Global cereal prices are expected to remain at high levels for
the coming year due largely to problems in production in several
major exporting countries and very low world stocks, warns the
latest Food Outlook report issued this week by FAO in London.
FAO expects many countries will pay more for importing
cereals from world markets than they did in previous years,
even though they are expected to import less. Record freight
rates and high export prices are the main reasons for the
increase in their import bills.
FAO’s latest analysis suggests that international
cereal prices are fuelling domestic food inflation in many
parts of the world. For most cereals, says the report, “supplies
are much tighter than in recent years while demand is rising
for food as well as feed and industrial use. Stocks, which
were already low at the start of the season, are likely
to remain equally low because global cereal production
may only be sufficient to meet expected world utilization.” The
report says that while agricultural commodity prices rose
sharply in 2006, in some cases they are soaring at an even
faster pace this year.
Prices increasing for most all food commodities
According to Food Outlook, the current state of agricultural
markets is distinguished by increasing world prices of
nearly all major food and feed commodities.
High international prices for food crops such as grains
continue to ripple through the food supply chain, contributing
to a rise in retail prices of such basic foods as bread
or pasta, meat and milk.
According to the FAO analysis, the world has rarely felt “such
a widespread and commonly shared concern about food price
inflation, a fear which is fuelling debates about the future
direction of agricultural commodity prices in importing
as well as exporting countries, be they rich or poor.”
The growing impact of biofuels on food availability and
Soaring petroleum prices have driven up prices for agricultural
crops by raising input costs and by boosting demand for
those crops used to produce biofuels. Food Outlook warns
that the combination of high petroleum prices and the desire
to address environmental issues is likely to boost demand
for feedstocks, especially sugar, maize, rapeseed, soybean,
palm oil and other oilcrops as well as wheat for years
Rising cost of shipping adds to food costs
Increased fuel costs, stretched shipping capacity, port
congestion and longer trade routes have pushed up shipping
costs, making freight rates a more important factor in
agricultural markets than in the past. According to Food
Outlook, record freight prices not only increased the cost
of transportation, they have also changed the geographical
pattern of trade, as many countries are sourcing their
imports from suppliers closer to home to save on transport
Weak US dollar lessens impact of rising commodity prices
The fact that the dollar depreciated sharply against all
major currencies lessened the real impact of the rise in
world prices in non-dollar economies. However, countries
whose currencies did not strengthen will bear the full
brunt of the rise in US dollar-denominated commodity prices.
According to Food Outlook all indications point to more
wheat being planted around the world for harvesting next
year. A strong expansion in wheat production, assuming
normal growth in consumption, is bound to bring down wheat
On other commodities Food Outlook has this to say: Maize
prices hit a 10-year high in February 2007 but have fallen
considerably since. Supply constraints in the face of brisk
demand for biofuels triggered the initial price hike in
maize prices. However, reacting to a massive expansion
in plantings and expectations of a record crop this year,
prices have started to come down, although by September
they had still remained 30 percent above last year.
Prices of barley, another important cereal, also soared
lately. Supply problems in Australia and Ukraine, tighter
availability of maize and other feed grains compounded
with strong import demand have contributed to the doubling
of prices of both feed and malting barley in recent weeks.
Among all agricultural commodities, dairy products have
witnessed the largest gains compared with last year, ranging
from 80 percent to more than 200 percent.
High feed prices have also increased the cost of animal
production and resulted in an increase in livestock prices.
Poultry is up most, by at least 10 percent. Growth in consumption
and gradual reductions in trade restrictions are contributing
to the increase in meat and poultry prices this season,
says Food Outlook.
Food Outlook also has a special chapter on the International
Year of the Potato 2008, explaining the importance of this
now ubiquitous food.
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