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LATEST NEWS UPDATES | Global food output to rise to record high: FAO

Global food output to rise to record high: FAO

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published Published on Jun 4, 2010   modified Modified on Jun 4, 2010

World cereal output is expected to rise this year to near-record highs, swelling overall supplies and putting pressure on already weakened prices, the Food and Agriculture Organisation (FAO) said on Thursday.

The global wheat output is expected to fall for the third consecutive year, but at 676.5 million tonnes, it would still be close to record levels, the UN’s food agency said, revising its earlier forecast for 2010.

Overall cereal output is expected to rise 1.2 per cent to 2.280 billion tonnes on the back of a 1.4 per cent gain in coarse grain output, FAO said in its Food Outlook.

A 0.9 per cent fall in wheat output this year was expected to be almost entirely offset by larger opening stocks, but stocks were expected to drop one per cent to 194 million tonnes at the end of the season in 2011, the agency said.

“Against the backdrop of an economic slowdown in many countries, this generally favourable wheat supply outlook is likely to maintain downward pressure on international prices,” FAO said in its report.

Competition between major producers is seen heating up as all are expected to have large supplies, but European exporters may benefit from a weaker euro against the US dollar, the Rome-based agency said.

However, a large surplus in the Black Sea region was likely to put a lid on a surge in EU exports, it said.

Maize output is expected to rise to 835 million tonnes from 815 million tonnes with record crops likely in the US, the world’s biggest producer and exporter. Maize prices are expected to come under more pressure from brimming supplies of alternative feed, including wheat, meals and distilled grains.

Global sugar output was expected to rise 3.5 per cent to 156.3 million tonnes in the 2009-10 marketing year, the report said, but forecasted a deficit of 6.3 million tonnes.

Early estimates for 2010-11 show that sugar output is likely to rise sharply due to higher sugarcane plantings as farmers benefit from higher prices and lower fertiliser costs. That could lead to a small surplus for the first time since 2007-08.

Staples’ prices fall


World prices of key food staples have dropped in the first five months of 2010 driven by falls in sugar and cereals. FAO’s Food Price Index fell to 164 points in May from 174 points in January, off its 214-point peak in 2008 spring.

“From sugar to wheat, most indicators point to increasing world supplies, a leading factor behind the sharp declines in international prices of major food staples this year,” FAO said.

Oilseed prices, which have resisted a big downturn, may fall in coming months as supply increases, it said.

In another sign that prices could ease in the next few months, dry bulk freight rates for large ships, which carry commodities including grains around the world, were likely to weaken later this year as new vessels enter the market, the International Grains Council said on Thursday.

FAO also said that implied volatility—market’s expectations of the future price moves of a commodity, inferred from the prices of derivative contracts—for wheat, maize and soybeans may have stabilised.

“Implied volatility has undergone a gradual moderation in the past 12 months, suggesting that markets are a little more assured than they were last year,” FAO said.

Dairy markets remained firm with robust demand and sluggish milk output growth. Meat sector prices had been rising due to falling production and increased demand and fish prices were strong thanks to growing demand and limited supplies, it said.

The global cost of imported foodstuff was set to rise 11 per cent to $921 billion this year on the back of a projected 17 per cent jump in non-cereal products which accounted for about two-thirds of global food import spending, FAO said.


The Business Standard, 4 June, 2010, http://www.business-standard.com/india/news/global-food-output-to-rise-to-record-high-fao/396956/


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