Global food prices: will the upward trend continue?
International prices of most agricultural commodities have started to decline, but they are unlikely to return to the low price levels of previous years, according to Food Outlook – a production by the UN Food and Agriculture Organisation.
“Food is no longer the cheap commodity that it once was. Rising food prices are bound to worsen the already unacceptable level of food deprivation suffered by 854 million people,” said FAO Assistant Director-General Hafez Ghanem. Despite a favourable global production outlook, the expected price decline in many basic agricultural commodities during the new 2008/2009 season is likely to be limited, because of the need to improve stocks and an increase in utilisation. The FAO believe that more than one good season is required to replenish stocks and reduce price volatility.
Food prices are, on average, 53 per cent higher in the first four months of 2008 when compared to the same period a year ago, despite the FAO food price index remaining stable since February.
So where are food prices heading now?
FAO’s latest forecast for world cereal production points to a record output this year. Among major cereals, the tight wheat supply is likely to improve most, given the prospects for better harvests in 2008. In spite of the record crops, price volatility is likely to remain high due to tight market conditions.
Oils and oilseeds
The rise in international prices of oilseeds and oilseed products has accelerated in 2007/08, with values climbing to new record levels in March 2008. World markets have tightened considerably as reduced supply growth for oils and a drop in meal supplies are coinciding with further expansion in demand. First forecasts for the 2008/09 season point towards a strong recovery in global oilseed production, and the resulting output should be sufficient to meet global demand. Downward pressure on prices could result.
Generally favourable growing conditions led to a record world sugar production in 2007/08 and although world sugar consumption is foreseen to increase at a sustained rate, it will not be enough to absorb an expected second consecutive global supply surplus. Consequently, international sugar prices are likely to remain under downward pressure.
Global meat output is expected to grow in 2008 despite high input costs, with prices unlikely to rise much higher as a result.
Global milk production is forecast to grow strongly in 2008 in response to the historically high milk prices seen over the past twelve months. However, the FAO claims there is uncertainty as to where dairy markets will head over the coming months.
Food Outlook forecasts that aquaculture production growth will continue this year with the historic milestone of reaching the same level as the expected capture fisheries likely to be achieved in 2008. Prices for wild species from capture fisheries are trending upwards, but the price increase for farmed species is expected to be more moderate.
Worldwide potato production could expand over the next decade between 2 and 3 percent annually – with developing countries being the drivers of growth. In China, the world’s biggest potato producer, authorities are reviewing proposals for the potato to become one of the country’s major food crops, while India is considering plans to double potato output in the next five to ten years. Prices are anticipated to remain at moderate levels.