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ISSN: 0251-1959 (print)

ISSN 1560-8182 (Online)

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© FAO 2014

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ACKNOWLEDGEMENTS

The Food Outlook report is a product of the FAO Trade and Markets Division. This report is prepared under the overall guidance of David Hallam, Director; Concepcion Calpe, Senior Economist; and Abdolreza Abbassian, Senior Economist and Food Outlook Team Leader. It is written by a team of economists, whose names and email contacts appear under their respective market summary contributions. The report benefited from research support by many staff, namely, David Bedford, Claudio Cerquiglini, Julie  Claro, Berardina Forzinetti, Grace Karumathy, David Mancini, Emanuel Marocco, Patrizia  ascianá, Marco Milo and the fisheries statistical team.

Special thanks go to Rita Ashton for compiling the report and overall administrative support, as well as to Claudio Cerquiglini, for preparing the charts and statistical tables. Additionally, the team is grateful to Nancy Hart for her editorial assistance.

HIGHLIGHTS

Food markets have been affected by weather concerns and political tensions in the Black Sea region, which have boosted the FAO Food Price Index since February. While the 2014 global food import bill could stabilize at USD 1.29 trillion, animal product bills are set to increase, sustained by rising volumes and prices.

WHEAT

In recent months, weather and geopolitical tensions pushed up wheat prices in international markets. However, the early supply and demand outlook for wheat in the 2014/15 marketing season points to a generally balanced situation, with world stocks remaining at relatively comfortable levels in spite of a forecast decline in world wheat production.

COARSE GRAINS

With world production of coarse grains headed towards a modest decline, inventories will have to be drawn down to meet the projected demand in the 2014/15 season. This tightening will not be a cause for concern if the current production forecasts materialize and trade flows are not negatively affected by tensions in the Black Sea region.

RICE

International trade in rice may reach a new record in 2014, as lower world prices induce traditional importers to return to the market to buy more. This, along with the potential of an El Niño event in the second part of 2014, may help reverse the slide of Indica prices witnessed in the past twelve months.

OILCROPS

Oil and meal market fundamentals are set to improve in 2013/14, thanks to record-high oilcrop production. Nonetheless, prices trended upward, reacting to a tight balance in the United States, to a slow production growth in palm oil, and to successive cuts in soybean production estimates.

SUGAR

World sugar production is forecast to decline marginally in 2013/14, but will still be enough to cover projected global consumption and enable a build-up in global stocks. On the other hand, world sugar trade is anticipated to increase significantly in 2013/14, reflecting greater demand from the traditional importing countries.

MEAT

World meat production is anticipated to grow moderately in 2014. International prices have remained at historically high levels since the beginning of 2011 and, while the price situation varies among the different types of meat, there is no sign of an overall decrease.

DAIRY

International dairy product prices declined in March and experienced a further, sharper fall in April, returning to a level similar to a year ago. Milk production continues to increase steadily in many countries.

FISHERIES

A combination of renewed demand in traditional markets and supply shortages for a number of farmed species has boosted overall price levels. The likely arrival of the El Niño phenomenon in 2014 could reduce South American catches of small pelagic species and lead to higher fishmeal and feed prices.

SPECIAL FEATURES

PULSES

“An important milestone occurred recently that will likely have lasting effects on the global market for pulses. In December 2013, the UN General Assembly declared that 2016 will be the “International Year of Pulses”. This will likely draw much needed attention to a commodity group which has, despite its many appreciable qualities, proven quite undervalued up until now.”

GEOGLAM crop monitor

“At the request of AMIS partners the GEOGLAM Crop Monitor developed a series of customized condition map and chart products. These include synthesis maps that provide information on all four crops within a single map, as well as crop specific condition maps and pie charts.”

CONTENTS

MARKET SUMMARIES

MARKET ASSESSMENTS

Wheat

Coarse grains

Rice

Oilcrops, oils and meals

Sugar

Meat and meat products

Milk and milk products

Fish and fishery products

SPECIAL FEATURES

Pulses

The Geoglam crop monitor

MAJOR POLICY DEVELOPMENTS

Grains

Rice

Oilcrops

Sugar

Meat

Dairy

STATISTICAL TABLES

MARKET INDICATORS

Investment flows

Ocean freight rates

Food import bills

The FAO price index

MARKET

SUMMARIES

CEREALS

Early prospects for 2014 cereal crops point to a decline from the previous year’s record level, but output is nevertheless expected to be the second largest ever. Based on conditions of crops already in the ground and planting intentions for those to be sown later this year and assuming normal weather for the remainder of the season, FAO’s first forecast puts world cereal production in 2014 at around 2 458 million tonnes (including rice in milled terms), some 2.4 percent down from 2013. Wheat and coarse grains would account for the reduction. Total cereal utilization in the new season (2014/15) is forecast to increase by 1.9 percent, which compares with a 4.0 percent rise in 2013/14. The slowdown reflects a subdued expansion in the industrial use of cereals and only a modest rise in the use of coarse grains for feed. World cereal stocks at the close of crop seasons ending in 2015 are forecast to fall to 566 million tonnes, 1.4 percent lower than their relatively high opening levels. The decline involves coarse grains, as wheat stocks may increase slightly and rice will remain steady. The small anticipated decline in world reserves will not make much of a change to the stocks-to-use ratio in 2014/15 compared with 2013/14. FAO’s first forecast of world trade in cereals in 2014/15 indicates a contraction of about 1.5 percent from the estimated record in 2013/14. Maize accounts for most of the decline, followed by barley and wheat. In spite of a generally favourable supply and demand situation, international prices of wheat and maize have increased significantly in recent weeks on weather concerns and tensions in the Black Sea region. The same factors are likely to be the main determinant of price movements over the second half of 2014. On the other hand, rice prices, especially Indica, have been sliding, amid large supplies and accrued competition among exporters.

Contact:

Abdolreza.Abbassian@fao.org

Paul.Racionzer@fao.org

WHEAT

Global wheat production in 2014 is forecast at some 702 million tonnes, 1.9 percent below last year’s record, but still the second largest ever. Much of the reduction is anticipated to be concentrated in Canada, but smaller harvests are also expected in Australia, Morocco, the Syrian Arab Republic, the Russian Federation, Ukraine and the United States, which would more than offset larger outputs in Argentina, Brazil, India, Mexico and Pakistan.

Following a surge to a record level in 2013/14, international trade in the new marketing season (2014/15) is forecast to decline, but only by 1 million tonnes, to 149.5 million tonnes. Continued strong demand in several countries in Asia is seen as the primary factor sustaining the high trade volume in 2014/15, even though, overall, imports in the region are forecast to decline slightly. By contrast, purchases by the EU are likely to increase. Although falling, export availabilities in major exporting countries are expected to be adequate to meet the projected import demand. An export recovery in Argentina is likely to compensate for a decline in shipments by the EU. Sparing any unpredictable turn of events in the Black Sea region, wheat exports from Ukraine are forecast to remain steady around the 2013/14 level.

World wheat utilization in 2014/15 is foreseen to grow by 1.7 percent to 699 million tonnes, underpinned by rising food and feed uses. Global wheat stocks are anticipated to reach almost 180 million tonnes by the close of the seasons in 2015, only slightly above their opening levels. As a result, the world stocks-to-use ratio is estimated to fall slightly, although staying at a relatively high level of 25.2 percent. Stocks held by the major exporters are also likely to decline, pointing to some tightening of supplies in the new season. To a large extent, this explains why concerns over weather conditions and political tensions have boosted international wheat prices in recent months.

Contact:

Abdolreza.Abbassian@fao.org

Paul.Racionzer@fao.org

COARSE GRAINS

FAO’s first forecast for world production of coarse grains in 2014 points to a 3.9 percent decline from 2013, with most of the reduction in the United States, the world’s largest producer. Following a 10 percent surge in 2013/14, FAO’s first forecast for world trade in coarse grains in the new 2013/14 season stands at 142 million tonnes, down 2.7 percent from the 2013/14 record level. Smaller maize trade would account for most of the decline, but trade in barley is also expected to contract slightly. The anticipated rise in maize exports by Argentina and the United States will be offset by reduced sales from Canada, Brazil, the Russian Federation and Ukraine. Assuming that current territorial conflicts do not interfere with trade, Ukraine could stll remain the fourth largest exporter of maize after the United States, Brazil and Argentina.

Total utilization of coarse grains in 2014/15 is likely to expand by 1.8 percent, outpacing the 10-year trend for the second consecutive season. The anticipated utilization growth is much lower than the 7 percent rise estimated for 2013/14. This is because of the high expected prices, unlike in 2013/14, when the strong rebound in production in the United States resulted in a sharp fall in prices that helped boost consumption. The increase in demand in 2014/15 would stem from a higher feed utilization in China, up 8 percent from 2013/14, as the expansion in the industrial use is expected to be less pronounced than in recent years.

World inventories are forecast to fall to 206 million tonnes by the close of the 2015 crop seasons, some 4 percent (9 million tonnes) below their opening levels, due to an anticipated decrease in the ending stock of maize in China and the United States. While the world stock-to-use ratio is estimated to decline slightly, the major exporters’ stock-to-disappearance ratio would remain at around 12 percent, which points to a relatively comfortable situation with respect to export availabilities in the new season.

Contact:

Abdolreza.Abbassian@fao.org

Paul.Racionzer@fao.org

RICE

Less attractive prices and a possible recurrence of an El Niño weather anomaly may keep world rice production growth subdued again in 2014. The expansion should be particularly modest in Asia, a region particularly exposed to the climatic event. In addition, lower producer prices in Thailand are likely to prompt a sizeable contraction in rice planting and production. Prospects for the season are more buoyant in Africa and the Americas, which may witness faster production growth. Under current forecasts, international trade in rice will expand briskly in calendar 2014 to a new record, sustained by ample supplies in exporting countries and increasing purchases by traditional importers, such as Bangladesh, Indonesia or the Philippines. Among exporters, Thailand is expected to benefit the most from the trade expansion, as quotations from the country have fallen closer to those of its direct competitors. Rising domestic requirements and high local prices may, in turn, curb shipments from India, although not enough for the country to lose its prime position among exporters. The expected sluggish performance of the sector in 2014 may mean that, for the first time in ten years, world production could fall short of utilization, triggering a small contraction of world rice inventories carried over in 2015, the first in a decade. International rice prices have followed divergent trends in the past four months, rising in the case of Japonica rice, but remaining on a downward trend in the case of Indica. Prospects for the next few months remain highly uncertain, especially under a looming El Niño.

Contact:

Concepcion.Calpe@fao.org

Shirley.Mustafa@fao.org

OILCROPS

World oilseed production is forecast to rise to an all-time high in 2013/14, allowing output of meals and oils to expand at above-average rates. An important exception is palm oil, which may be subject to a significant slowdown in production growth.

With regard to domestic availabilities, most of the key producing/exporting countries are forecast to see significant year-on-year improvements, except the United States, where supply is constrained by low carry-in stocks.

Global consumption of both oils and meals is set to continue expanding, stimulated by higher supplies and driven by growing demand in developing countries in Asia. However, global meal consumption could grow less than anticipated, given unexpectedly firm international meal prices and improved global availability of maize. As for vegetable oils, additional demand from the biodiesel sector is expected to contribute to consumption growth.

As the world supply and demand situation improves, world stocks, especially of oilmeals, are expected to be replenished. However, this will not apply to soymeal inventories in the United States, which are projected to continue falling, dragging the country’s stock-to-use ratio to an all-time low. As for oils/fats, the global stock-to-use ratio is estimated to recover only partially from last season’s low level. The recent appreciation of vegetable oil prices and the continued firmness in meal values have to be seen against this background. Concerning trade, global transactions in oils/fats are expected to grow only moderately, while trade in meals/cakes is set to increase sharply.

With South America’s record soybean crop finally entering the market and a likely slowdown in China’s import demand, the global supply and demand situation for oilseed and meals should ease substantially in the coming months. By contrast, the outlook for vegetable oil markets remains mixed.

