth in global feed demand, particularly in China.

International trade in vegetable oils is forecast to rebound, up 3.4 percent from the 2020/21 reduced level, while world trade in meals is seen growing modestly, by 2.9 percent, from its subdued performance in 2020/21.

Based on current forecasts, the output of oilcrop products in 2021/22 is anticipated to exceed global consumption of oils and meals, albeit by a small margin. This is seen to result in a moderate reconstitution of inventories and some easing of pressure on prices, which had been fluctuating within a multi-year high range since the beginning of 2021. Looking forward, markets will be influenced by several factors, including weather in major growing regions, trade policies, biodiesel mandates, crude oil prices and how the COVID-19 situation evolves.

For additional analyses and updates, see:

Oilcrops Monthly Price and Policy Update
https://www.fao.org/markets-and-trade/publications/en/?querystring=Oilseeds

AMIS Market Monitor
http://www.amis-outlook.org/amis-monitoring

Contact:

Peter Thoenes

Di Yang

SUGAR

FAO’s preliminary forecasts for the global sugar market in 2021/22 (October/September) points to a likely second consecutive season of a tight supply-demand balance. Although world production is forecast to rebound after three years of decline, it is nevertheless expected to fall short of global consumption. As a result, global sugar inventories are anticipated to decline in 2021/22.

The forecast for world sugar production in 2021/22 stands at 173.7 million tonnes, up 2.2 percent from the reduced level in 2020/21. The upturn is largely based on expectations of production recoveries in the European Union, the Russian Federation and Thailand. Prospects are also favourable in India, while in Brazil, the world’s largest producer, output is forecast to decline for the second consecutive season in 2021/22.

Global sugar consumption is set to rebound for a second successive season in 2021/22, growing by 1.9 percent following the COVID-19-related contraction in 2019/20. The foreseen increase is underpinned by the rapid growth prospects for the global economy. Two countries, in particular, are expected to drive up global sugar consumption, India – the world’s largest sugar consumer – and China. Growth is also foreseen across Africa and South America.

The early forecast for world sugar trade in 2021/22 is pegged at 60.5 million tonnes, slightly down from the estimated volume for 2020/21. Foreseen lower exports by Brazil and India, compared with their record sales in 2020/21, will likely outweigh an anticipated recovery in shipments from Thailand – the world’s second largest sugar. By contrast, the continuation of high sugar prices in international markets, as well as the rising freight rates, could curb import demand from Asia. This is expected to more than offset predicted higher purchases by the European Union.

International sugar prices have been overall fluctuating but on an upward trend for more than a year, and in October they were more than 40 percent above their levels a year earlier. Price increases were underpinned by concerns over reduced output in Brazil amidst stronger global demand for sugar. Higher ethanol prices in Brazil lent additional support to international sugar prices, as they encouraged greater use of sugar cane for the production of ethanol.

Contact:

ElMamoun Amrouk

Fabio Palmeri

MEAT AND MEAT PRODUCTS

World meat production in 2021 is forecast to increase by 4.2 percent from 2020 and approach 353 million tonnes, principally based on expectations of a strong output rebound in Asia and notable expansions in all major producing regions, except Oceania. The bulk of the anticipated increase in Asia is foreseen in China, where meat output is likely to rise by 16 percent year-on-year to 90 million tonnes, exceeding the 2018 level, underpinned by increased pig stock liquidation, following price declines and recent African swine fever outbreaks in some provinces. Noticeable production expansions are also expected in India, Pakistan and Viet Nam on increased livestock numbers and demand. A moderate production expansion is anticipated in Latin America and the Caribbean, centred in Brazil and Mexico, induced by high import demand. In North America, moderate output growth is likely, on increased slaughter, triggered by lower producer margins and pasture deterioration in some regions. Europe is likely to register slight growth, constrained by the limited availability of cattle and avian influenza outbreaks, whereas the overall production outlook in Africa is favourable. By contrast, the increased demand for restocking and lower cattle inventory is expected to lead to an output contraction in Oceania.

World meat trade in 2021 is forecast to exceed 42 million tonnes (carcass weight equivalent), representing a 1.1 percent increase from 2020, but marking the slowest pace of annual growth in six years. This deceleration primarily results from an anticipated import contraction in China and some leading meat importing countries in Europe and the Middle East, reflecting increased national availabilities, incomplete food service recovery and logistical bottlenecks. However, several countries, especially the Philippines, Mexico, Chile and Viet Nam, are likely to purchase more meat to enhance local affordability and meet the rising food service needs. Meat export prospects are favourable for Brazil, the United States of America, India, Paraguay and Canada, whereas the European Union, the United Kingdom of Great Britain and Northern Ireland, Australia and Argentina may see their shipments contract.

The FAO Meat Price Index rose for 10 consecutive months since October 2020, principally driven by solid global import demand often outstripping supplies from major exporting countries. However, a slowdown in imports by China has led to declines in global meat prices since August.

