As Global Food Prices Rise Sharply, FAO Says Nigeria, 44 Other Countries Need External Food Assistance

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Nigeria and 44 other countries are in need of external assistance for food as the Food and Agriculture Organisation (FAO) Food Price Index rose sharply in November.

The other countries are: Afghanistan, Bangladesh, Burkina Faso, Burundi, Cabo Verde, Cameroon, Central African Republic, Chad, Congo, Democratic People’s Republic of Korea, Democratic Republic of Congo, Djibouti, Eritrea, Eswatini, Ethiopia, and Guinea.

Others include Haiti, Iraq, Kenya, Lebanon, Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Namibia, Niger, Pakistan, Senegal, Sierra Leone, Somalia, South Sudan, Sudan, Syrian Arab Republic, United Republic of Tanzania, Uganda, Venezuela, Yemen, Zambia and Zimbabwe.

Forty-five countries, 34 of them in Africa, continue to be in need of external assistance for food, according to the quarterly Crop Prospects and Food Situation report, published on Thursday by FAO’s Markets and Trade division.

According to the report, aggregate cereal production by the 51 Low-Income Food-Deficit Countries is anticipated to grow this year to 496.3 million tonnes – some seven percent higher than the last five-year average – thanks to large outputs in Southern Africa and Far East Asia.

However, cereal import requirements in the 2020/21 marketing year are estimated to rise to 73.9 million tonnes, mostly reflecting increased needs among Sub-Saharan African countries.

The report notes that the presence of La Niña heightens the risk of above-average rainfall in Southern Africa and East Asia, while parts of Near East Asia and East Africa are expecting reduced rains, conditions that may result in adverse production shocks.

FAO Food Price Index, however, averaged 105.0 points in November, up 3.9 percent from October and 6.5 percent higher than its value a year earlier.

The monthly increase was the sharpest since July 2012, putting the index at its highest level since December 2014, FAO said.

The Index is a measure of the monthly change in international prices of a basket of food commodities. It consists of the average of five commodity group price indices weighted by the average export shares of each of the groups over 2014-2016.

A feature article published in the June 2020 edition of the Food Outlook presents the revision of the base period for the calculation of the food price index and the expansion of its price coverage, to be introduced from July 2020.

A November 2013 article contains technical background on the previous construction of the food price index.

Monthly release dates for 2020: January 9, February 6, March 5, April 2, May 7, June 4, July 2, August 6, September 3, October 8, November 5, December 3.

The November increase did not only mark the biggest month-on-month rise since July 2012, but it also resulted in the index reaching its highest level since December 2014.

All sub-indices of the index registered gains in November, with the vegetable oil sub-index rising the most, followed by those of sugar, cereals, dairy and meat.

The FAO Cereal Price Index averaged 114.4 points in November, up 2.7 points (2.5 percent) from October and as much as 19.0 points (19.9 percent) higher than its November 2019 value. The latest increase marked the fifth consecutive monthly rise in the value of the index.

Wheat export prices continued to edge upwards in November, largely on a tightening outlook for export supplies and reduced harvest prospects in Argentina.

Maize prices also rose further in November, supported by continued large maize purchases by China, amidst further cuts to this year’s production estimates in the United States of America and Ukraine, both major exporters.

Among other coarse grains, firm demand continued to push up feed barley and sorghum prices. By contrast, international rice prices held steady in November, as support provided by tight availabilities and currency movements in selected South-East Asian exporters was offset by limited demand and harvest pressure in other major origins.

The FAO Vegetable Oil Price Index averaged 121.9 points in November, gaining a stunning 15.4 points (or 14.5 percent) month-on-month and reaching its highest level since March 2014. The rally mainly reflects additional spikes in palm oil prices, combined with further increases in soy, rapeseed and sunflower seed oil values.

International palm oil price quotations rose for a sixth consecutive month, underpinned by sharp contractions in world inventory levels, as smaller than customary output in major producing countries coincided with firm global import demand.

As for soyoil, prices firmed amid subdued export availabilities in South America and upbeat import demand, notably from India. Likewise, rapeseed and sunflowerseed oil values strengthened further on limited supplies. Meanwhile, firming petroleum prices also lent support to vegetable oil prices.

The FAO Dairy Price Index averaged 105.3 points in November, up 0.9 points (0.9 percent) month-on-month, continuing the upward trend registered in recent months and nearing an 18-month record high.

The latest rise was largely driven by firmer butter and cheese prices, reflecting steady increases in global import demand and a surge in retail sales in Europe coinciding with the region’s milk production reaching seasonal lows.