Contact:

Peter.Thoenes@fao.org

SUGAR

International sugar prices, on a downward trend for most of 2013, recovered modestly by the beginning of 2014, underpinned by drought conditions in Brazil, the world’s largest sugar producer and exporter. The 2013 price decline reflected large export availabilities in the main sugar producing countries, following expansion in sugar crops area. In 2013/14, and for the fourth consecutive season, FAO estimates world sugar production to surpass consumption, but the expected surplus is likely to be smaller than in previous years. Although sugar production is set to decline marginally in 2013/14, for the first time since 2008/2009, it would still be sufficient to cover projected global consumption and allow some build-up in global stocks. Falling sugar outputs in India, the EU, the United States and the Russian Federation are anticipated to be offset mainly by expansion in Thailand, Pakistan and South Africa. Production in Brazil is expected to decline, as unfavourable weather reduced sugarcane yields, but only slightly. World sugar consumption is set to grow by about 2.3 percent in 2013/14, reflecting increases in several developing countries that should benefit from falling domestic sugar prices. Strong purchases by traditional importers, as a result of more affordable international sugar prices, are expected to lead to an expansion in trade in 2013/14. Early indications for the 2014/15 season indicate that the world sugar market is likely to be more balanced, or even display a small deficit, as producers adjust to lower international sugar prices by reducing production.

Contact:

Elmamoun.Amrouk@fao.org

MEAT AND MEAT PRODUCTS

World meat production is anticipated to grow modestly in 2014 to 311.8 million tonnes, an increase of 3.3 million tonnes or 1.1 percent compared with 2013. Growth is anticipated to be concentrated in the developing countries, which are also the main centres of rising demand.

At the international level, prices have remained high by historical standards for the past three years. The FAO Meat Price Index averaged 186 in April 2014, unchanged when compared with a year earlier. Falling feed prices have facilitated some price decrease for poultry and pigmeat, while prices of bovine and ovine meat have remained firm, reflecting limited export availability.

Global meat trade is forecast to increase moderately, by 1.4 percent to 31.3 million tonnes. At this level, growth would be less than the average for recent years, reflecting production constraints in some of the principal exporting countries. There are marked differences in projected trade for the different varieties of meat, with growth forecast for bovine and poultry meat and a decline for ovine and pigmeat. Poultry remains the main product traded, representing 43 percent of the total, followed by bovine, pig and ovine meat, respectively.

Contact:

Michael.Griffin@fao.org

MILK AND MILK PRODUCTS

Internationally, dairy product prices fell sharply in April 2014, following indications of market weakness in March. Consequently, they have returned to a level similar to early 2013. The main contributors to the current situation are a strong opening to the milk production season in the Northern Hemisphere and an unusually extended season in New Zealand, which have caused a sudden rise in the availability of products for export. The FAO Dairy Price Index stood at 251 points in April 2014, 2.8 percent below the same month in 2013.

World milk production in 2014 is forecast to grow by 2.1 percent, reaching 783 million tonnes, a similar rate to previous years. Asia is expected to account for most of the increase, but production is likely to rise in all regions.

World trade in dairy products is projected to continue rising in 2014, linked to a favourable milk production outlook in most of the major exporting countries and continued strong demand. Trade is forecast to rise by 1.8 percent, a reduced rate of growth compared to recent years, to reach 69 million tonnes of milk equivalent.

Asia is expected to remain the main centre for rising international demand in 2014, with increased purchases forecast for China, the Islamic Republic of Iran, Indonesia and the Philippines. Elsewhere in Asia, Saudi Arabia, the United Arab Emirates, Japan, Singapore, Malaysia and Thailand remain important markets, but the level of their imports are not expected to change markedly and, in some cases, could decrease. Reduced international prices may stimulate import demand in Africa as a whole. The principal importers that may buy more are Algeria, South Africa and Ghana. In Europe, imports by the Russian Federation are anticipated to increase, stimulated by strong demand for butter and skimmed milk powder (SMP).

Contact:

Michael.Griffin@fao.org

FISH AND FISHERY PRODUCTS

The economic recovery of traditional markets, such as the United States and the EU, is boosting overall demand for fish and fishery products adding to the already firm buying interest of many emerging economies, such as Mexico and Brazil. However, demand is weakening in other traditional destinations, such as the Russian Federation and Japan, where depreciating currencies and a higher VAT have made food and imports more expensive.

International prices overall have been rising, boosted by demand and, more importantly, by supply shortages for a number of both farmed and wild species. These include salmon, shrimp, pangasius and tilapia from aquaculture, and shrimp, squid, octopus and herring from capture fisheries. At the same time, however, prices have been softening for tuna, mackerel and cod. Shrimp remains the most valuable seafood category although, at the moment, importers seem reluctant to buy at current levels, indicating that some weakening of shrimp prices can be expected over the next few months.

Overall supply continues to expand thanks to a growing aquaculture sector. With most wild stocks now regulated by annual quotas, overall catches are fairly stable from year to year. However, the expected arrival of El Niño during 2014 will reduce quotas for small pelagic species in South America and overall catches. As a result, prices of fishmeal and feed could rise, leading to higher input prices for the aquaculture, livestock and poultry sectors.

World per capita consumption of seafood continues to rise by around 2 percent annually and is fast approaching annual consumption of 20 kg per capita. However, there remain large regional differences in consumption levels which, in turn, provide important opportunities for local aquaculture producers who increasingly target domestic consumers rather than international markets. In particular, it is the freshwater aquaculture sectors in Asia, South and Central America and sub-Saharan Africa that are boosting overall output and consumption.

Contact:

Audun.Lem@fao.org

MARKET

ASSESSMENTS

WHEAT

PRICES

Wheat prices firmer on weather and political tensions

A record wheat crop in 2013 boosted much needed world supplies and helped push international prices of wheat sharply below their previous year’s levels. However, by the third week in February, export prices started to surge on worries about the impact of prolonged drought in major growing areas in the United States and escalating tensions in the Black Sea region. I However, the strong rally in international prices lost momentum in April as rain brought some relief and it also became increasingly evident that shipments from the Black Sea were not being disrupted by the territorial issues between Ukraine and the Russian Federation.

Similarly, wheat futures at the Chicago Board of Trade (CBOT) for nearby delivery strengthened in recent months, reflecting weather and geopolitical concerns. However, in April, a generally good prospect for global wheat production in 2014 started to weigh on the quotations for September delivery and prices averaged slightly below last year’s values. Given a good supply outlook for coarse grains, the prospect for further gains in prices of lower quality wheat, which can also be used for animal feed, may be limited. In comparison, the price of higher quality (protein) wheat, traded at Kansas City Board of Trade (KCBT), is likely to remain firm in view of tighter supplies (more detailed analysis of the futures markets can be found in the Market Indicators section of this report).

PRODUCTION

Global wheat output to decline only slightly in 2014

FAO’s latest forecast for 2014 world wheat production stands at 702 million tonnes, down 13.4 million tonnes (1.9 percent) from last year’s record harvest, but still the second largest crop ever. The bulk of the reduction is expected in Canada, where plantings are forecast to decrease due to lower domestic prices and yields to return to average after the record highs achieved in the previous season.

In the United States, although serious drought persists in the southern and central major wheat producing areas, crops are still in early stages of development and good rains in the growing season could still prevent a significant reduction in yield. FAO’s latest forecast of total 2014 wheat output stands at 57 million tonnes. In the EU, the world’s largest wheat producing area, the winter wheat crop generally benefitted from unseasonably warm weather throughout the winter. However, with the onset of spring, below average rains over most European countries have stressed vegetation conditions in some important growing areas, including the Benelux countries, the northern Balkans, most of Germany and the main agricultural regions of Central Europe. Good rainfall will be needed in the affected areas during the remainder of the growing season to avoid yield loss. Meanwhile, winter wheat conditions are reported to be good in Spain, Italy and the southern Balkans, as a result of favourable rainfall. An aggregate 2014 wheat crop of 143.7 million tonnes is forecast, similar to last’s year record harvest.

Similarly, in the major producing European CIS states, higher than normal temperatures and dry weather continue to reduce soil moisture, resulting in faster than normal development. In the Russian Federation, the total wheat area in 2014 is forecast to increase as the spring wheat plantings are expected to compensate for the shortfall in winter sowing, following wetter than normal conditions in September. The country’s wheat output in 2014 is currently forecast at 51 million tonnes, nearly 2 percent less than last year’s average level. Ukraine is also forecast to harvest a lower wheat crop this year, with a 12 percent decrease to some 19 million tonnes. The expected reduction is attributed to a 6 percent contraction in the area planted, reflecting a switch to more profitable spring crops, and an expected 6 percent decrease in yields.

In Asia, harvesting of the 2014 wheat crops in the Far East sub-region is already underway and prospects remain positive in the main producing countries, following generally favourable weather conditions. In China, after prolonged dry spells during March, rains in April improved crop conditions. FAO’s latest forecast points to an aggregate 2014 wheat crop (including winter and spring seasons) of about 122 million tonnes, similar to last year’s record level. The projected good outcome is mainly attributed to Government support programmes, including direct payments to farmers, minimum purchase price, seed and machinery subsidies and other inputs, that prompted a slight increase in plantings this season. In India, the latest estimates point to a record 2014 winter wheat (Rabi) crop of 96 million tonnes, following a 6 percent increase in plantings and anticipated higher yields due to good rainfall during the growing seasons. Producers also benefited from adequate availability of irrigation water, fertilizers and other inputs. In Pakistan, the latest official estimate puts 2014 wheat production at a new record level of about 25.4 million tonnes, mainly as a result of an increase in plantings, favourable rainfalls and good supplies of irrigation water and fertilizers. In the Near East, in Turkey, the 2014 wheat production is forecast at 19.7 million tonnes, some 11 percent less than 2013 record output, due to a dry autumn and a hard freeze in early April.

In North Africa where most cereal production is rain-fed, winter wheat prospects this year are mostly favourable. Algeria and Tunisia predicted excellent yields, following widespread rains. However, in Morocco, winter dryness in the southern part of the country and an estimated return to average yields could result in the 2014 wheat production falling to 5 million tonnes, approximately 30 percent below last year’s record crop.

In the Southern Hemisphere, the bulk of the winter wheat planting is due to start in April–May in Australia. Early indications point to a decrease in 2014 wheat production, as yields are projected to return to average, after record levels last year. In South America, where wheat sowing takes place from May to September, the 2014 production is expected to recover from last’s year reduced level following frosts and dry weather. Aggregate output in the subregion is forecast at 21.7 million tonnes, up almost 14 percent from last year. The increase would largely be driven by higher outputs in Argentina and Brazil. In Central America and the Caribbean, production in Mexico, the main producer, is expected to increase by almost 6 percent in 2014/15 to 3.6 million tonnes.

TRADE

World trade in 2014/15 to remain close to the record volume of 2013/14

FAO’s first forecast for world trade in wheat (including wheat flour in wheat equivalent) in 2014/15 (July/June) stands at 149.5 million tonnes, down only 1 million tonnes from 2013/14. World wheat trade in 2013/14 is estimated to have surged by as much as 7 percent (nearly 10 million tonnes) to an all-time high, supported by large export supplies and generally lower prices compared to the previous season. The latest trade estimate for 2013/14 is 2.5 million tonnes higher than was reported in April, reflecting upward revisions of imports by several countries in Asia.

Continued strong import demand in Asia will be instrumental to keep the level of world trade high in 2014/15. Aggregate wheat imports in Asia are currently put at over 74 million tonnes, down only slightly from the peak in 2013/14, with China accounting for most of the decline, given the country’s prospect for another bumper crop this year. However, imports by other nations in the region could remain close to, or even exceed, the 2013/14 estimated levels. Foreign purchases by the Islamic Republic of Iran are likely to remain high, especially as the easing of economic sanctions will facilitate the transactions. Strong domestic demand is likely to boost imports by Indonesia. Indonesia does not produce any wheat, but a growing taste for wheat products has turned this traditionally rice-consuming nation into the third largest wheat importer after Egypt and China. In the Syrian Arab Republic, import requirements are expected to be higher than in 2013/14, given the prospects for yet another below-average harvest in the face of severe insecurity due to the ongoing conflict.