For additional analyses and updates, see:

Meat Market Review
https://www.fao.org/markets-and-trade/publications/en/?news_files=113402

Meat Market Review: Emerging trends and outlook 2021 (forthcoming)

Contact:

Upali Galketi Aratchilage

MILK AND MILK PRODUCTS

World milk production is forecast to reach 928 million tonnes in 2021, 1.5 percent higher than in 2020, with anticipated output expansions in all regions, led by Asia and North America. Rising dairy cattle numbers, farm productivity improvements and investments are driving the increase in Asia, especially in India, China and Pakistan. Increased milk yields and high cattle numbers underpin the anticipated output growth in the United States of America, despite elevated culling of dairy cows since June 2021 due to squeezed profit margins. In South America, lower rainfall and high grain prices dampened farm margins, leading to a slight production decline, while Oceania’s favourable pasture conditions and milk prices are expected to sustain output growth. Milk output in the European Union is likely to expand moderately, helped by increased milk yields and favourable spring weather, which have spurred pasture improvements and contained rising feed costs. In Central America and the Caribbean, milk production is forecast to rise slightly, supported mainly by industrial farms, whereas subdued growth is anticipated in Africa.

World dairy trade is forecast to rise by 4.2 percent in 2021 to nearly 90 million tonnes (in milk equivalents), driven principally by China, with an anticipated 29 percent growth in imports, mainly in milk powders and whey. However, in recent months, the import growth rate has slowed down due to rising domestic production and sluggish consumer demand. Elsewhere, import volumes are forecast to rise in Mexico, Indonesia, Viet Nam and Bangladesh, reflecting increases in consumer and processing industry demand to levels that exceed expected domestic output expansions. By contrast, lower consumer demand, quota decisions and COVID-19 market disruptions are likely to contract imports significantly in several countries in East Asia, Europe and the Middle East. From the export perspective, higher production and competitive prices are likely to increase sales from the United States of America, New Zealand, Australia, the European Union and Argentina, among others, with milk powders and cheese anticipated to register the highest volume increases.

Except for a short spell of three months from June this year, international dairy prices registered increases since mid-2020, underpinned by sustained import demand, especially from Asia, and generally tight exportable supplies from the world’s major producing regions.

For additional analyses and updates, see:

Dairy Market Review
https://www.fao.org/markets-and-trade/publications/en/?news_files=113040

Dairy Market Review: Emerging trends and outlook 2021 (forthcoming)

Contact:

Upali Galketi Aratchilage

FISH AND FISHERY PRODUCTS

The global market for fisheries and aquaculture products remains in the recovery phase from the impacts of COVID-19, with both industry and consumers still in the process of understanding the nature, scale and duration of the social and economic changes that have taken place worldwide. However, there are positive indications, with total production volumes for 2021 forecast to grow by 2 percent compared with 2020, demonstrating growth for both capture output and farmed harvests. Forecasts also show growth in international fisheries and aquaculture trade for 2021 (12 percent by value and 3.7 percent in volume), as well as a slight recovery of consumption.

While COVID-19 related restrictions are now being widely lifted or relaxed, many of the new market dynamics resulting from the pandemic appear likely to endure in the long term. Food service establishments are reopening, giving a welcome boost to demand for species popular in the restaurant sector, but the renewed interest in home cooking, food delivery services and digital retail channels remains. At the same time, many of the adverse effects of the pandemic continue to drag on global trade, particularly the exceptionally high shipping rates and logistical delays associated with new border procedures, port backlogs and lack of availability of shipping containers.

Persisting tensions between China and the United States of America, resulting in tariffs imposed on several heavily traded fisheries and aquaculture commodities, continue to affect trade, although these have also offered new opportunities to competing producing nations. Many Chinese suppliers have turned their attention to the growing domestic market in response to the additional requirements that exporters must now negotiate.

This combination of supply chain challenges and recovering demand has resulted in higher prices for the majority of traded products. Prices of aquaculture products have bounced back particularly strongly due to delayed supply response and the success that integrated aquaculture supply chains have had in adapting to the new pandemic consumer trends. However, with so many uncertainties remaining, there is an elevated risk of sharp price swings.

For additional analyses and updates, see:

The GLOBEFISH market reports at
http://www.fao.org/in-action/globefish/market-reports

Contact:

Felix Dent

Audun Lem

Stefania Vannuccini

Rising input prices add unwanted pressure on the already fragile global food economy

Josef Schmidhuber

Bing Qiao

The context

The recent upsurge in agricultural input prices has triggered considerable alarm about rising costs of food production, which in a free market economy will be typically passed onto consumers through higher food prices. Already, the impacts on prices are captured by the rising FAO Food Price Index (FFPI), which reached a ten-year high in August 2021. This appears to be supported by developments in input prices, as evidenced by the newly constructed Global Input Price Index (GIPI, see Box and Figure 1).

