Good harvests and ample stockpiles continue to drive international food prices down

Biannual FAO Food Outlook report and new Food Price Index released

Rome—Food markets are more stable and prices for most agricultural commodities are sharply lower than they have been in recent years, according to the latest edition of FAO's biannual Food Outlook report and a new update to the Organization's monthly Food Price Index, both out today.

Bumper harvests and abundant stockpiles are key factors helping drive down international cereal prices, according to the report.

World wheat production in 2014 is forecast to reach a new record, it says.

For coarse grains, prospects for near-record production levels, combined with already-high inventories point to a very comfortable world supply and demand balance in 2014/15, especially for maize.

While rice outputs could decline slightly this year, stockpiles remain "huge" and are sufficient to cover over one-third of projected consumption during the 2015-16 period.

All told, world cereal production in 2014 is anticipated to reach 2 523 million tons (2.5 billion tons) — an upward revision of 65 million tons from FAO's initial forecast in May. World cereal stocks should hit their highest level in 15 years by the end of the cropping season in 2015.

Global output of oilseeds is also forecast to exceed last season's record due to further expansion of soybean production.

Meanwhile, world production of cassava looks to be on track to achieving another record high, driven by sustained growth in Africa, where the tuber is a strategic crop for food security and poverty alleviation.

Today's Food Outlook anticipates that world sugar production will increase in 2015-16, as well.

Meat production is set to grow moderately in 2014, but not enough to ease prices from their current high levels, while milk production continues to grow steadily in many countries.

Production of fish is also on the rise, driven largely by aquaculture and less-than-expected El Niño impacts.

Price drops across the board – almost

The FAO Food Price Index (FPI), also released today, has registered its sixth consecutive monthly drop — the longest period of continuous decline in the value of the index since the late 1990s — averaging 191.5 points in September 2014.

Among the FPI sub-indices, sugar and dairy fell most sharply, followed by cereals and oils, while meat remained firm.

Although meat prices remain high they could be stabilizing: the September Meat Price index remains 22 points up versus the same time last year, a historic high, but registered only a slight increase over August (0.3 of a point) after months of steady hikes.

High meat prices and large trade volumes for products in the animal protein category, including meat, dairy and fish, mean that the global food import bill — that is, the aggregate amount that all countries spend on imported foodstuffs — will surpass $1 trillion again this year, for the fifth year in a row.

The FAO FPI is a trade-weighted index that measures prices of five major food commodities on international markets.

While price trends for these commodities at the macro level are a useful indicator of global trends and can signal when consumer food prices might be at risk, they are not always directly mirrored in national, regional and local markets.

Regional differences highlighted in second report

To help spot food price spikes affecting consumers in the developing world, particularly in low-income food-deficit countries (LIFDCs), FAO recently launched a new website that reports abnormally high prices of staple foods in markets in 85 different countries.

Additionally, the Organization produces a quarterly report, Crop Prospects and Food Situation that focuses on developments affecting food security in developing countries and LIFDCs.

The latest edition, published today alongside Food Outlook and the October FPI, highlights a number of hot-spots of particular concern.

The Ebola virus disease outbreak in Guinea, Liberia and Sierra Leone has disrupted markets, farming activities and livelihoods, seriously affecting the food security of large numbers of people, it says. And irregular rains in several areas of the Sahelian belt will result in mixed production prospects.

Food crop production in the Central African Republic is up from 2013's sharply reduced output, but still remains well below average due to the impact of widespread civil insecurity, the report adds.

In Eastern Africa, the overall food security situation is improving as harvesting has started in several countries. But while food prices in the region are generally stable or declining, they are at record high levels in Somalia and the Sudan.

Meanwhile, drought conditions in Central America have significantly reduced the 2014 main first season harvest in key producing countries. 

Drought conditions have also been a problem in the Near East, leading to a below-average cereal harvest for the region, while the conflicts in Syria and Iraq continue to significantly degrade food security.

Caps

Global wheat production in 2014 is projected to reach a new record.