In Africa, total wheat imports in 2014/15 are forecast to approach 40 million tonnes, nearly unchanged from 2013/14. Among the countries in North Africa, imports by Egypt are expected to remain at 10.5 million tonnes, similar to the 2013/14 level, but 1 million tonnes lower than the record registered in 2011/12. Although the Government has increased its target of wheat purchases from farmers in 2014 to 4.25 million tonnes (some 500 000 tonnes more than in 2013), imports are unlikely to decline in 2014/15, given the rise in demand in the face of stagnant domestic wheat production. While imports by Tunisia are forecast to decline by 400 000 tonnes because of a recovery in production, those by Morocco, are set to increase by 1 million tonnes due to falling production. Wheat imports to other major destinations in Africa are expected to remain steady. In Nigeria, they are projected at 4.2 million tonnes, the same as in 2013/14. Although the government has recently announced plans to use 75 000 ha for planting wheat, production in the country is likely to remain extremely small. In South Africa, where domestic wheat prices surged in recent months, in part driven by a weakening currency, imports are likely to stay high at around 1.8 million tonnes in 2014/15, also supported by a reduction in the already harvested winter wheat crop.

In Europe, wheat imports in 2014/15 are forecast to reach 8.7 million tonnes, up nearly 2 million tonnes from 2013/14. All of the projected increase would be on account of the EU, which, while harvesting a wheat crop similar to last year high level, may need to offset declining supplies of coarse grains, barley in particular. In Latin America and the Caribbean, aggregate imports in 2014/15 are put at nearly 21 million tonnes, down almost 2 million tonnes from 2013/14. Lower purchases by Brazil, in anticipation of a record production, and by Mexico, where larger crops are being harvested, would account for the bulk of the decline in imports.

As for exports, following an extraordinary 2013/14season, marked by a surge in sales by all major supplying countries except Argentina and Australia, it is more difficult than usual to predict wheat shipments from the leading origins in 2014/15. Adding to the uncertainty, are the continuing geopolitical tensions in the Black Sea region, which may have more influence on trade patterns in 2014/15 than in 2013/14. Based on the latest indications, wheat shipments in 2014/15 from the EU could fall by 3.5 million tonnes compared to 2013/14, offsetting larger projected sales from Argentina and Australia. Wheat exports by the EU are estimated at a record high level of 29 million tonnes in 2013/14, some 34 percent higher than in the previous season. In Canada, despite an anticipated fall in production this year, exports are likely to remain at the same level as in 2013/14, as supplies would still be ample because of large carryover stocks. Favourable production outlook in Kazakhstan is likely to keep wheat exports from this CIS country at around the same level as in 2013/14. Wheat shipments from Ukraine could also remain close to the current season’s levels, especially if imports by the EU were to increase in 2014/15, as currently projected. A small reduction in exports is possible in the Russian Federation, but shipments from the United States are foreseen similar to the 2013/14 level, supported by large sales to Brazil. Wheat shipments from the United States to Brazil soared to a 30-year high in 2013, following a collapse of exports by Argentina, Brazil’s traditional supplier. Elsewhere, India is likely to have large supplies for exports, given this year’s expectation of a record wheat crop, but sales from Turkey could decline on sharply reduced domestic production.

UTILIZATION

Wheat utilization to increase for the first time since 2011/12

World wheat utilization in 2014/15 is forecast to reach 699 million tonnes, 1.6 percent larger than in 2013/14. This would represent the first significant growth since 2011/12, as wheat utilization contracted sharply in 2012/13 and is estimated to have remained steady in 2013/14. Total wheat use for direct human consumption is forecast to reach 485 million tonnes, up 1 percent from 2013/14. At this level, world wheat consumption, on a per capita basis, would remain steady, at just over 67 kg per annum. Developing countries account for the bulk of the wheat used for food, consuming 350 million tonnes, up 1.3 percent from 2013/14, which would result in a stable annual per capita consumption level of 60 kg. Food use of wheat in the developed countries, as a group, is expected to reach 135 million tonnes, marginally above the estimated level for 2013/14, but again sufficient to maintain a steady per capita consumption of around 96 kg. Among the world’s most populated countries, China is projected to keep food per capita consumption stable at nearly 64 kg, while in India it could increase slightly to 61.5 kg, reflecting larger domestic supplies.

Total feed use of wheat in 2014/15 is forecast to reach 133.5 million tonnes, some 3.7 percent higher than in 2013/14, when it contracted by 2.6 percent because of the recovery in supplies of coarse grains. The projected increase in wheat feed use in 2014/15 mainly reflects the outlook in the EU, traditionally the largest market for feed wheat. Total feed use of wheat in the EU is forecast at 50 million tonnes, 8 percent higher than in 2013/14. In China, wheat feed use is forecast to reach 19 million tonnes in 2014/15, up 6 percent from 2013/14, but well below the 28 million tonnes peaks achieved in 2011/12. In the United States, feed use of wheat is expected to remain steady at around 6 million tonnes, given a generally favourable outlook for maize supplies.

STOCKS

World wheat inventories stay high but exportable supplies tighten

Based on the preliminary forecasts for 2014 production and 2014/15 utilization, world wheat stocks by the close of seasons in 2015 are tentatively put at almost 180 million tonnes, some 2.8 million tonnes (1.5 percent) higher than their already high opening levels. This increase follows a strong anticipated recovery of almost 13 percent in the level of world stocks by the end of the current year, driven mostly by expectation of significant increases in China, Canada, EU, India and the Russian Federation.

At the current forecast levels, the world wheat stocks-to-use ratio in 2014/15 would remain steady at 25.2, or well above the historic low of 20 percent registered in 2007/08. However, the ratio of major wheat exporters’ closing stocks to their total disappearance (defined as domestic utilization plus exports), which is considered a better measure for availabilities in global markets, may decline from 15.3 percent in 2013/14 to 14.2 percent in 2014/15. The projected lower ratio for 2014/15, which is close to the 14.1 percent registered in 2012/13, points to a tightening of wheat supplies. This may become an issue if world demand proves higher than currently projected. Among the major exporters, the biggest declines in inventories are forecast for Canada and Ukraine, while Argentina and the Russian Federation are likely to end the new season with increases. Elsewhere, wheat stocks are set to accumulate in India, boosted by the anticipated record crop this year, and China, given the expectation of another above-average wheat harvest in 2014.

COARSE GRAINS

PRICES

Large maize supplies drive down international prices

In spite of recent strong gains in international prices of major coarse grains, generally large supplies have kept prices well below the previous season’s levels. The benchmark US maize price (yellow, No. 2, f.o.b.) averaged USD 224 per tonne in April, down 21 percent from April 2013 but up 13 percent since the start of this year. A strong recovery in global production in 2013, largely driven by the rebound in maize output in the United States, the world’s largest maize producer and exporter, has been the main factor behind the easing of the market. Export prices of other coarse grains also remained below last year’s levels, including feed barley and sorghum, which, as of April, were at least 10 percent below April 2013. In recent weeks, spill over from rising wheat quotations and geopolitical tensions in the Black Sea provided support. However, the increase in international prices of maize has not been as significant as that of wheat, partly due to China’s series of import cancelations, following the finding of unapproved MIR 162 genetically modified strain in US maize deliveries.

By late April, the Chicago Board of Trade (CBOT) maize futures for December delivery (new crop) were quoted at around USD 200 per tonne, down USD 19 per tonne, or 9 percent, from the corresponding period last year. In spite of the expectation of lower world output in 2014, in particular smaller production in the United States, maize futures have remained below the 2013 levels and, thanks to large carryover stocks, overall supplies appear adequate to meet the projected world demand in 2014/15. However, weather developments in the coming months will be critical as current forecasts for this year’s production in the Northern Hemisphere assume normal weather until the harvests, which are still several months away. In addition, continuing tensions in the Black Sea region could influence markets more than they did in recent months should this year’s production and/or trade flows be affected.

PRODUCTION

Early indications point to smaller 2014 coarse grains output

FAO’s first forecast for world production of coarse grains in 2014 stands at just over 1 255 million tonnes, 3.9 percent below last year’s record level, but still well above the average of the past five years. Much of the reduction is anticipated in the United States, the world’s largest producer, where maize plantings are forecast to decrease slightly, in view of lower price prospects this season. Declining production in Argentina, Brazil and Ukraine is also expected to contribute to the overall decrease.

Global output of maize in 2014 is forecast at 967 million tonnes, 4 percent down from 2013 record. In the United States, the world largest maize producer, the area planted is expected to decrease slightly according to the official estimates and, assuming normal weather and about average yields, production is forecast at 330 million tonnes, down from nearly 354 million tonnes in 2013.

By contrast in China, the world’s second largest maize producer, 2014 production is tentatively gauged at a new record high of 218 million tonnes, reflecting larger plantings in response to rising demand for feed grains.

In the EU, maize plantings are forecast to decrease slightly this year, particularly in France, Poland and Romania. However, assuming overall improved yields, output is expected to increase to 66.8 million tonnes, 3.4 percent higher than last year’s above-average level.

In the Southern Hemisphere, the main 2014 maize harvests are already completed or in the final stages. In South America, maize production in 2014 is forecast at about 111 million tonnes, down 10 percent from last year’s record level, but 14 percent higher than the region’s five-year average. The drop in production reflects yield reductions in Argentina, due to unfavourable weather, and smaller second season plantings in Brazil. In Central America, the 2014 maize output in Mexico – the sub-region’s largest producer – is forecast at some 21 million tonnes, almost 7 percent below last year, but about average. The decline follows reduced plantings in response to low prices.

In Southern Africa, where harvesting of the 2014 maize crop is well underway, early forecasts indicate an improved output of nearly 25 million tonnes, about 10 percent above the weather-depressed 2013 harvest. Production in South Africa, the sub-region major producer and exporter. Current forecasts indicate an aggregate maize crop of 13.6 million tonnes, nearly 10 percent higher than in 2013.

Planting of the 2014 spring season maize crop is underway in Ukraine. Prospects are uncertain due to increased production costs, following the depreciation of the national currency and current political crisis, coupled with below average precipitation in recent months. More rains are needed to avoid reductions in the area and yields of early planted crops.

World output of barley in 2014 is forecast at about 136 million tonnes, 6.4 percent lower than the 2013 record level. Smaller crops are expected in almost all the major barley producing countries, particularly in European countries, Canada, Turkey and Australia.

World sorghum output in 2014 is expected to remain virtually unchanged from last year’s good level, at 60.5 million tonnes. Production is forecast to decrease in the United States and Mexico, but to increase significantly in India.

TRADE

World trade in coarse grains could decline in 2014/15

Following a 10 percent surge in 2013/14, FAO’s first forecast for world trade in coarse grains in 2014/15 (July/June) stands at 142 million tonnes, down 3 percent (4 million tonnes) from the 2013/14 record level. While trade in maize and barley could decline slightly, world trade in sorghum and other coarse grains (including oats, rye and millet) in 2014/15 is anticipated to remain similar to 2013/14.

The anticipated decrease would be mainly on account of lower volume of maize trade, which is forecast to reach 110 million tonnes, 3 million tonnes below the record in 2013/14. The contraction is mostly caused by a fall in maize imports in Europe, from 12 million tonnes in 2013/14 to 7 million tonnes in 2014/15. The reduction is consistent with EU’s prospects for higher maize production and large supplies of wheat from the new season. On the other hand, maize imports to other destinations are likely to remain close to the peaks estimated for 2013/14, given the expectation of strong feed demand in major markets. In Asia, total maize imports are forecast to reach nearly 57 million tonnes, slightly higher than in 2013/14. Maize purchases by China (Mainland) are put at about the same high level as in 2013/14 in spite of the anticipated record production this year. Indeed, high domestic prices are likely to encourage large imports of nearly 6 million tonnes again in 2014/15. As a result of increasing domestic demand from the animal feed and industrial sectors, China, which was a net maize exporter until the start of this decade, has become a major net maize importer since 2010/11 Maize imports by Japan – which does not produce any maize of its own and is the world’s largest maize importer – are forecast to remain steady at 15.6 million tonnes. However, purchases by the Republic of Korea may increase by 500 000 tonnes to 9.5 million tonnes, underpinned by lower expected world prices in the new season.