This Special Feature examines the pathways and impacts of rapidly rising input prices, especially those of energy derived from fossil fuels, which can have detrimental effects on the global food economy in terms of their influence on food prices and future price developments, as well as their likely consequences for global food security. In addition, emphasis is duly placed on those most likely to be hit the hardest – consumers in economically-vulnerable, import-dependent countries, given that much of their income is spent on food and energy, bringing about high exposure.

A number of fundamental features of agricultural markets emerge from Figure 1. Firstly, the rapid rise and the current multiyear high in international food prices are bewing accompanied by an equally rapid rise and a multiyear high in (variable) production costs. The near synchronous change in revenues and costs keeps overall farm profitability in check. Secondly, this co-movement between agricultural product prices and agricultural input prices is a general feature that has characterized international markets for the past decades.[1] Thirdly, the difference between the food price and the input price indices should not be construed as absolute (gross) margins; it can merely capture changes in gross margins. As such, its evolution over time suggests that all other things being equal, producer benefits from rising farm and food prices are swiftly offset by rapidly rising costs/input prices. Fourthly, while changes in production costs generally lead the changes in output prices, a closer inspection of the two series suggests that input costs can also follow output prices. To gain better insights into “causality” between input and output price, a deeper econometric analysis will be required. Fifthly, the aggregate, global picture is likely to mask large regional and sector-specific differences within agriculture. For instance, most soybean producers are presently operating at relatively large positive gross margins, facing lower needs of currently expensive (nitrogen) N-fertilizer and, at the same time, enjoying high product prices. Pig producers, by contrast, face low meat prices and high feed costs, often resulting in low gross margins and even negative net margins. Finally, it needs to be emphasized that the GIPI only captures variable costs, such that the movement in the difference between the two lines only captures changes in gross margins, not in the net margins themselves.

Figure 2 underscores the global tendencies of Figure 1, by way of presenting subindices for energy, fertilizers, feed and seed prices (which form the GIPI), where it is shown that their current momentum is matching that of the FFPI.[2]

What is driving the GIPI?

Table 1 presents 12-month changes in the GIPI constituents, as well as the FFPI. It shows that in the past 12 months for which data are available (Jun/Aug 2020 to Jun/Aug 2021), all indexed prices of (internationally traded) inputs have increased, with energy (66 percent) and fertilizers (56 percent) standing out, but also a significant increase in feed (22 percent). Over this same period, the FFPI rose by 34 percent, while the GIPI increased overall by 25 percent. With the FFPI (output prices) rising at a faster rate than the GIPI (input prices), this could, as alluded to earlier, portend a potential improvement in the profit margins of some farmers.[3] However, it should be noted that the GIPI does not take into account variable costs of other inputs, such as labour and land rents, nor does it capture fixed costs such as those of capital goods, for example ‘structures’, tractors, implements and machinery more generally.

By contrast, the preceding 12-month period was characterized by across-the-board falls in all prices, except for seeds. While prices of seeds have historically exhibited high intra-year volatility, as evidenced in Figure 2, year-to-year absolute changes have been moderate, but nonetheless positive. The unit price of imported seeds is the largest of all input prices included in the GIPI.

Why rising energy prices have become so important for food markets

Agriculture is an energy-intensive sector, absorbing high amounts of energy, either directly through petroleum, natural gas and electricity use or, indirectly, using agrichemicals such as fertilizers, pesticides and lubricants, all of which have large, embodied shares of energy. Energy is also required to manufacture feed ingredients, such as the crushing of oilseeds to produce oilmeals and the milling of grains to manufacture feedstuffs (pellets, flours and compound materials). When it comes to food processing, the price of energy features heavily in the cost schedule. Examples include the milling of cereals into flours, the crushing of oilseeds into vegetable oils, the production of processed meat and dairy products, and the drying, preservation and refrigeration of many perishable foodstuffs. Higher energy prices will also lead to higher transport, distribution and retail costs, which will again be reflected in consumer prices.

Globally, estimates of direct and indirect energy consumption vary widely across countries. In highly developed agricultural economies, they can exceed 30 percent for direct use and 15 percent for indirect consumption. These high shares mean that higher prices of these inputs will inevitably translate into higher production costs, and eventually into higher food prices (see Figure 4 for crude oil and urea prices). This link through the input side is well established and well documented.

The lessons from the last global food price crisis in 2007/08 showed that under scarcity, the diversion of food crops to non-food uses can drive up food prices markedly. To better understand the impact pathways of energy costs on food prices, Figure 3 provides a schematic illustration of the linkages and ‘pass throughs’ to food markets. In addition to the links through the input prices, food and fuel prices are increasingly linked through output prices.

