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FAO Food Price Index up Slightly

05 October 2012

GLOBAL - Dairy, poultry and pork have helped to push the FAO Food Price Index up slightly in September 2012 by 1.4 per cent, or three points, from its level in August, following two months of stability.

The Index, based on the prices of a basket of internationally traded food commodities, climbed to 216 points in September from 213 points in August. The rise reflected strengthening dairy and meat prices and more contained increases for cereals. Prices of sugar and oils, on the other hand, fell.

The FAO Index currently stands 22 points below its peak of 238 points in February 2011, and 9 points below its level of 225 points in September 2011.

The FAO Cereal Price Index averaged 263 points in September, 1.0 per cent, or three points up from August, as gains in wheat and rice prices offset a decline in maize. While shrinking maize export availabilities and high maize prices have been leading cereal markets in recent months, tightening wheat supplies have also become a concern.

Nonetheless, international wheat prices fell towards the second half of the month, following the announcement by the Russian Federation that it would not impose restrictions on exports.

Meat Prices

The FAO Meat Price Index averaged 175 points in September, up 2.1 per cent, or four points, from August. The grain-intensive pig and poultry sectors recorded particularly strong gains, increasing by six per cent and two per cent respectively. The FAO Dairy Price Index averaged 188 points in September, up seven per cent, or 12 points, from August, representing the sharpest monthly increase since January 2011. All the five dairy products monitored saw prices rise. World demand for milk products remains firm which, combined with increasing feed costs, is underpinning world prices.

Word Cereal Harvests Revised Down

Meanwhile, FAO's latest forecasts confirm a decline in global cereal production this year from the record registered in 2011. But record harvests are expected in Low-Income Food-Deficit Countries (LIFDCs).

World cereal production in 2012 is now forecast at 2,286 million tonnes, slightly down from the 2,295 million tonnes estimated in September, according to the new issue of FAO's quarterly Crop Prospects and Food Situation report.

At the currently forecast level, world cereal production in 2012 would be 2.6 per cent down from the previous year's record crop but close to the second largest in 2008. The overall decrease comprises a 5.2 per cent reduction in wheat production and a 2.3 per cent reduction for coarse grains.

This is expected to result in a significant reduction in world cereal stocks by the close of seasons in 2013 (down by 28 million tonnes to 499 million tonnes), even with world demand sliding as a result of high prices. Production has been affected by drought in key producing areas such as the United States, Europe and Central Asia.

However, very early indications for wheat crops in 2013 are encouraging, with winter wheat planting in the northern hemisphere already well advanced under generally favourable weather conditions.

Record Harvests Expected in LIFDCs

Crop Prospects and Food Situation focuses on developments affecting the food situation of developing countries, and LIFDCs in particular.

Its forecast for the LIFDCs' 2012 aggregate cereal production points to a record level of 534 million tonnes, up 1.7 per cent from the good harvest of 2011.

Excluding India, the largest country in this group which is expected to see a stagnant total cereal harvest this year, the aggregate cereal output of the remaining 65 LIFDCs is estimated to expand by 2.9 per cent.

Nonetheless, currently high prices are expected to drive the 2012/13 cereal import bill for LIFDCs to a record $36.5 billion, compared to $35.2 billion in 2011/12.

In North Africa, wheat production declined sharply in Morocco as a result of unfavourable weather conditions. As the sub-region is highly dependent on wheat imports, the anticipated larger import bills, combined with staple food subsidies, would result in additional budgetary pressures.

In West Africa, notwithstanding favourable harvest prospects in the region, the food security situation in the Sahel is still of concern with close to 19 million people in need of continued assistance largely due to the lingering effects of last year's poor harvests.

A desert locust threat also remains a serious concern.

Improvement in East Africa

In East Africa, the overall food security situation has started to improve with the beginning of the harvest season in several countries, marked by declining food prices and improved livestock productivity due to enhanced rains. However, about 13.4 million people in the Horn of Africa are still in need of humanitarian assistance.

In Southern Africa, a prolonged dry spell caused a drop in overall cereal production in 2012, with several countries registering significant declines, including Lesotho. The lower cereal harvests have contributed to an increase in the number of food insecure.

In East Asia, the 2012 aggregate cereal harvest is estimated to exceed the record harvest of 2011. However, delayed monsoon and erratic weather conditions in some countries may dampen the final outcome. Improved harvests are expected to reduce overall cereal imports.

Syria a Major Concern

In West Asia, deteriorating food security amid civil unrest continues to be a major concern in Syria and Yemen.

In Syria, the number of people in need of urgent food assistance has increased to 1.5 million and could double by the end of the year if the current situation does not improve.

In Yemen, ten million people, or nearly half of the population, are estimated to be in need of emergency food assistance as a result of high levels of poverty, prolonged conflict and high food and fuel prices. But in Afghanistan, a bumper wheat harvest has been gathered.

In the CIS countries, cereal output has sharply dropped from last year's levels. Lower export availabilities in the region have resulted in higher regional prices and strengthened domestic prices of main staple wheat flour in importing countries.

Crop Prospects and Food Situation listed 35 countries, 28 of them in Africa, as affected by food insecurity and requiring external assistance for food.

TheFishSite News Desk



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