Total maize imports in Africa could reach 17 million tonnes in 2014/15, around 300 000 tonnes more than in 2013/14, with most of the anticipated increase in Egypt and Morocco, more than offsetting some declines in imports by Kenya and Zimbabwe. In Latin America and the Caribbean, maize imports by Mexico, the world’s largest importer after Japan, could reach 11 million tonnes, 500 000 tonnes more than the estimated in 2013/14 on expectation of a slight decline in this year’s production after last year’s record harvest.

World barley trade (excluding malt) in 2014/15 is put at 20 million tonnes, down 1 million tonnes from the estimated trade in 2013/14. Most of the anticipated decline is expected in Asia, where total imports could fall by 700 000 tonnes to 16 million tonnes. Imports by Saudi Arabia, the world’s largest barley importer, may decline by 500 000 tonnes to 8.5 million tonnes in 2014/15 on large carryover stocks from this season. Also in Africa, barley imports could decline slightly, to 1.6 tonnes, as lower deliveries to Algeria and Tunisia more than offset larger imports by Morocco, where production is expected to plunge by 37 percent.

Global trade in sorghum is forecast at 7.5 million tonnes in 2014/15, unchanged from 2013/14. Total imports into Asia are predicted to reach 4 million tonnes, up 150 000 tonnes from 2013/14, with China (Mainland) accounting for most of the increase, purchasing as much as 2.2 million tonnes of sorghum from world markets, a record. In addition to lower prices of sorghum compared with maize in international markets, China’s increased import demand for sorghum in recent years is also due to the fact that unlike wheat and maize, sorghum is not subject to limits under tariff-rate quotas (TRQs). At the current forecast level, China will surpass Mexico, traditionally the largest sorghum importer. Purchases by Mexico are forecast to reach 1 million tonnes in 2014/15, 300 000 tonnes higher than in 2013/14, but well below the 2 million to 3 million tonnes imported annually in the past. The increase in domestic sorghum production and higher imports of maize are among the main reasons for the declining trend in sorghum imports by Mexico.

Given the likelihood of a slight decrease in world trade in 2014/15, exports of coarse grains from all major exporting countries, with the exception of Argentina and the United States, are forecast to remain below the 2013/14 estimated levels. Based on improving domestic supplies, shipments of maize from Argentina in 2014/15 (July/June) could rebound to 16.5 million tonnes, 2.5 million tonnes higher than the sharply reduced levels of 2013/14. However, smaller sales are projected for Canada, Brazil, the Russian Federation and Ukraine. Total exports of coarse grains by Ukraine are projected at 18 million tonnes, 2.3 million tonnes below the level estimated for 2013/14, promoting. Among other exporting countries, larger maize production is expected to encourage higher exports from the Republic of South Africa, while above-average carryover stocks of maize in India could boost maize shipments from that country.

UTILIZATION

Utilization in 2014/15 to stay above average for the second consecutive season

The first forecast for global utilization of coarse grains in 2014/15 stands at 1 264 million tonnes. At this level, utilization would exceed the 10-year trend for the second consecutive season. The supply recovery and sharp declines in prices are estimated to boost total utilization of coarse grains by as much as 7 percent in 2013/14, but the growth in 2014/15 is likely to be more modest, at around 1.8 percent, especially because the possibility to witness further declines in prices during the new season appears limited.

Total feed utilization of coarse grains in 2013/14 is tentatively put at 735 million tonnes. Falling prices and a strong recovery in maize supplies (mostly in the United States) are expected to result in a 9 percent rise in world feed use of coarse grains in 2013/14. However, in 2014/15, this growth is likely to slow to 2.7 percent, with the bulk of the anticipated expansion to occur in the developing countries. Total feed use by this group of countries is projected to rise by 4.2 percent to 381 million tonnes with the largest increases in China (up 12 million tonnes, or 8 percent) and Brazil (up 1.5 million tonnes, or 3 percent). In the developed countries, total feed use is forecast at 354 million tonnes, some 1.2 percent higher than in 2012/13, with most of this expansion in North America. In Europe, total coarse grain feed use could contract slightly on reduced usage of barley in the EU in favour of wheat.

World food consumption of coarse grains in 2014/15 is forecast to reach 206 million tonnes, an increase of 2 percent from 2013/14. Most of the increase is expected in Africa and, to a lesser extent, Asia. At the global level, the anticipated expansion in food consumption of coarse grains would keep average per caput intake stable at around 28 kg per year. Total industrial use of coarse grains in 2014/15 is likely to remain close to 300 million, similar to 2013/14, amid relatively large supplies and low prices, but much will depend on macro-economic factors and developments in the energy market in the new season. Total industrial use of maize (for production of ethanol, starch and sweeteners), which is estimated by the International Grains Council to approach 260 million tonnes in 2013/14, could increase slightly in 2014/15, underpinned by increased starch production in China. However, the use of maize for production of fuel ethanol (mostly in the United States) is likely to remain steady.

STOCKS

World stocks to decline but export supplies remain adequate

Based on the preliminary forecast for world production in 2014 and utilization in 2014/15, world inventories of coarse grains by the close of crop seasons in 2015 are projected at 206 million tonnes, some 4 percent (9 million tonnes) below their opening levels. Among the major coarse grains, maize stocks could decline to 162 million tonnes, down 4 percent from 2014, while barley inventories are expected to approach 28 million tonnes, down 1.4 percent.

Most of the decrease in world reserves in 2015 is likely to occur in China and the United States. In China, coarse grains inventories could fall to 62 million tonnes, down 6 million tonnes from their relatively high opening levels. Strong growth in domestic utilization would be the primary reason for this anticipated decline, as production is expected to reach an all-time high, up slightly from last year’s record. In the United States, a likely reduction in domestic maize production and higher utilization could trim stocks by about 3 million tonnes, to 33 million tonnes.

Given the projected decline in world inventories, the world stock-to-use ratio is estimated to fall to 16.2 percent in 2014/15, down 1 percent from 2013/14 but still above the historical low of 13.8 percent registered in 2012/13. However, the major exporters’ stock-to-disappearance ratio (i.e. domestic consumption plus exports) is foreseen to remain steady at around 12 percent.

RICE

PRICES

Rice prices follow different trends in the various market segments

International rice prices have followed divergent trends since the beginning of 2014. Prices in the medium grain segment rose sharply amid prospects of diminished availabilities in the United States and Australia, the major Japonica suppliers, and continued export restraints in Egypt. This strength contrasted with the weakness dominating the long-grain segment. Indeed, reflecting ample export availabilities and lukewarm buying interest, the high quality Indica sub-index eased by 4 percent between January and April 2014, while the lower quality Indica prices remained below 200 points for the full four-month period, a low not seen since August 2010. Aromatic rice prices were stable. Much of the drop in the Indica rice price indices was caused by a steady slide in Thailand, which also triggered a weakening of prices in the other origins. For the benchmark Thai white rice, 100%B, quotations stood at to USD 408 per tonne in April, the lowest level since January 2008. In the first four months of 2014, they averaged USD 440 per tonne, 27 percent below the corresponding period in 2013.

International rice export prices in the next few months are likely to be influenced by the progress of secondary crop harvests in Northern Hemisphere countries and of 2014 main crops along and south of the equator. Given expectations of an overall ample supply in major exporting countries, these harvests will tend to weigh on the market, although the expected return of several large traditional importers to the international marketplace will dampen the pressure for prices to fall. Looking forward, climatic events affecting the development of 2014 season crops, such as the potential El Niño event, will influence market sentiment. On the policy front, decisions in Thailand concerning government support to the rice sector will hold particular sway, as will the pace with which officials continue the disposal of public stocks. A lifting of milled rice export restrictions in Egypt would also tend to ease some of the on-going upward pressure on Japonica rice prices.

PRODUCTION[1]

Rice production growth to remain subdued in 2014 under a looming El Niño

At this time of the year, the 2014 rice season is already quite advanced south and along the equator, where several countries have already harvested their main crops. In the Northern Hemisphere, where some 87 percent of world rice is produced, the season is just beginning with crops still at the planting stage. Based on the current FAO forecast, world rice production in 2014 could reach 501.1 million tonnes, only 4 million tonnes, or 0.8 percent, above the 2013 level and about 500 000 tonnes more than predicted last month. If confirmed, this would be the third consecutive season of subdued growth, with part of the expected slowdown resting on expectations of a mild El Niño recurring as of mid-2014, a critical period for world rice crop development. In Asia, the rice hub, El Niño is normally associated with drought, which may have negative impacts on yields and also foster a shift of dry season rice cultivation towards less water demanding crops.

Production in Asia is now forecast at 453.2 million tonnes in 2014, only 0.5 percent more than last season. The slow pace of growth anticipated for the region not only reflects the possible effects of climatic setbacks, but also of less favourable price incentives. The increase for the region would be mostly led by a recovery in China which, in 2013, was affected by dry conditions and then by storms. This year, the government reiterated its strong assistance to the food grain sector, in particular wheat and rice. Accordingly, paddy support prices for the 2014 season were again raised, but far less than in the previous years. Nonetheless, at an equivalent of USD 440–504 per tonne, China’s support prices for paddy rice in 2014 remain very high under international standards. Production in India is anticipated to rise by 1 percent this year, to a new record, although the final outcome of the season will depend on the pattern of monsoon rains, which normally reach the country on 1 June, when planting of the first paddy crop starts. Early predictions by India’s meteorological centre point to a 35 percent probability of a normal monsoon and 33 percent probability of a below-normal monsoon in 2014, indicating that the threat of a recurring EI Niño cannot be ignored. In 2009, the last year of a strong El Niño event, rice production in the country dropped 10 percent. Indonesia, the world’s third largest producer, is also particularly exposed to an El Niño anomaly. However, the 2014 season is well advanced in the country, which is already harvesting its main crop, so an El Niño event would more likely affect the first 2015 crop, which will be planted in the last quarter of 2014. After more than 300 000 ha were damaged by widespread floods early this year and recurring pest infestations, the government has lowered its 2014 paddy production target to 73.0 million tonnes, equivalent to 46 million tonnes, milled rice basis, still relatively high. However, the current FAO forecast is lower, at 45.4 million tonnes, but would represent a 1 percent increase from the good 2013 outturn. Within the region, Bangladesh, Cambodia, Myanmar, the Philippines and Pakistan are also forecast to harvest larger crops. In Viet Nam, production is only expected to rise marginally, especially under current efforts by the government to encourage a shift of land from rice to maize and soybeans. By contrast, the 2014 production outlook is negative in Sri Lanka, which already garnered its main crop, the coverage of which was constrained to half the area of last year by dry conditions. Production is predicted to fall in Japan, amid less favourable prices, but also in Laos and Thailand. In Thailand, the second round of the 2013/14 rice pledging scheme guaranteeing producer prices well above the market was suspended in February. Although it is unclear whether the programme will be reactivated later this year, falling producer prices are now expected to result in a 2 percent contraction of plantings and production in 2014.

Production prospects in Africa are positive overall, with FAO forecasting a 3 percent growth, to 18.4 million tonnes in 2014. Part of the increase would be credited to Madagascar, where more favourable climatic conditions and reduced locust incidence are anticipated to foster a 19 percent output recovery. After an 8 percent overall gain in 2013, production in western Africa is now forecast to increase by a further 2 percent in 2014, assuming normal weather conditions. Increases are currently anticipated for Burkina Faso, Cote d’Ivoire, Ghana, Guinea, Mali and Sierra Leone, where most governments are running supportive rice policies. By contrast, production in Nigeria could fall somewhat, based on the Nigerian Meteorological Agency prediction of a delayed and short-lived 2014 rainy season. In the rest of the region, Tanzania has already had to cope with late and poorly distributed rainfall, which may curb output by 5 percent. Mozambique is also anticipated to incur losses from excess precipitation and floods. In Egypt, efforts by the government to re-establish limits on rice plantings may result in a 1 percent drop of output in 2014.