Two principal channels create the links on the output side. The first involves biofuel policies, which, through mandates, tariff protection or price incentives entice biofuel producers to use a certain and rather inflexible amount of feedstocks for the production of biofuels. Maize, sugar and oilseeds (vegetable oils) are the most common feedstocks, and ethanol and biodiesel are the most popular biofuels. These mandated or incentivized quantities are largely independent of energy prices. The second channel of transmission goes directly through energy prices. When energy prices rise, there is a threshold at which the production of biofuels from food crops, especially maize, sugar and oilseeds (vegetable oils), becomes competitive. Higher energy prices make more and larger quantities of agricultural feedstocks competitive for conversion into energy and, given the large size of the energy market relative to the food market, pull food prices up. The food price rise is capped again where agricultural feedstocks become so expensive that they can no longer compete in the energy market (see Figure 5 for crude oil and maize prices and Figure 6 for crude oil and sugar prices).

How are developing regions affected?

Figure 7 depicts the Input Price Index for developing regions compared with the GIPI. In later years, the aggregate indices of the regions show a marked tendency to correlate in both level and change between one another, as well as with the GIPI. However, this does not show the dependency on imported inputs, and risk of inflationary pressures.

Indeed, in countries that are heavily dependent on imported agricultural inputs, and where food and imported energy expenditures constitute a large share of their GDP – which typically characterize many of the most economically vulnerable nations in the world – rising prices of imported energy and inputs can trigger inflation, as shown in Figure 3.

Using mineral fertilizers for illustration, Figure 8 shows Import Dependency Ratios (IDRs)[4] for the primary nutrients – nitrogen (N), phosphorous (P) and potassium (K) for all regions, with Africa divided into North Africa and sub-Saharan Africa (SSA). This is due to the concentration of large producers and exporters of fertilizers, especially nitrogen and phosphorous, in North Africa.

The figure is telling, in that SSA is among the most import-dependent regions in the world for phosphorous and nitrogen, with dependency rates for both at around 70 percent. The price of nitrogen is principally driven by fossil fuels, in the form of gas, and with the region being also heavily dependent on imported energy, these factors could all lead to higher food production costs and food inflation.

Figure 9 ranks consumer spending on food, as well as fuel, water and housing across the most exposed countries to large expenditure shares in these categories. Even at the rather low food and fuel prices of 2017, 30 countries spent 60 percent or more of their income on these necessities. Preliminary estimates for 2021 suggest that another 23 countries have joined this group and that the average expenditure shares in these 53 countries (30 plus 23 new ones in 2021) have risen from 62 percent in 2017 to 69 percent in 2021. Figure 10 provides a summary of these findings, offering a population-weighted global average. It is seen that food expenditure shares have risen sharply from 2017, increasing countries’ exposure in general.

For many consumers, this may mean either lower quantities or qualities of food consumption, and hence hunger and malnutrition, or less money for other necessities such as health or the schooling of their children. Curtailing such important expenditures could send communities into a vicious cycle of deepening food insecurity and poverty, with potentially irreversible effects.

So what about the prospects?

Just as many parts of the world have reopened their economies in the aftermath of the COVID-19 pandemic to stimulate economic growth – even though the pandemic remains unchecked due to very low vaccination rates, especially in developing regions – the current rise in food and fuel prices is highly regressive in the case of poor consumers, compounding economic stress and exerting a negative impact on their livelihoods.

While the world is still far from the territory of past food price crises, such as the episodes between 2006 and 2012, vigilance is now of the utmost importance. Why?

• As the Northern Hemisphere approaches winter, the demand for heating from fossil fuel derivatives will rise. This is not unexpected, but with the possibility of climate variability giving rise to unprecedented temperatures below seasonal averages, the demand for energy for heating purposes is far from predictable. Energy shocks from the heating sector would also be transmitted into agri-inputs, energy itself and nitrate fertilizers, eventually resulting in higher food prices.

• China, being a significant force in global markets, constitutes a further element of uncertainty. In recent weeks, factories in 20 out of 23 of Mainland China’s provinces have reportedly undergone electricity outages under imposed rationing, forcing many to shut down production for extended periods. The upshot is that agriprocessing in China may undergo a slowdown, resulting in shortages in the face of strong demand. This would instigate inflationary pressures, and a realistic possibility that China would be procuring intermediate and final products (such as soybean oil and meal, and cereal flour) from global markets, which could result in further international price hikes for traded foodstuffs.[5]

Wrapping it all up

The construction of a Global Input Price Index makes it possible to track the evolution of agricultural input costs at the global and aggregate scale, i.e., at industry-wide level. With the caveat of the need for econometric analysis, its juxtaposition with global product prices, here represented by the FAO Food Price Index, suggests that changes in production costs – input prices – readily translate into changes in product prices, and hence food prices. For producers, it means that potentially larger profit margins are generally evaporated by higher production costs. While this is expected conceptually, it is astounding to see how much the theoretical postulate is confirmed by empirical observations, including those regarding the current price boom. For consumers, it means that food prices will inevitably rise with higher production costs, and do so without significant delays. This also holds for the current price rise, particularly exposing those consumers who are already exposed to high expenditure shares for food and fuel. For policy-makers, it means that rising costs for agricultural inputs, notably all forms of energy, will inevitably translate into higher food prices, unless new forms of production can be identified that make agriculture less energy-intensive and, importantly, less energy-dependent on fossil fuels.

