5 Months After, Global Food Prices Soar As FAO Sees World Meat Decline  

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For the first time in five months, global food prices rose in October as international quotations for sugar and key cereals increased significantly, according to the Food and Agriculture Organisation of the United Nations (FAO).

But, for the first time in more than two decades, the UN food agency says the world meat production is expected to decline in 2019 as the African Swine Fever outbreak in China decimates pig herds.

Production of bovine, ovine, poultry and pig meats is forecast to total 335 million tonnes in carcass weight equivalent, 1.0 percent lower than the previous year, according to the Food Outlook published on Thursday.

The drop is driven by an anticipated contraction of at least 20 percent for pigmeat output in China, which usually accounts for close to half the world’s production. Poultry output in China, by contrast, had been rapidly ramped up and is expected to grow by 17 percent year-on-year, containing the country’s total meat output decline to 8 percent.

Pigmeat typically accounts for more than a third of worldwide meat output, poultry for 39 percent and bovine meat for 21 percent.

Global production of poultry – which accounts for a larger share of all meat than pigmeat – as well as that of bovine and ovine meat is expected to grow this year, with increases anticipated Argentina, Brazil, the European Union and the United States of America, Global trade in meat products is forecast to grow by 6.7 percent this year, compared to a slowing trend observed for many food commodities.

Food Outlook assesses market and production trends for a wide array of food commodities, including cereals, fish, sugar, oilcrops and milk as well as meat. The current edition also has a special report on the threat to global banana markets posed by Fusarium Wilt Tropical Race 4 (TR4), which was recently detected for the first time in Latin America.

Worldwide wheat and maize production is expected to increase in 2019, while that for rice to dip below the previous year’s record. On the consumption side, per capita food use of all three cereals is forecast to keep pace and even exceed population growth, according to FAO.

Global oilseed production, meanwhile, is anticipated to contract for the first time in three years, largely due to expectations of a contraction in soybean plantings and lower yields in the United States of America as well as weaker prospects for rapeseed in Canada and the European Union.

FAO also expects world sugar production to drop by 2.8 percent in the year ahead, even as global consumption expands.

Milk production is expected to expand by 1.4 percent, with dairy herd expansions in India and Pakistan accounting for almost 90 percent of the increased volume.

Global fish production is foreseen to remain unchanged from 2018, with a 3.4 percent decline in capture fisheries offset by a 3.9 percent increase in aquaculture harvests. Trade in fish is predicted to drop, although imports to China are expected to increase substantially.

The Food Outlook also assesses the hypothetical market risks of the TR4 disease on the $45 billion global production market for bananas and plantains. The analysis is presented to provide indications useful for informing policy decisions rather than offering forecasts.

With conservative assumptions – including that the fungus does not spread beyond Colombia in Latin America – TR4’s gradual spread is likely to take its greatest toll in Asia, and would entail a 2.0 percent drop in global output, the loss of 240 000 direct jobs and induce a 9.2 percent rise in the global reference price for bananas by 2028.

The spread of TR4 evokes the ghost of damage done by an earlier Fusarium wilt variety that devastated the Gros Michel banana variety in the 1950s, triggering billions of dollars of trade losses and leading to its replacement by the Cavendish. Fusarium wilt fungi are particularly severe as they remain in the soil for decades, leading farms to be abandoned and catalyzing pressure to expand banana cultivation in new unaffected lands.

The TR4 strain poses particularly elevated risks as it affects varieties beyond the Cavendish, which accounts for most of the fast-growing world trade in the fruit but not of local consumption. Bananas can provide up to 25 percent of daily calorie intake in rural areas of some countries, such as Angola and Rwanda.

The wide-ranging potential ramifications of TR4 spreading necessitates “elevated vigilance” at production sites around the world and investment in research – by exporting countries and by developed countries that import some of the 100 billion bananas eaten each year – on preventing and mitigating the disease, says Sabine Altendorf, FAO’s tropical fruit economist.

However, the FAO Food Price Index, averaged 172.7 points in October, some 1.7 percent higher than the previous month and 6.0 percent higher than during October 2018.

The measure, which tracks monthly changes in the international prices of commonly traded food commodities, was released by FAO.

The FAO Cereal Price Index rose by 4.2 percent during the month, as wheat and maize export prices moved up sharply on the back of reduced crop prospects in several major producing countries and robust trade activity. By contrast, rice prices slipped, driven by subdued demand and prospects of an abundant basmati harvest.

The FAO Sugar Price Index increased by 5.8 percent in October amid expectations of much tighter supplies in the year ahead, due mainly to anticipated large reductions in sugar output in India and Thailand, the world’s largest sugar producer and largest sugar exporter, respectively.

The FAO Vegetable Oil Price index also rose, increasing 0.5 percent to reach its highest level in more than a year. Palm oil quotations nudged up by new biodiesel mandates in Indonesia as well as firm import demand and expected slowdown in output growth, while those for sunflower oil fell in the wake of bumper harvests in the Black Sea region.

The FAO Meat Price Index rose 0.9 percent, driven by higher import demand for bovine and ovine meats, especially from China. Pig meat prices rose moderately, while those of poultry meat declined due to increased export availabilities.

The FAO Dairy Price Index,declined by 0.7 percent in October, as notably lower price quotations for cheese more than offset increases in those for skim and whole milk powders.

FAO also lowered its forecast for global cereal production this year, linked to reduced prospects for coarse grains and wheat. Still, year-on-year, world cereal output is set to grow by 1.8 percent from 2018, according to the Cereal Supply and Demand Brief, also released today.

Specifically, worldwide coarse grain production in 2019 is expected to increase by 1.2 percent to 1 425 million tonnes, while that of wheat is anticipated to grow by 4.5 percent to a record level of 765 million tonnes. The forecast for global rice production is pegged at 513.4 million tonnes, slightly below last year’s level.

Looking to 2020, rainfall shortages may hamper the sowing of crops, including wheat in the European Union and maize in South America. The weather outlook is generally favourable for crop plantings in the Russian Federation and South Africa.

World cereal utilisation in 2019/20 is forecast at 2 709 million tonnes, a record high, while world cereal stocks by the end of the 2020 seasons are seen at 849.5 million tonnes, down 1.5 percent from their opening levels.

FAO anticipates the global cereal stock-to-use ratio declining modestly to 30.4 percent, still judged a comfortable level. Wheat inventories are expected to rise, while those of maize and rice to decline.

World trade in cereals in 2019 is expected to rise 0.7 percent to 415 million tonnes.

FAO will present a more comprehensive picture of market trends for the main agricultural food commodities later today, when the semiannual Food Outlook report is released.

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