In Latin America and the Caribbean, the main paddy crops already have been harvested in the southern part of the continent with positive results. Production in the region is now anticipated to increase by over 3 percent to 19.5 million tonnes. Much of that growth reflects an 8 percent expected gain in Brazil, where the sector benefited from attractive prices and favourable weather conditions. Prospects also point to sizeable expansions in Argentina, Colombia, Ecuador, Guyana and Paraguay, while production is expected to decline in Bolivia, Peru and Uruguay, marred by adverse weather conditions and rising production costs. In Central America and the Caribbean, where the 2014 season is just starting, continued support from the government may sustain further increases in production in Costa Rica, Cuba, Mexico and Nicaragua.

In North America, output is officially projected to rebound by 12 percent in the United States under positive return prospects. All of the increase is likely to arise in the southern producing states, as drought in California is constraining plantings.

In Europe, a partial 3 percent recovery from inclement weather last season is anticipated for the European Union. Although the 2013 reform of the Common Agricultural Policy enters into effect on 1 January 2014, EU eligible rice producers will still receive the Euro 177 per hectare decoupled payment in 2014, as a transition measure and for the last time. In the Russian Federation, production is also forecast to recover from several setbacks, including untimely rains and pest outbreaks that resulted in some 11 percent contraction in 2013.

In Oceania, Australia already garnered its 2014 crop, with production officially assessed to have fallen by 22 percent, reflecting lingering drought conditions and excessively cool temperatures in the main producing state of New South Wales.

TRADE

Revived import demand to boost international rice trade in 2014

International trade in rice in 2014 is anticipated to increase by 5.5 percent, to 39.3 million tonnes, same as forecast last month and a new record. Ample supplies in exporters’ hands have intensified competition for markets, resulting in falling export quotations. Against this backdrop, several traditional importers facing rising domestic prices and/or thinning reserves are returning to the international market to buy more. This especially concerns traditional importing countries in Asia, such as Bangladesh, China, Indonesia, Malaysia, Nepal, the Philippines and Sri Lanka, which are expected to be responsible for much of the 2.0 million tonne increase expected in world imports. On the other hand, shipments to the Islamic Republic of Iran, officially reported to have reached 1.9 million tonnes in 2013, may drop by some 20 percent, after two years of abnormally large inflows. Good crops may also prompt Afghanistan to cut imports. Rice imports by African countries are currently anticipated to edge higher, mainly on larger purchases by Nigeria, Mali, Senegal and Tanzania, while Madagascar and Mozambique are foreseen to curb deliveries. Imports by countries in Latin America and the Caribbean may also rise, supported by larger inflows to Bolivia, Colombia, Costa Rica, Haiti and Peru. On the other hand, improved supplies should allow Brazil and Cuba to reduce their imports. In the other regions, the EU is officially projected to buy 1.3 million tonnes in calendar 2014, up 5.5 percent from last year. In 2013, the EU sourced increasing volumes from countries benefiting from unlimited and tariff-free access to the EU market under the Everything-But-Arms programme (EBA), in particular Cambodia, a matter of increasing concern to the EU rice industry. The Russian Federation and the United States are also expected to step up imports in 2014.

On the supply side, ample availabilities in exporting countries, amid large harvests and opening inventories, have translated into steady declines in export quotations. The price falls were particularly pronounced in Thailand, reflecting the suspension of the pledging programme in February 2014 and the heavy downloads of supplies from public stocks, a trend that has brought export quotations from the country heavily down, helping it to regain its competitive edge. As a result, Thailand may be able to capture much of the expansion in world import demand, with exports forecast to rise from 6.6 million tonnes in 2013 to 8.7 million tonnes this year. Most of the other exporters may be in a position to increase their sales too, in particular Viet Nam, which, as one of the traditional suppliers of rice to Indonesia and the Philippines, should benefit from the expected surge in purchases by the two countries. Exports by Pakistan are also predicted to end higher in 2014, on the back of the good 2013 crop, continued strong demand in East Africa and the lifting of import restrictions by the Russian Federation in February. As one of the five major rice exporters, the United States is officially forecast to keep rice shipments steady at about 3.3 million tonnes, reflecting limited domestic supplies and relatively high prices. Accrued competition and higher domestic requirements may, in turn, depress shipments from India, the number one exporter since 2012, from 10.5 million tonnes in 2013 to 9.8 million tonnes this year, a level that would preserve the country leading position among exporters. As for the other rice exporting countries, most may benefit from the expansion of trade and step up deliveries, including Cambodia and Myanmar, both of which will benefit from the EBA preferential access to the EU market, but also Argentina and Brazil. By contrast, limited supplies will likely constrain sales by Australia and Uruguay.

Although very preliminary and largely drawing on current expectations on supply and demand, rice trade in calendar 2015 is forecast to stay close to the record anticipated for 2014. Rice flows from the major sources may, however, differ from those currently predicted for the current year. Shipments from Thailand, in particular, may increase further in 2015, enough for the country to recover its leadership among exporters. With the exception of the United States, which may also sell more in 2015, all the other major exporters may cut deliveries, especially India, but also Pakistan and Viet Nam. As for imports, these are anticipated to fall in China, Malaysia and Sri Lanka, compensating for increases in Brazil, Cote d’Ivoire, the Republic of Korea, the Islamic Republic of Iran, Iraq, Nepal and Nigeria.

UTILIZATION

Food drives rice utilization

Still tentative and based on early expectations of 2014 production, FAO sees global rice utilization in 2014/15 expanding by about 12 million tonnes, or 2.4 percent, to 502.2 million tonnes. Much of the season’s consumption growth would be sustained by a continuing rise in direct human consumption, as food intake is estimated to absorb 417 million tonnes in 2014/15, 1.7 percent, or 7 million tonnes more than in 2013/14. However, amounts destined to animal feed and other uses – including seeds, nonfood processed products and waste – are also anticipated to increase. Taking into account a projected 1.4 percent growth in world population, the average rice food intake would rise to 57.7 kilos per capita, which is somewhat above the 2013/14 estimate of 57.4 kilos. Indeed, rice remains expensive in domestic markets, with many countries reporting lingering high local prices.

GLOBAL RICE INVENTORIES

Forecast to rise for the ninth consecutive year

Based on the latest estimates, global rice stocks carried over in 2014 are set to rise for the ninth consecutive year, reaching 180.9 million tonnes (milled basis), 3.4 percent, or 6 million tonnes, above their opening level. All of the increase will be concentrated in the developing countries, where inventories would rise by 4 percent, largely sustained by a further increase in China. By contrast, poor production results may entail a 5 percent contraction of carryovers in developed nations. As a group, the five major rice exporters are expected to build up their reserves, owing to larger inventories in Pakistan, Thailand and Viet Nam, which would compensate for a drawdown in India and the United States. As a result, the world stock-to-use ratio, a key indicator of food security, is predicted to rise from 35.7 percent in 2012-13 to 36.0 percent in 2013-14. As for the five major exporters’ stock-to-disappearance ratio, which is a better indicator of the international market tightness, current forecasts point to a decline from 28.0 percent to 27.8 percent over the same period.

Although still very preliminary and based on early prospects for production, trade and utilization in 2014/15, global rice stocks carried over in 2015 are forecast to be trimmed for the first time in ten years, albeit by only 0.4 percent. If confirmed, the reduction of world rice stocks would be the first, after 9 years of uninterrupted stockpiling. Whether the projected decline is a sign that world supplies are finally adjusting to better match demand remains to be seen.

[1]All figures quoted correspond to rice expressed on a milled weight basis

OILCROPS, OILS AND MEALS[1]

PRICES[2]

Oilseed and oilmeal prices to soften in the second half of 2013/14; vegetable oil prices to remain firm

At the beginning of the 2013/14 season (October/September), global production prospects pointed towards a relaxation in prices for oilcrops and derived products. With oilseed and especially soybean output anticipated to grow markedly for a second consecutive year, the global supply situation was forecast to improve. In particular, oilmeal prices were expected to relax, given the possibility of a sizeable surplus of production over demand.

Contrary to such expectations, international prices for oilseeds and oilmeals started moving upward towards February 2014. The sudden rise was mainly driven by a progressive tightening in the United States’ soybean balance caused by an exceptionally strong export pace: given limited (old-crop) availabilities in Brazil and Argentina, much of China’s brisk import demand was met by the United States, causing a rapid dwindling in United States’ stock positions. Furthermore, increasingly unfavourable weather conditions depressed new-crop soybean yields in South America. These developments, together with indications that global export availabilities of rape and sunflower seed could be less abundant than expected, heightened concerns over supplies. International prices responded accordingly. By mid-April, CBOT soybean futures and spot prices of oilseed and meals (as reflected by FAO’s price indices) had exceeded their corresponding values of one year earlier.

Vegetable oil prices also strengthened in recent months, largely driven by palm oil, the most widely traded oil. Hit by unfavourable weather conditions, palm oil production in Southeast Asia fared below expectations, while global import demand for palm oil (and other oils) gained pace, also because of a steady uptake from the biodiesel industry. The ensuing reduction in global palm oil inventories propelled palm oil prices to 18-month highs.

With South America’s record soybean crop finally ready to enter the market and a likely slowdown in China’s import demand, the global supply and demand situation for oilseed and meals is likely to improve substantially in the coming months, eventually allowing prices to soften. The possibility of a further expansion in world soybean production in 2014/15 would lend additional relief to prices. By contrast, prices of vegetable oils are unlikely to relax significantly, given the prospect of limited palm oil production growth in Malaysia and rising domestic consumption in Indonesia, which inevitably will reduce global export availabilities.

OILCROPS

Another record-breaking harvest expected in 2013/14

After the strong rebound of 2012/13, global oilcrop production is forecast to expand by another 6 percent, or 27 million tonnes, in 2013/14. Higher area and better yields will both contribute to the expansion. Growth will be led by soybeans, the production of which is forecast rise by 5 percent compared to 2012/13. In the Northern Hemisphere, where the 2013/14 season crops were harvested in calendar 2013, aggregate soybean output has risen by about 5 million tonnes, under the lead of the United States, which remains the world’s top producer. In the United States, soy plantings dropped slightly, but yields soared to record levels thanks to beneficial weather conditions, thus allowing production to recover from the last two season’s poor levels. In China, production continued to shrink following additional cuts in area planted. India’s production declined despite record plantings, as excessive monsoon rains slashed yields. In the Southern Hemisphere, notably South America, the soybean harvest is now in full swing. Thanks to a further expansion in area harvested, the region’s total production should climb to a new record. During the growing season, production forecasts for the region went through several downward corrections, as crops suffered from poor weather, which pushed yields below potential. Still, Brazil and Argentina are both set to harvest record crops, with aggregated output up 8–9 million tonnes from last year. In Paraguay and Uruguay, however, prolonged spells of dry weather may lead to a slight drop in production.

Significant improvements are also expected for rapeseed and sunflowerseed. Global rapeseed production is estimated to expand by an above-average 11 percent, following near-ideal weather conditions in several key producing countries, especially in Canada, the United States, Ukraine and the Russian Federation, but also in the EU, India and China. While higher plantings in some countries also contributed to the rise in production, the area harvested in Canada actually dropped compared to the previous year. By contrast, Australia reported a reduction in both area and yields. Sunflowerseed is expected to see a steep recovery in global production (up 16 percent year-on-year), as countries hit by adverse weather conditions last season – notably Ukraine, the Russian Federation and the EU – benefitted from very good growing conditions this season, allowing production to rise to all-time highs, especially in the Black Sea region. By contrast, Argentina reported a third consecutive drop in sunflowerseed output on account of both lower plantings and adverse weather. World groundnut output is also expected to expand, owing to a strong rebound in India and additional production gains in China, which should offset a drop in the United States. Further growth is also expected in palmkernel, reflecting continued expansion in mature oil palm area in Southeast Asia, particularly in Indonesia.