The analysis presented here constitutes an initial attempt to assess and track global input costs; it is limited to presenting the global and industry-wide picture. It appears that the aggregate picture that has emerged from the analysis masks large differences across regions and within the global food economy. In a second step, therefore, the regional and sector-specific details could be analysed and assessed. Drilling deeper into regions and sectors would require detailed cost of production data and activity-specific intensity levels. If and where such information is available, this would allow analysts to spot and track opportunities for producers. It could also help policy-makers to promote particularly profitable activities or identify potential bottlenecks within an agricultural industry.

[1] The strong co-movement of the GIPI and the FFPI can be partly explained by the relatively high weight of feeds in the GIPI. The FFPI covers the same or similar commodities as food items, notably a number of grains and oil meals.

[2] Both the FFPI and GIPI are depicted in nominal terms.

[3] On the assumption that price pass through between global and local markets is full.

[4] The IDR is calculated as

[5] Energy shortages are also being felt worldwide, especially in the United States of America and in Europe.

Annex

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 inclusion of a country in the LIFDCs group is based on three criteria: 1) the level of the annual per capita gross national income (GNI); 2) the net food trade position; and 3) self-exclusion (when countries that meet the first two criteria request to be excluded from the category). The current list of LIFDCs (updated in June 2021) includes 47 countries, four less than the previous list. Three countries graduated out of the list based on income criterion - Djibouti, Solomon Islands and Viet Nam, and one country, India, graduated based on the food import criterion. For full details see: www.fao.org/countryprofiles/lifdc. The LDCs group currently includes 46 countries with low income, low levels of human assets and highly vulnerable to economic and environmental shocks.

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 remained at relatively high historical levels, although maize and soybean prices declined from the multiyear highs attained in May. A steady rise in production and quarterly stocks estimates weighed on prices throughout the growing season, as did a sharp year-on-year drop in soybean exports, particularly to China. Conversely, wheat futures prices, bolstered by tightening stocks, notably in the major exporting countries, realized their highest level in eight years in October 2021, based on monthly averages. Wheat values also staged a dramatic resurgence relative to maize prices since June, rising from a discount to a USD 60 per tonne premium in October. Price trends in exogenous markets, such as foreign exchange and energy, saw reversals from a year ago. A slight uptrend in the US dollar index superseded the downward momentum occurring throughout most of 2020. Crude oil prices saw a significant turnaround, doubling in price y/y from around USD 40 to above USD 80 per barrel, as tracked by the West Texas Intermediate contract. Other commodities, such as edible oil and some industrial metals, including copper and aluminum, reached ten-year highs, causing continued concern about inflationary pressures. Supply chain issues, however, which severely hampered transport of containerized goods, were far less disruptive to the bulk cargo transport sector of grains and oilseeds.

VOLUMES AND OPEN INTEREST

Trade volumes for all three commodities remained below previous record years of 2018 for wheat and soybeans and 2019 for maize, failing to attract the speculative fervour marked by other high-priced years. Open interest – the number of outstanding matched purchases and sales for each commodity contract – also reflected muted interest in grain and oilseed positioning, falling y/y by about 25 percent. Options trading, which had grown steadily over the past several years, also registered y/y declines for all three commodities.

VOLATILITY

Both implied and historical volatility levels for wheat, maize and soybeans reached considerable peaks in June and July, the months after prices attained multiyear highs. Both implied (calculated by the level of option premiums on underlying futures contracts) and historical volatility (based on 30 days of futures prices) declined thereafter, reflecting more normal levels by October. The volatility surge in maize and soybean prices seemed particularly acute following the near record low levels exhibited in 2019 and the start of 2020, a period characterized by trade tensions and the start of the COVID-19 pandemic. Maize historical volatility, for example, rose from 20 to 62, and subsequently retreated to 26 within the 2021 calendar year. In the energy sector, the Crude Oil Volatility Index, which saw a record spike during the 2020 COVID-19 pandemic to 325, has remained at relatively stable levels of 40 to 50 since the beginning of 2021, despite the near doubling of West Texas Intermediate oil prices.

FORWARD CURVES

Forward curves for maize and soybeans, and to a lesser extent wheat, exhibited a front-end relaxation from July onwards as nearby prices mostly declined. All three commodities exhibited forward curves very similar to the relatively flat configurations registered a year ago, except at considerably higher price levels. Soybeans, however, showed a slight y/y divergence: the mostly downward sloping (backwardation) soybean curve 2020 tipped towards an upward sloping (contango) curve as projections of larger ending 2021/22 stocks gained credence. The numerous uncertainties arising from the 2020 COVID-19 pandemic seemed largely resolved, although concerns about transport and rising fuel costs still lingered, embedded in the flat market forward outlook.

