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Food Outlook Global Market Analysis
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TABLE OF CONTENTS Market summaries
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International prices of most agricultural commodities have increased in recent months, some sharply. The FAO Food Price index has gained 34 points since the previous Food Outlook report in June, averaging 197 points in October, only 16 points short from its peak in June 2008. The upward movements of prices were connected with several factors, the most important of which were a worsening of the outlook for crops in key producing countries, which is likely to require large draw downs of stocks and result in tighter global supply and demand balances in 2010/11. Another leading factor has been the weakening of the United States Dollar (US Dollar) from mid-September, which continues to sustain the prices of nearly all agricultural and non-agricultural traded commodities. The increase in international prices of food commodities, all of which accruing in the second half of 2010, is boosting the overall food import bill in 2010 closer to the peak reached in 2008.
Market assessments Cereals Wheat Coarse grains Rice Cassava Oilseeds, oils and meals Sugar Meat and meat products Milk and milk products Fish and fishery products
The pressure on prices to rise was first felt in the cereal market, most notably for wheat and barley, in August. This prompted FAO to call for an extraordinary meeting on 24 September 2010 to discuss the underlying causes and possible remedies. The meeting clearly identified the importance of reliable and upto-date information on crop supply and demand to cope with unexpected developments in world markets. More transparency and a better understanding of the role of commodity futures markets and government responses were also viewed as necessary to address price volatility. The full report of the meeting is included in the Special Feature section of this issue of Food Outlook.
Special features 59-67 Ŷ Wheat Rust: A growing threat to world food security 59 Ŷ Strengthening market signals for global price discovery 61 Ŷ Report of the Extraordinary Intersessional Meeting of the Intergovernmental Groups on Grains and Rice 66
Amid fears of a repeat of the price surge experienced in 2008, FAO expects supplies of major food crops in 2010/11 to be more adequate than two years ago, mainly because of much larger reserves. The fact that supplies of rice, wheat and white maize, the most important staple food crops in many vulnerable countries, are also more ample lessens the risk of a repeat of the 2007/08 crisis in the current season. Nonetheless, following a series of unexpected downward revisions to crop forecasts in several major producing countries, world prices have risen alarmingly and at a much faster pace than in 2007/08.
Statistical appendix tables 68-103
Attention is now turning to plantings for the next (2011/12) marketing season. Given the expectation of falling global inventories, the size of next year’s crops will be critical in setting the tone for stability in international markets. For major cereals, production must expand substantially to meet utilization and to reconstitute world reserves and farmers are likely to respond to the prevailing strong prices by expanding plantings. Cereals, however, may not be the only crops farmers will be trying to produce more of, as rising prices have also made other commodities attractive to grow, from soybeans to sugar and cotton. This could limit individual crop production responses to levels that would be insufficient to alleviate market tightness. Against this backdrop, consumers may have little choice but to pay higher prices for their food. With the pressure on world prices of most commodities not abating, the international community must remain vigilant against further supply shocks in 2011 and be prepared.
GIEWS
11-58 10 11 17 22 28 34 41 45 49 52
Market indicators 104-116 Developments in the futures 104 Ocean freight rates 109 Implied volatilities 110 Food import bills 112 The FAO price indices 114 FAO Food Price Indices (October 2009 - October 2010) 2002-2004=100 380
Sugar
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Cereals
Dairy 170
Oils & Fats 100
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global information and early warning system on food and agriculture
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