By contrast, following six months of consecutive increases, skim milk powder prices dropped due to a slower pace of purchases in Asia, especially China, coupled with increased global export availabilities, including India’s powder surpluses.

Despite a rise in demand for spot supplies from the Middle East and North Africa, especially Algeria, smaller purchases by China weighed on whole milk powder price quotations.

The FAO Meat Price Index averaged 91.9 points in November, up 0.8 points (0.9 percent) month-on-month, marking the first increase since January, but still 14.6 points (13.7 percent) below its value in the corresponding month last year.

International bovine meat prices increased, after four months of consecutive declines, due to robust demand from China and tight supplies from Oceania. Pig meat prices recovered slightly, underpinned by a fast pace of purchases by China amidst low availability of slaughter-ready animals in Brazil, while Germany and Poland remained banned from exporting to the Asian markets over African swine fever outbreaks.

Ovine meat prices also rose, mainly because of firm import demand from China and low supplies from Oceania. By contrast, poultry meat quotations fell, reflecting increased shipments from leading producers amidst subdued international import demand.

The FAO Sugar price index averaged 87.5 points in November, up 2.8 points (3.3 percent) from October, representing the second consecutive monthly increase. The increase in international sugar quotations in November was mainly underpinned by firmer new data supporting earlier expectations of a global production shortfall in the 2020/21 marketing season.

These expectations result from weaker crop prospects in the EU, Thailand and the Russian Federation, as unfavourable weather conditions had negatively impacted yields. Sugar prices also received further support in the aftermath of hurricane-damaged sugarcane crops and infrastructure in Nicaragua, Honduras and Guatemala.

*Effective July 2020, the price coverage of the FFPI has been expanded and its base period revised to 2014-2016. For more details on this revision, please see the feature article of the June 2020 issue of the Food Outlook.

The FAO Food Price Index tracks changes in the international prices of the most globally traded food commodities. All of its sub-indices rose in November.

The FAO Vegetable Oil Price Index gained a stunning 14.5 percent in the month, led by an ongoing rally in palm oil prices linked to sharp contractions in world inventory levels.

The FAO Cereal Price Index rose 2.5 percent from October and averaged 19.9 percent higher than in November 2019. Wheat export prices rose, linked to reduced harvest prospects in Argentina, as did maize prices on account of lower output expectations in the United States of America and Ukraine as well as large purchases by China. International rice prices held steady during the month.

The FAO Sugar Price Index rose 3.3 percent month-on-month amid growing expectations of a global production shortfall in the upcoming marketing season as unfavourable weather conditions drove weaker crop prospects in the European Union, the Russian Federation and Thailand.

The FAO Dairy Price Index increased 0.9 percent to near an 18-month high, driven largely by firmer butter and cheese prices and surging retail sales in Europe during a seasonal low period for milk production in the region.

The FAO Meat Price Index rose 0.9 percent from October, but it is still 13.7 percent below its value a year ago. Prices of bovine, ovine and pig meats all increased, while those of poultry meat declined.

FAO has further lowered its forecast for global cereal production in 2020, which now stands at 2 742 million tonnes – still a record high and 1.3 percent above the previous year’s outturn.

The new forecasts released today with FAO’s Cereal Supply and Demand Brief point to world coarse grains production of 1 470 million tonnes, wheat production of 761.7 million tonnes, and rice output of 508.4 million tonnes.

Looking ahead, planting of the northern hemisphere’s winter wheat crop is underway and remunerative prices are expected to increase sowings in several major producing countries. However, crop conditions in the United States of America are moderately poorer due to dry weather conditions, influenced by the prevailing La Niña weather phenomenon.

World cereal utilization in 2020/21 is now forecast to rise to 2 744 million tonnes, up 1.9 percent from 2019/20, led by expectations of increasing feed use of maize and sorghum in China as well as a rise in the production of maize-based ethanol in Brazil and the U.S.A.

Worldwide cereal stocks by the close of seasons in 2021 are predicted to decline to 866.4 million tonnes, translating into a global stock-to-use ratio of 30.7 percent – which FAO notes is a five-year low but still a relatively comfortable level.

World trade in cereals in 2020/21 is forecast to rise 3.4 percent from the previous year to 454.6 million tonnes, driven primarily by a faster than expected pace in maize sales by the U.S.A. and continued strong purchases from China.

The impact of the COVID-19 pandemic, particularly in terms of income losses, is an important driver of the levels of global food insecurity.

The pandemic is exacerbating and intensifying already fragile conditions caused by conflicts, pests and weather shocks, including recent hurricanes in Central America and floods in Africa.

 

 

 

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