INVESTMENT FLOWS

Managed money, known for switching frequently between long and short positions since the first publication of the Commitment of Traders Report [2008], largely maintained its positions across wheat and maize y/y, while trimming its net long in soybeans. In the wheat market, which enjoys the highest level of speculative trading relative to domestic crop size, money managers have remained uncharacteristically neutral since late 2020, even as prices realized new highs in October 2021. In maize, managers scored large profits by betting on rising prices, but largely overstayed long positioning as maize prices tumbled. Similarly in soybeans, they remained in long positions after the considerable price drop from June onwards, only recently retreating towards a neutral stance. Nonetheless, agricultural money managers (as tracked by Barclay Hedge) showed, as of October, a positive year-to-date return of 5.4 percent, which follows on a 2020 banner year of a 14.5 percent return. Commercials held standard short positions in all three commodities throughout the calendar year. Swaps dealers (dealers in passive fund investments) showed mixed levels of activity, but continued to maintain a low profile relative to ten years ago, when their large positioning provoked considerable discussion over their effects on price discovery. The Deutsche Bank Agricultural Index Fund, the largest passive agricultural fund tracking ten futures markets, including wheat, maize and soybeans, rose from an all-time low in June 2020 of USD 13.50 to USD 19.26 in October 2021.

Ocean freight rates

International Grains Council (IGC)

OCEAN FREIGHT MARKET (MAY 2021 - OCTOBER 2021

The dry bulk freight complex exhibited strength in the past six months, building on steep gains seen in the first quarter of the calendar year. Aside from buoyant grains and oilseeds trade, markets witnessed a broad-based upturn in coal import demand against the backdrop of soaring natural gas prices. Logistical and weather-related challenges also featured, notably in China, where stricter COVID-19-related rules increased vessel turnaround times and worsened congestion at local ports. According to data from Lloyd’s List Intelligence, as of late October, around 7 percent of the global bulk fleet was waiting at Chinese ports to either load or discharge cargo.

Supply-side prospects were also supportive, as annual dry bulk fleet growth in 2022 was increasingly expected to fall short of this year’s envisaged 3.5 percent expansion due to potentially reduced new-build deliveries and heavier vessel scrapping. Still, freight markets lacked clear direction at times, as new waves of coronavirus infections in some countries contributed to supply and demand uncertainties, while there were ideas that inflated transport costs were capping fresh enquiries.

Despite the recent sharp correction in Capesize earnings and occasional setbacks in other constituent segments, the Baltic Dry Index (BDI) – which measures movements in timecharter rates across main carrier sizes – has advanced by a net 44 percent since late April.

Delivery costs on the main grains and oilseeds routes (which comprise marine fuel and other associated charges) have also surged over the period, as evidenced by movements in the IGC Grains and Oilseeds Freight Index (GOFI), a trade-weighted measure of nominal voyage rates. Reflecting rallying vessel hire prices and climbing bunker costs, the GOFI firmed by 53 percent since late April, led by subindices for northern hemisphere grains and oilseeds origins. The Index was at its highest point on record as of late October (since its introduction in January 2013), also posting a more than twofold rise y/y.

Average earnings in the Capesize segment, which mainly moves heavy raw materials, have strengthened by around one-quarter since April, although trends have been two-sided. With exporters trying to boost sales amid record-high iron ore prices, sector earnings climbed to a more-than-decade high in early May, but retreated thereafter, in part tied to a disruption to coal shipments from Colombia and talk of China’s plans to strengthen commodity price controls.

Although news of export delays in South Africa due to rail infrastructure problems and civil unrest weighed on market sentiment in July, Capesize earnings strengthened markedly during the third quarter of the year, bolstered by accelerating iron ore shipments from Australia and Brazil. Also backed by a protracted vessel backlog off China and robust demand for coal, especially in Asia, the corresponding Baltic sub-Index peaked at a more than 13-year high in early October. However, values subsequently slid amid mounting fears of a potential significant slowdown in Chinese imports of construction-related commodities due to domestic power shortages and issues in the property sector.

Despite occasional pressure from Capesize losses, average rates in the Panamax sector reached a decade high in early July. The upside was primarily driven by Asia, where coal cargoes out of Indonesia and iron ore inquiries in Western Australia were remarkable features, while demand was also good for minerals and grains from the Atlantic.

A subsequent reversal was linked to softening fundamentals in both Basins, albeit with the market showing renewed growth in August on robust fixing in the Black Sea area and Europe, including from France and the Baltics. Alongside that, improved activity was noted in the northern Pacific, where traders fixed vessels to Far East Asia. However, exporters in that region reportedly struggled to complete maize loadings due to dwindling late-season availabilities.

The start of autumn was marked by export disruption at the US Gulf due to Hurricane Ida. With many facilities closed due to damage and power outages, some shipments were diverted to other Gulf terminals and PNW ports, leading to stiffer competition for elevation capacity. Nonetheless, a steady recovery in Gulf operations spurred market sentiment more recently, as did increased bookings of spot soybean dispatches from Brazil.