By contrast, cottonseed and copra production are both set to fall by 3–4 percent this season. For cottonseed, a higher outturn in India will not be sufficient to compensate for marked declines in the United States and China. As for copra, this year’s global output is set to fall as a result of Typhoon Haiyan, which inflicted serious damage on coconut palms in the Philippines.

OILS AND FATS[3]

Growth in global oils/fats supplies to rebound

Current crop forecasts for 2013/14 should translate into a 6-percent increase in global oils/fats production after two seasons of below-average growth. The expected rise is mostly driven by the good outturn of several high oil-yielding crops (rapeseed, sunflowerseed and groundnut), in addition to the all-time record in soybeans. Production of palm and palmkernel oil, which together account for about one-third of global oil supplies, is also anticipated to expand, although this year’s growth rate could fall behind that of recent years. In Malaysia, where prolonged dry weather has stressed oil palms, possibly affecting their productivity in the forthcoming months, production is tentatively forecast to rise by some 300 000 tonnes, or 2 percent, compared to over 4 percent on average during the last three years. By contrast, in Indonesia, production looks set to rise by at least 2 million tonnes, or 7 percent, primarily on further growth in mature palm oil area.

Global oils/fats supplies (comprising 2013/14 production and 2012/13 ending stocks) are forecast to increase by 5 percent year-on-year – about double the rate achieved last season. Thanks to record crops, domestic availability of oils/fats is expected to improve strongly in several major producing countries, notably Canada, Ukraine and the Russian Federation, but also in Argentina, Brazil, China, the EU, India and Indonesia. By contrast, domestic supplies may shrink in Malaysia and the Philippines. In the United States, due to extremely low opening stocks, total supplies are estimated to increase by merely 2 percent, recovering only partially from the exceptional drop of the last two seasons.

Biodiesel industry to contribute to growth in global oils/fats consumption

After last season’s poor growth, a rebound in global oils/fats consumption is forecast for 2013/14. Relatively low prices, continued economic growth in several countries in Asia and rising use of oils/fats as biodiesel feedstock are expected to stimulate demand. Total consumption is currently estimated to expand by nearly 9 million tonnes, or 5 percent.

With regard to individual oils/fats, palm oil should contribute less than usual to total expansion in utilization, mirroring the modest growth in supplies, which has led to a lower than usual price discount of palm oil relative to other vegetable oils. Conversely, soy, rape and sunflowerseed oil are expected to play a more important role in this year’s consumption rise.

Country-wise, developing nations in Asia are again set to drive global consumption growth, in particular, China, India and Indonesia. While in China, oils/fats consumption growth could slow down compared to past years, in Indonesia, it is forecast to surge by 2.3 million tonnes, as more palm oil is absorbed by the country’s biodiesel industry following the introduction of ambitious mandatory consumption targets. Demand in Malaysia is also likely to strengthen, following a nationwide implementation of higher biodiesel blending rates starting in July 2014. In the EU, the world’s second largest consumer after China, a rebound in oils/fats consumption seems likely, underpinned by higher demand from biofuel producers, as overseas biodiesel purchases remain constrained by anti-dumping duties. By contrast, in the United States, continued tightness in domestic soybean supplies and a possible stagnation in demand from the biodiesel sector are expected to limit year-on-year growth in oils/fats consumption to 1 percent. Demand from the United States biodiesel producers will depend on the final decision on this year’s mandatory blending volumes and on whether or not the blender’s tax credit is going to be renewed. In Argentina, biodiesel production – and thus demand for soyoil as fuel feedstock – could shrink for the second consecutive year as the country’s biodiesel exports continue to be hindered by the EU’s import restrictions. The impact of the recently raised domestic blending mandates on Argentina’s consumption might also be limited because, at the prevailing government-set prices, production of biodiesel for the domestic market is said to be unprofitable. Similarly, in Brazil, demand from the biodiesel sector is not expected to expand significantly this season, given that the government again postponed the shift to higher mandatory blending rates.

Stock-to-use ratio to recover in 2013/14

Based on the above supply and demand forecasts, global 2013/14 closing stocks (which comprise oils/fats inventories plus the oil contained in stored oilseeds) are forecast to grow by about 9 percent – making up for last season’s decrease. Larger global inventories of soybean, rape and sunflowerseed (and their respective oils) should more than offset a likely reduction in palm oil stocks. Rapeseed oil inventories are expected to swell to an all-time high, with Canada and China recording the strongest rises. In Canada, the pile-up is related to bottlenecks in the country’s rail transportation, which have seriously hampered export flows. Regarding soy, the projected rise in global inventories concerns principally China, Argentina and Brazil. In the United States, where efforts have concentrated on meeting exports demand, inventories should remain close to last season’s depressed level. In the case of palm oil, the anticipated shortfall in production is likely to result in a drawdown in stocks in Indonesia and Malaysia.

Despite the projected sizeable increase in global inventories, the world stock-to-use ratio for oils/fats may recover only partially from the low level recorded last season. An even more modest recovery is expected in the stock-to-disappearance ratio of the major exporting countries[4], which helps explain why international prices for oils/fats trended upward in recent months.

Trade in oils/fats to expand moderately

Expansion in global oils/fats trade (including the oil contained in traded oilseeds) should be limited to 3 percent this season. Sluggish consumption growth in a number of key importing countries and the possibility of firming international oil and oilseed prices foreshadow a slow expansion in trade. Falling import requirements in the EU and slower expansion of imports by China and India – the world’s three leading importers – are mostly behind the anticipated deceleration in world trade. In all three destinations, abundant domestic supplies are foreseen to weaken import demand.

With respect to exports, large availabilities of soy, sunflower and rapeseed oil should make up for a reduction in global shipments of coconut, palmkernel and, especially, palm oil – the world’s most traded oil. The drop in palm oil exports is extraordinary, considering that, typically, palm oil accounts for at least half of the expansion in global trade (5-year average). The reversal comes from this year’s unprecedented decline in shipments from Indonesia and, in particular, Malaysia. Combined, the two countries are forecast to reduce their exports by 1.4 million tonnes, or 4 percent, amid poor production growth and higher domestic consumption of palm oil-based biodiesel. Furthermore, the appreciation of international palm oil prices relative to competing oils is bound to depress import demand for palm oil. Global shipments of soy and sunflower oil are projected to rise by 2.6 million and 1.9 million tonnes, respectively. As to soyoil, the second most traded vegetable oil, higher shipments are expected, in particular from the United States, but also Brazil and Argentina. The boost in United States’ exports (15 percent) is particularly noteworthy when compared to the only modest improvement in domestic supplies (4 percent). In Argentina, higher shipments are partly linked to weak demand from the local biodiesel industry. For sunflower oil, Ukraine and the Russian Federation will be responsible for the expected world increases. Thanks to its more competitive price, the share of sunfloweroil in total vegetable oil trade is estimated to climb to 8 percent. As for rapeseed oil, global trade is seen expanding by no more than 0.5 million tonnes despite this season’s conspicuous rise in production, mainly reflecting the above mentioned transportation difficulties faced by Canada, the world’s top rapeseed supplier. With regard to coconut oil, the anticipated drop in global exports is entirely due to the Philippines’ reduced copra harvest.

MEALS AND CAKES[5]

Global meal supplies to expand in 2013/14

If the current crop forecasts materialize, global meal/cakes production could expand by at least 6 percent, rising for the second consecutive year and setting a new record. Production growth will again be driven by soy: mirroring record harvests, incremental soymeal output is estimated at 5 million tonnes (expressed in protein equivalent). Sizeable increases are also projected for rape and sunflower meal.

Also global oilmeal supplies (which comprise 2013/14 production and 2012/13 carry-out stocks) are forecast to climb to a new record, exceeding last year’s level by almost 6 percent. The world three leading meal producers, Argentina, Brazil and the United States, would account for a large part of total expansion. In the United States, domestic availability is anticipated to recover from recent drops, though it will still fall short of past record levels. Sizeable expansions are also likely in Canada, the EU, the Russian Federation and Ukraine. All these improvements would primarily result from good harvests although, in Argentina and Brazil, higher carry-in stocks are also playing a role. By contrast, in China, domestic supplies could diminish significantly compared to last year, mainly because of a sizeable reduction in carry-in stocks.

Growth in meal consumption to accelerate

Following subdued growth of less than 2 percent in the last two seasons, world meal consumption is forecast to expand by 3–4 percent in 2013/14. Current forecasts are based on growing demand by the livestock sector that will arise from further economic growth in a number of countries and on the likely softening in international meal prices. At the same time, however, ample global maize availabilities are expected to dampen growth in global meal demand.

Mirroring this season’s supply forecasts, consumption growth will be led by soymeal, followed by rape and sunflower meal. Developing countries should contribute strongly to total growth, with countries in Asia playing a dominant role. In China, consumption is projected to expand by about 4–5 percent, less than in recent years, reflecting a relatively weak projected expansion in domestic pig and, especially, poultry production. Among developed countries, aggregate consumption may recover only in part from the sizeable fall recorded last season. Especially in the EU and the United States, consumption levels are expected to remain well below their respective historic peaks. Given record high export commitments, a further fall in the United States domestic consumption seems likely.

Strong recovery in meal inventories possible

Global meal production is forecast to surpass consumption by 5 million tonnes (in protein equivalents), or 4 percent, as opposed to only 1 percent last season. Such production surplus would facilitate a pronounced replenishment of inventories, with global meal stocks (including the meal contained in stored oilseeds) increasing by a whopping 21 percent. The build-up in inventories is to be attributed partly to the large availability of maize, which competes with oilmeals in the international market. The stock build up will be concentrated in selected exporting countries, especially Argentina and Brazil, but also Canada and the Russian Federation. In Argentina, the surge in stocks is partly related to the farmers’ tendencies to store a significant portion of their crop on-farm as a hedge against rising inflation and currency instability. Conversely, in the United States, the world’s second most important supplier of meals, inventories could shrink despite improved domestic production, given the country’s record export commitments.

Based on the current estimates, both the global stock-to-use ratio and the major exporters stock-to-disappearance ratio would improve significantly in 2013/14. In fact, the global stock-to-use ratio is to rise to a 3-year high, which should provide scope for international meal prices to soften. However, prices will likely begin relaxing only after the South American soybean crops become available in the market, i.e. from April/May onward. Until then, the United States’ tight supply situation is likely to keep prices under upward pressure.

Global meal trade expected to resume growth

After last season’s dismal growth, world trade in meals/cakes – including the meal contained in traded oilseeds – is projected to rise to an all-time high in 2013/14, exceeding last season’s level by about 9 percent.

Similar to past years, much of the expansion in world imports of meals will originate in China and other developing countries in Asia. After last season’s exceptional slowdown, China’s imports are estimated to rise by a stunning 16 percent, underpinned by a further expansion in local crushing capacity. With soybean imports tentatively estimated at a record 69 million tonnes (the equivalent of 54 million tonnes of soymeal), China remains the world’s top meal buyer. In the rest of Asia, aggregate imports are seen expanding by 5–6 percent. EU meal imports could resume growth after two successive years of decline, although ample supplies of attractively priced feed grains are likely to dampen the increase in import demand for oilmeals.