Also underpinned by firm Black Sea rates and sustained coal business at key loading areas, the Panamax Baltic sub-Index reached a fresh decade high recently and was up by 64 percent compared with six months earlier.

Supramax and Handysize segments generally outperformed the wider bulk freight complex, as split cargoes from larger carriers boosted demand for smaller vessels. Reflecting near-constant increases, corresponding Baltic Indices rose by 66 percent and 86 percent, respectively during the past six months, to multiyear highs. In a similar vein to the Panamax market, brisk coal trading provided overall support, while growing interest from the exceptionally strong container sector was a notable trend. Strong enquiries for grains, fertilizer and minerals were the drivers in the Mediterranean/ Black Sea region and parts of Europe, while persistent logistical constraints on the Parana River buoyed rates in South America. Additionally, the US Gulf witnessed solid advances in freight prices, especially in recent weeks, as activity gathered pace after the earlier weather-related downturn.

Global food import bill set for an all-time high in 2021

Higher international prices and freight rates combine to propel the cost of importing food to USD 1.75 trillion in 2021

The world food import bill is forecast to reach a record high in 2021, surpassing USD 1.75 trillion, which would represent a 14 percent increase (USD 218 billion) over 2020, and up 12 percent (USD 185 billion) on the June 2021 report. The upward revision since June reflects stronger than anticipated imports by developed countries in the second and third quarter of 2021. The bulk of the foreseen growth in the global food import bill over last year is set to be cost-driven, reflecting higher price levels of internationally traded food, as well as a threefold increase in freight costs, as indicated by the Baltic Dry Index (BDI).

Developed regions are foreseen to account for nearly 60 percent of the global food import bill in 2021, recording a growth of 11 percent. Developing regions, while accounting for the remaining 40 percent of the bill, are forecast to see even higher growth in 2021, with their aggregate food import bill expanding by nearly 20 percent from 2020, marking the fastest growth on record. Record year-on-year growth is also anticipated for the most vulnerable country groups. The Least Developed Countries (LDCs) could see their food import bill rise by 16 percent, while sub-Saharan Africa (SSA) and Low-Income Food-Deficit Countries (LIFDCs) are expected to experience even faster growth, with rates in excess of 20 percent compared with 2020.

Higher import bills do not necessarily translate into more food inflows for vulnerable countries

However, the higher import bills are mainly on account of higher unit costs, rather than higher import volumes (quantities)[1]. For instance, of the additional imports of USD 25 billion by LIFDCs, more than USD 14 billion are due to higher prices and freights, whereas only USD 11 billion reflect higher volumes. Similarly, for LDCs, higher costs account for almost USD 5 billion of the total expansion of USD 7.5 billion. Meanwhile for SSA, the increase of USD 10 billion over 2020 reflects in equal parts higher prices and higher volumes.

Imports of staple foodstuffs set to drive record bills for developing regions, while international purchases of high-value products are fueling the increase in the bills of developed regions

From a food group perspective, cereals, animal fats, vegetable oils and oilseeds are forecast to see the fastest expansion, both in absolute and percentage terms, with import bills predicted to rise by USD 40.1 billion, USD 37.2 billion and USD 31.1 billion, respectively. More than 70 percent of these increases are on account of additional purchases by developing regions, which bears testimony to the need to maintain basic staple availabilities. By contrast, developed regions account for nearly 70 percent of the growth in high-value foods, notably fruits and vegetables, fishery products, and beverages. This reflects the swift economic recovery in these economies and the low-income responsiveness of consumers, even for these high-value food items.

Overall, however, the global food system has demonstrated a remarkable resilience to disruptions throughout the COVID-19 pandemic. Food trade has not only continued to expand in value and volume, but growth has even accelerated.

[1] Factor decomposition of changes of the food import bill:

Food Price Indices

The FAO Global Food Consumption Price Indices remain at multiyear highs[1]

The FAO Global Food Consumption Price Indices (FGFCPIs)[2] track monthly changes in international prices of a basket of food commodities. The FGFCPIs encompass the five food commodity groups that comprise the FAO Food Price Index (FFPI), in addition 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 the 2014–2016 base period. These weights are derived from the FAO food balance sheets (http://www.fao.org/faostat/en/#data/FBS).

Since reaching multiyear highs in May 2021, the FGFCPIs have followed a mixed trajectory, subsiding through July to then resume their upward trend. In the case of the Calorie-base FGFCPI, these tendencies placed the September 2021 value of the index at 126.9 points, essentially on par with its May 2021 level, but still 26.0 percent above its year-earlier value. The relative stability of the Calorie-base FGFCPI compared with the May 2021 level is explained by the offsetting movements of its subcomponents. Since May 2021, declines in international prices of rice and, to a lesser extent, coarse grains and vegetable oils, have tended to counterbalance increases in wheat and sugar quotations. However, contrary to tendencies prevailing in the first quarter of the year, the Calorie-base FGFCPI has tended to depart from the export value weighed FFPI in recent months, by September undershooting the FFPI value by close to 3.1 points. This is largely a reflection of the comparatively lower contribution to global energy intake of meat products, whose prices have been behind much of the recent rises captured by the FFPI.