Export growth will be concentrated in the United States and South America and primarily concern soybean meal. In the United States, where shipments have advanced at a record pace, total exports could exceed last season’s level by 5.8 million tonnes (including the meal contained in oilseed sales). In order to meet internal demand, the United States may even have to resort to importing an unprecedented level of 1.7–1.8 million tonnes of soybeans. Exports by Argentina and Brazil are projected to expand by about 2.9 million tonnes each. In Brazil, record shipments – made possible by improved port logistics – may confirm the country as the leading supplier in global trade, whereas, in Argentina, exports could fall short of past records, given farmers’ slower than usual release of soybeans into the market. In Paraguay, an only modest expansion in shipments is expected due to recent downward adjustments in harvest estimates. Global exports of sunflower meal are set to climb to a new record, boosted by increased availabilities in Ukraine and the Russian Federation. By contrast, global shipments of rapeseed meal should expand less than originally forecast because of the logistical difficulties encountered in Canada and because of Australia’s poor crop outturn.

2014/15 PRODUCTION OUTLOOK

With the 2013/14 season still on-going, it is too early to draw world supply and demand projections for 2014/15. The only preliminary, incomplete information that can be provided concerns planting intentions in the Northern Hemisphere, where preparations for the next campaign are about to start.

In general, relatively firm oilseed prices should underpin plantings of crops for collection in 2014/15. In particular, continued tightness in the United States’ soybean balance is likely to stimulate global soybean sowings. First estimates for the United States point to a further expansion in soybean cultivation, mostly at the expense of maize. With the soybean/maize price ratio (CBOT September contract) ranging between 2.3 and 2.5 since the end of last year, farmers expect better returns from soybeans than maize. A tentative 6.5 percent increase in area planted, together with on-trend yield levels, would lift the United States’ soybean production to almost 97 million tonnes, 8 percent above the current season’s estimate. Elsewhere, a recovery in production seems likely in India, assuming normal weather conditions, whereas China’s gradual production decline is expected to continue. Later this year, a further increase in plantings appears probable in South America, although rising expenses for plant protection could lower the rate of expansion below last year’s. Overall, another sizeable increase in global soybean output of about 5 percent could be achieved.

With regard to rapeseed, a contraction in production appears inevitable in both Canada and India, unless last year’s optimal weather conditions recur. In Australia, the latest reported planting and yield estimates point to a further slide in rapeseed production. Global production may still turn out close to this season’s record level, thanks to above-average plantings and mostly favourable weather conditions prevailing in the EU, China and Eastern Europe. For sunflowerseed, production could increase again this year, with a further expansion in plantings boosting production in Ukraine and the Russian Federation, provided weather conditions remain favourable and barring further escalation in the ongoing geopolitical conflicts. Also in the United States and Argentina, prospective yield recoveries could lead to higher production. By contrast in the EU, production may fall. The global production outlook for palm oil remains uncertain, given the possible prolonged effects of unfavourable weather conditions earlier this year on the performance of palm trees in Southeast Asia. The possibility of an El Niño weather event developing during the second half of this year creates additional uncertainty.

Together, the above forecasts point to a further, albeit more moderate, rise in total production of oilseeds and oilcrop products in 2014/15, which could pave the way for an increasingly comfortable supply and demand situation – including in the United States.

[1]Almost the entire volume of oilcrops harvested worldwide is crushed to obtain oils and fats for human nutrition or industrial purposes, and to obtain cakes and meals which are used as feed ingredients. Therefore, rather than referring to oilseeds, the analysis of the market situation is mainly undertaken in terms of oils/fats and cakes/meals. Hence, production data for oils (cakes) derived from oilseeds refer to the oil (cake) equivalent of the production estimates for the relevant oilseeds, i.e. they do not reflect the outcome of actual oilseed crushing. Furthermore, the data on trade in and stocks of oils (cakes) refer to the sum of trade in and stocks of oils (cakes) plus the oil (cake) equivalent of oilseed trade and stocks.

[2]For details on prices and corresponding indices, see Statistical Tables section, table 24.

[3]This section refers to oils from all origins, which – in addition to products derived from the oil crops discussed under the section on oilseeds – include palm oil, marine oils as well as animal fats.

[4]Argentina, Brazil, Canada, Indonesia, Malaysia, Ukraine and the United States.

[5]This section refers to meals from all origins. In addition to products derived from the oil crops discussed under the section on oilseeds, this also includes fish meal and meals of animal origin.

SUGAR

PRICES

Sugar prices strengthen on lower than expected production surplus for 2013/14 season

International sugar prices, as measured by the ISA daily prices for raw sugar, followed a declining trend at the beginning of 2013, continuing the steady fall that had characterized the market since 2011. The slide is attributed to a large expansion of production between 2008/09 and 2010/11. Prices averaged US 18.02 cents per pound between January and June 2013, a decrease of 20 percent from the same period in 2012. However, by September 2013, prices had moved upward, following reports that unfavourable weather constrained sugarcane harvesting operations in the Centre-South region of Brazil, the world’s largest sugar producer. Prices reached an average of US 18.66 cents per pound in October, before commencing a downward trend to reach an average US 15.62 cents per pound in January 2014. Since then, prices have recovered slightly, as a severe drought affected sugarcane crop development in Brazil. Between January and March 2014, international sugar prices averaged US 16.70 cents per pound, about 10 percent less than in the same period in 2013. Early indications of a smaller global production surplus for the 2014/2015 season could limit further price declines, although the plentiful global inventories accumulated over the past few years will reduce the scope for large gains in world sugar quotations.

PRODUCTION[1]

World sugar production to decline marginally in 2013/14

With most of the 2013/14 sugarcane and sugar beet crops already harvested in the main producing areas, FAO’s current estimate for world sugar production in 2013/14 stands at 182 million tonnes, relatively unchanged from the November 2013 forecast, and 0.2 percent below the 2012/13 season. Downward revisions in output, mainly for Brazil, India and the EU, were largely offset by upward revisions for Thailand and Pakistan. Developing countries are forecast to harvest 141.4 million tonnes, 1.2 percent more than in 2012/13, led by large increases in Thailand and Pakistan, while output in developed countries is anticipated to contract by 5.0 percent to 41 million tonnes, led by the Russian Federation and the EU. Despite the expected fall, the first one since 2008, global sugar production is anticipated to surpass consumption by 4.1 million tonnes. As a result, world sugar stocks are likely to benefit and stand above their 10-year average. Preliminary forecasts for the 2014/15 season indicate the possibility of a reduction in the production surplus, as sugar crop areas contract on the back of relatively low sugar returns.

In South America, production is expected to remain close to last year, amid generally unfavourable weather conditions, notably in Brazil. In fact, Brazil’s sugar output will decline as a result of extreme drought conditions in early 2014, which are expected to affect sugarcane yields. The country’s production is now estimated at 39.7 million tonnes, 300 000 tonnes below the volumes reached in 2012/13. However, it is uncertain how much of the sugarcane harvested will be diverted to ethanol production. Brazil’s sugar output is influenced by changes in the ethanol/sugar price ratio, which eventually determines how much of the two products will be produced out of sugarcane. The higher the price ratio, the larger the amount of cane converted into ethanol at the expense of sugar. Given that the ethanol returns to sugar have recently strengthened and that Brazil’s mandatory amount of ethanol to be blended into gasoline has been raised back to 25 percent, after it had been cut to 20 percent in October 2011, it is now expected that sugarcane harvest will be split about equally between the two products. On the other hand, sugar production is expected to increase in Colombia, the second largest producer in the region, and in Argentina, despite unfavourable growing conditions in the main producing region of Tucuman.

In Central America and the Caribbean, estimates for 2013/14 indicate that sugar production in Mexico will decline, due to the large supply availabilities in 2012/13 that have reduced the incentive to expand sugarcane areas for the new season. In Guatemala, higher than expected sugarcane yields boosted sugar output in 2012/13, but no further increase is anticipated for 2013/14. In Cuba, sugar production is expected to continue its recovery, driven by investments increasing sugar productive capacities at both farm and factory levels. A series of policy measures, including higher official price support to cane, also helped incentivise farmers and production is now estimated to expand by 16 percent for the new season.

In Africa, 2013/14 sugar production is projected to rise on the back of largely favourable weather conditions. South Africa, Egypt, Swaziland and Sudan are anticipated to harvest larger crops, while output is expected to remain at last year’s level in Kenya. In Zambia, sugar production has increased 90 percent since 2006, driven by investment in irrigation and the price incentives introduced under the 2009 EU Economic Partnership Agreement (EPA). Sugar production is estimated to increase by another 2.2 percent in 2013/14. In South Africa, the largest producer in the region, sugarcane output has benefited from good rains since October, higher harvested areas and better yields. The crop is estimated to be the largest since 2005/06.

In Asia, sugar output is expected to increase by 1.3 percent compared with the 2012/13 marketing season, due to expansions in Thailand and Pakistan. At the same time, production is set to fall in India, China and Turkey. Latest estimates indicate that sugar output in Thailand, the world’s second largest sugar exporter, will increase by close to 10 percent in 2013/14, outdoing the all-time high of the previous season, amid favourable weather and area expansion. Similarly, production increases are expected in Pakistan, where the area planted to sugarcane has expanded in response to the relatively high sugar returns witnessed over the past three seasons. Remunerative prices also encouraged the use of fertilizers and other inputs, which boosted sugar crop yields. Sugar output is also set to expand in Indonesia.

In contrast, sugar production in China is expected to decline in 2013/14, due to unfavourable weather conditions, namely frost, which hit some producing regions in the south of the country. This is despite a reported increase of close to 1 percent in sugarcane planted area. Over the past couple of years, the financial assistance, as well as the subsidized inputs that sugar mills provided to farmers, were major contributing factors in boosting plantings. With limited available areas for expansion due to competition with other crops, further increases in output will need to originate from high yielding varieties and/or improved crop management and productivity gains at the mill-factories. In India, despite good monsoon rains which boosted yields, total estimated sugar production is now gauged at 26 million tonnes, 0.5 million tonnes lower than in 2012/13, as a dispute over cane prices delayed sugarcane crushing. It is expected that the recent partial deregulation of the sugar industry, which abolished the required 10 percent levy on sugar mills and deregulated sales in the open market for the next two years, will result in providing sugar mills with some financial flexibility to repay cane arrears. As such, it is foreseen that the amplitude of the production cycles which characterize the sugar subsector in India will diminish over the coming years. Output in 2013/14 is also likely to fall in Turkey, mainly due to a reduction in planted beet areas following a cut in quota allocations for the new season.

In Europe, the latest estimates for the EU point to a decrease in sugar production, as unfavourable weather conditions hampered beet yields, notably in France, Germany and Poland. Total beet area also is reportedly down, with significant decreases in Germany and Italy. As expected, the EU Commission, Parliament and Council came up with a compromise solution in June for the 2014–2020 Common Agriculture Policy. This included the elimination of sugar production quotas and of the minimum sugar beet prices as of September 2017. With the removal of the production quotas, the EU is projected to become more self-sufficient in sugar in the medium-term. The impact of the abolition of sugar quotas on the EPAs and EBA countries is still uncertain and further analysis is warranted.

Production in 2013/14 is expected to fall significantly in the Russian Federation, as a result of the decision by farmers not to expand area, given the scarcity of storage facilities and limited processing capacity – this caused problems to the Federation in 2011/12, when it harvested a record-level crop. Also, an increase in the area planted to grains at the expense of beet explains the reported fall of 21 percent in beet planted area. Sugar production is also expected to contract sharply in Ukraine, where cultivated area is reportedly significantly lower than last year. Ample supplies in 2012/13 against limited processing capacity led farmers to substitute grains for beet, which is less profitable than alternative crops such as maize, sunflower and wheat. In Australia, sugar output is projected to decline by 2.2 percent following floods and the spread of canopy disease which impacted plantings. Nonetheless, the weakening of the Australian dollar against the US dollar has so far helped boost sugar producer returns in local currency.

In the rest of the world, production in the United States is forecast to fall from its 2012/13 level, as ample supplies have put pressure on domestic sugar prices. The United States stock-to-use ratio is projected at 22.6 percent in 2013/14, well above the historical level of 14.5 percent. In order to sustain prices to the loan-level price guaranteed to sugar producers, the USDA purchased sugar and re-sold it at a loss to bioenergy producers as part of the Feedstock Flexible Program (FFP). The oversupply condition that prevailed in 2012/2013 season led processors to forfeit sugar, a situation that had not occurred in a decade.