The strength exhibited by wheat, poultry, bovine and ovine meat quotations since May 2021 has been more evident when viewing international food price developments through a global protein perspective. However, these increases have been partly mitigated by declines in export prices of other important sources of protein, such as fish, coarse grains and oilseeds. September prices of these products stood between 8 and 11 percent lower than their May 2021 values, while, for dairy products, price declines over the same period were in the order of 2.7 percent. Reflective of these trends, the Protein-base FGFCPI averaged 121.1 points in September 2021, up 0.8 percent from May 2021 and 21.4 percent above its September 2020 value.

The FAO Food Price Index at its highest since July 2011[3]

The FAO Food Price Index[1](FFPI) averaged 133.2 points in October 2021, up 3.9 points (3.0 percent) from September and 31.8 points (31.3 percent) from October 2020. After rising for three consecutive months, the FFPI in October stood at its highest level since July 2011. The latest month-on-month increase was primarily led by continued strength in the world prices of vegetable oils and cereals.

The FAO Cereal Price Index averaged 137.1 points in October, up 4.3 points (3.2 percent) from September and 25.1 points (22.4 percent) above its level one year ago. International prices of all major cereals increased month-on-month. World wheat prices continued to surge for a fifth consecutive month, rising by a further 5 percent in October, to stand 38.3 percent higher year-on-year, and reaching their highest level since November 2012. Tighter availability in global markets due to reduced harvests in major exporters, especially Canada, the Russian Federation and the United States of America, continued to put upward pressure on prices. Reduced global supplies of higher quality wheat, in particular, exacerbated the pressure, with premium grades leading the price rise. Among coarse grains, international barley prices increased the most in October, underpinned by strong demand, reduced production prospects and price increases in other markets. World maize prices also firmed, supported by gains in energy markets. However, increased seasonal supplies and easing of port disruptions in the United States of America limited the increase in maize values. International rice prices also edged up further in October, although the onset of main crop harvests in various Asian suppliers capped the increases.

The FAO Vegetable Oil Price Index averaged 184.8 points in October, up 16.3 points (or 9.6 percent) month-on-month and marking an all-time high. The increase was driven by firmer price quotations for palm, soy, sunflower and rapeseed oils. International palm oil prices increased for a fourth consecutive month in October, largely underpinned by persisting concerns over subdued output in Malaysia due to ongoing migrant labour shortages. In the meantime, world prices of palm, soy and sunflower oils received support from reviving global import demand, particularly from India that lowered import tariffs further on edible oils. As for rapeseed oil, the continued strength in international values chiefly stemmed from protracted global supply-demand tightness. Noticeably, rising crude oil prices also lent support to vegetable oil values.

The FAO Dairy Price Index averaged 120.7 points in October, up 2.6 points (2.2 percent) from September and 16.2 points (15.5 percent) above its level in the corresponding month a year ago. In October, international price quotations for butter, skim milk powder and whole milk powder rose steeply for the second consecutive month, underpinned by firm global import demand amid buyers’ efforts to secure supplies to build stocks. Seasonally low milk supplies and tight inventories in Europe and a slower start than earlier anticipated to the new milk production season in Oceania also lent support to world milk prices. By contrast, cheese prices remained largely stable, as supplies from major producers were adequate to meet global import demand.

The FAO Meat Price Index[4] averaged 112.1 points in October, down 0.8 points (0.7 percent ) from its revised value in September, marking the third monthly decline, though still 20.3 points (22.1 percent) above its value in the corresponding month last year. In October, international quotations for pig meat fell, principally underpinned by reduced purchases from China. Bovine meat prices also fell, reflecting a sharp decline in quotations for supplies from Brazil amid market uncertainty surrounding import suspensions by its leading trading partners over mad-cow disease concerns. By contrast, poultry meat quotations rose, boosted by high global demand, while production expansions remained weak due to high feed costs and avian flu outbreaks, especially in Europe. World ovine meat prices also increased slightly on continued supply limitations from Oceania due to high demand for flock rebuilding.

The FAO Sugar Price Index averaged 119.1 points in October, down 2.1 points (1.8 percent) from September, marking the first decline after six consecutive monthly increases. International sugar quotations remained, however, more than 40 percent above their levels in the same month of last year, mainly underpinned by concerns over reduced output prospects in Brazil. The recent monthly decline in international sugar prices was triggered by limited global import demand and prospects of large export supplies from India and Thailand. The weakening of the Brazilian Real against the US dollar also contributed to lowering world sugar prices in October. Higher ethanol prices in Brazil, however, prevented more substantial sugar price declines.

[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.