UTILIZATION

Falling domestic sugar prices to support growth in consumption

Global sugar consumption is anticipated to reach 178 million tonnes in 2013/14, 4 million tonnes, or 2.3 percent, more than in 2012/13, in line with the 10-year trend. Large supply availabilities, notably in Thailand, and lower international and domestic prices are expected to support increases in per capita sugar intake in 2013/14. Falling domestic sugar prices were recorded in major markets, including Brazil, India, China and the NAFTA region. Under current prospects, world per capita sugar consumption is to rise slightly, from 24.8 kg in 2012/13 to 25.1 kg in 2013/14. In developing countries, aggregate sugar utilization is estimated to expand by 3.7 million tonnes, to 127 million tonnes, equivalent to 71 percent of global consumption. In the generally more mature markets of the developed countries, consumption is to increase by 0.6 percent to 51 million tonnes, underpinned by higher consumption in the United States, prompted by greater use of sugar for ethanol production under the Feedstock Flexible Program.

Improved 2013/14 global economic prospects, especially in developing countries, could boost further demand, as manufacturing and food preparation sectors, which account for the bulk of aggregate sugar consumption, are highly influenced by the economic environment. However, the depreciation of the currency of several major sugar importers against the US dollar – which makes imports in domestic currency more expensive – could lead to weaker intake of sugar in net importing countries, which include Indonesia, the Russian Federation, Egypt, Syrian Arab Republic and Japan.

TRADE

Trade to expand significantly in 2013/14

The forecast for world sugar trade in 2013/14 (October/September) stands at 56.8 million tonnes, a 6.2 percent increase over the previous season. The main feature of sugar trade in the 2013/14 season is the greater availability of supplies in the main traditional origins, including Thailand, Australia and India. Although exporting less than in 2012/13, Brazil is expected to supply 45 percent of world trade in 2013/14. However, the final volume it sells abroad will depend on the quantity of sugarcane production processed into ethanol, especially considering the recent increase in the country mandated blend ratio and gasoline prices. Demand for ethanol will also be driven by the need of the United States to meet its advanced mandate requirements through imported ethanol-based sugarcane from Brazil. Also, a further depreciation of the Brazilian real against the US dollar could stimulate the country exports beyond the current forecasts. The second largest world exporter, Thailand, is expected to expand sugar deliveries by as much as 0.7 million tonnes amid ample domestic supplies and competitive export pricing. The bulk of the country’s export is forecast to be shipped in raw form (about 60 percent) to neighbouring countries, including Indonesia, Malaysia and the Republic of Korea. Exports to China are expected to increase, to compensate the fall in Chinese production. Thailand is also projected to fill its 2014 tariff rate quota (TRQ) of 15 027 metric tonnes (raw value) with imports into the United States.

Despite an estimated decline in sugar output, shipments from India are estimated to reach 2 million tonnes, up 1.3 million tonnes from last season, amid large inventories and the newly introduced export subsidy programme. India’s competitiveness on the international market is being constrained by rising production costs and falling world prices, which may limit further gains in world markets. Deliveries from Australia, the world’s third largest supplier in 2012/13, are set to rise to just below the country’s historic high of 3.61 million tonnes, supported by greater exportable surplus. The weakness of the Australian dollar with respect to the US dollar is also likely to benefit exports. South Africa is likewise expected to sell more, following a larger harvest, with the bulk of shipments directed to the Southern Africa Customs Union (SACU) market, and to the United States to fill its 2014 TRQ allocation.

Exports by Guatemala are foreseen to be larger than last year by close to 6 percent, given ample supply availabilities and competitive pricing. Sugar has become a key source of foreign exchange earnings for the country, with large investments targeting refined sugar export markets, especially in the United States, the Republic of Korea and Canada, the main destinations of Guatemala’s sugar outflow. The country is now the fifth largest global sugar exporter. Sales by Mexico are anticipated to increase in 2013/14, despite lower production, owing to ample inventories. The Government of Mexico recently established a trust fund to facilitate exports of sugar surplus to NAFTA and international markets, in an attempt to lift internal prices. Aside from the United States market, other destinations for sugar export from Mexico include Canada, Burkina Faso, Columbia, Chile and the Netherlands. However, the final amount of shipped sugar will depend on the realized production for 2013/14 and the extent to which high fructose corn syrup (HFCS) substitutes for domestic sugar use. Production gains are also anticipated to enable Cuba to boost exports by 8 percent, with about 0.4 million tonnes directed to China, as part of an export agreement between the two countries.

Imports by Asian countries are forecast to expand in 2013/14 by 2.2 million tonnes, as a result of falling international prices and steady growth in domestic demand. Much of the increase would stem from higher purchases by Indonesia and China, underpinned by a steady demand from the food and beverages industry and lower international prices. In 2013/14, Indonesia is expected to become the world largest sugar importer, with volumes reaching 5.4 million tonnes, closely followed by China.

Similarly, in Europe, shipments to the EU are forecast to rise due to a contraction in domestic sugar production. EU’s imports might need to be revised upwards following the conclusion in 2013 of a free trade agreement between the EU, Colombia, Peru and six central American countries, namely Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama. These free trade agreements will allow an additional volume of 264 000 tonnes of sugar to enter the EU duty-free under TRQs and to increase at an annual rate of 3 percent. As a result of falling domestic production, imports by the Russian Federation, once the world’s largest sugar market, are expected to rise from 900 000 tonnes in 2012/13 to 1.6 million tonnes in 2013/14, still below the 2.8 million tonnes taken in 2010/11. Likewise, shipments into Turkey are estimated to increase, while those to Japan, Malaysia and Morocco are projected to fall, given the anticipated improvement in domestic availabilities.

Imports by African countries are expected to remain relatively unchanged, in general, given the strong gains in their sugar output estimated for the 2013/14 season. In the rest of the world, purchases by the United States, about half of which are managed through a TRQ system of 1.4 million tonnes, may drop somewhat in light of falling domestic prices and comfortable stock levels.

1Sugar production figures refer to centrifugal sugar derived from sugar cane or beet, expressed in raw equivalents. Data relate to the October/September season.

MEAT AND MEAT PRODUCTS

Moderate production growth; trade mixed

World meat production is anticipated to grow modestly in 2014 to 311.8 million tonnes, an increase of 3.3 million tonnes, or 1.1 percent, compared with 2013. Growth is anticipated to be concentrated in the developing countries, which are also the main centres of rising demand.

At the international level, prices have remained high by historical standards for the past three years. The FAO Meat Price Index averaged 186 in April 2014, unchanged when compared with a year earlier. Falling feed prices have facilitated some price decrease for poultry and pigmeat, while prices of bovine and ovine meat have remained firm – reflecting limited export availability.

Global meat trade is forecast to increase moderately, by 1.4 percent to reach 31.3 million tonnes in 2014 – or 10 percent of production. At this level, growth would be less than the average for recent years, reflecting production constraints in some of the principal exporting countries. There are marked differences in projected trade for the different varieties of meat, with growth forecast for bovine and poultry meat and a decline for ovine and pigmeat. Poultry remains the main product traded, representing 43 percent of the total, followed by bovine, pig and ovine meat, respectively.

BOVINE MEAT

Production: little changed

Bovine meat production is forecast to remain largely unchanged at around the 68 million tonne mark, a mere 0.5 percent more than in 2013, continuing a trend of limited growth which has been evident for several years.

The small increase in world production is being led by the developing countries, which collectively account for almost 60 percent of the total. As a group, they are forecast to record a 2.3 percent growth, concentrated principally in Latin America and the Caribbean and in Asia. The developed countries are predicted to experience an output decline of 1.9 percent, mainly due to a fall in North America and, to a lesser extent, Oceania.

In South America, cattle availabilities and slaughter have been rising, particularly in Brazil and Argentina. Brazil, the second largest producer after the United States, is anticipated to account for most of the region’s growth, with production projected to rise by 300 000 tonnes to 9.9 million tonnes. The Brazilian cattle herd is in an expansion phase supported by improvements in productivity and genetics. Additionally, favourable prices on the export market have stimulated the use of feed to maintain cattle weight during the dry season. In Argentina, government export restrictions have increasingly focused the industry on internal demand, which absorbs 93 percent of production. Preference for younger, lighter animals for the domestic market means that production is growing at a relatively slow rate. In neighbouring Paraguay and Uruguay, strong growth is anticipated, spurred by international demand and sustained cattle prices, and supported by herd growth and productivity increases.

In Asia, India, the fifth largest bovine meat producer, is expected to continue to expand its industry, supported by government programmes to utilise buffalo bulls from the country’s expanding dairy sector. Output is forecast to drop in the Republic of Korea, where low profitability, in part due to competition from lower-priced pork, has led to herd reduction. In China, production is anticipated to show moderate growth to 6.8 million tonnes, as increased consumer demand has stimulated the slaughter of dairy cattle by small-producers who are unable to comply with newly introduced milk quality standards.

Most parts of Africa have received reasonable rainfall during the current season, which has improved pasture conditions and led to a moderate increase in bovine meat production. However, due to delay in the onset of seasonal rains in several East African countries, pasture and fodder and feed supplies suffered. As a consequence, production growth in some countries, including Kenya and Tanzania may be constrained. Furthermore, outbreaks of foot-and-mouth disease in east-central Kenya will have a negative impact on production. A mass vaccination programme has been initiated and the movement of livestock curtailed in the affected areas. Egypt is expected to show continued limited growth in production – based on dairy cattle (including buffaloes). Meanwhile, output in South Africa may be little changed, as dry conditions in some parts of the country could negatively affect pastures, as well as feed and forage availability.

Overall, production in developed countries is forecast to drop by 1.9 percent, to 28.5 million tonnes. In the United States, the world’s largest beef producer, prolonged and extensive dry conditions have caused a fall-off in the production of calves and consequent herd reduction. Therefore, beef output could decline by almost 4.5 percent, to 11 million tonnes, its lowest level since 1994. Neighbouring Canada is expected to see only a small increase in production, as herd rebuilding takes priority. In Oceania, drought has affected the industry. In Australia, slaughter rates increased in 2013/2014, as availability of pasture and fodder were reduced. In 2013/14, output is expect to fall by 4 percent, as drought conditions have persisted in some parts of the country. In New Zealand, the effects of drought were limited to the first part of 2013, but still resulted in an increased slaughter rate and an associated rise in production for the 2012/13 season. Output is expected to contract in 2013/14, as the sector recovers and herds are rebuilt. The beef industry in New Zealand is highly dependent on the dairy sector for slaughter cattle and male calves for fattening. In the Russian Federation, continued herd reduction is expected to counterbalance some improvement in productivity, and output is anticipated to be little changed at 1.6 million tonnes. In the EU, the world’s third largest beef producer at 7.4 million tonnes, the long-term reduction in the cattle herd is slowing which is expected to result in a small rise in production, with dairy cattle set to increase, while beef cattle may decline slightly.

Trade: China’s imports expected to grow; Brazil retains premier export position

World trade in bovine meat is anticipated to grow by 3.5 percent, to 9.4 million tonnes, despite international prices being at exceptionally high levels. Consumer demand and a shortage of domestic supplies in some countries are important contributors to the expansion in trade.

China, in particular, is expected to record a strong rise in imports, although not to the same degree as in 2013, when the doubled. China could buy 1.2 million tonnes in 2014, 18 percent more than last year, confirming the country as the main world market for bovine meat. In China, demand continues to be stimulated by rising incomes and growth in meals outside the home. Additionally, some consumers have switched from poultry to other meats following an outbreak of avian influenza last year. Elsewhere in Asia, imports by Japan, the Republic of Korea and Malaysia could increase, as domestic production is forecast to be either stable or, in the case of Japan and the Republic of Korea, lower. Purchases by the EU may also rise, as a result of a focus on herd rebuilding. Imports by the second major market, the United States, are expected to increase by 3.3 percent, to compensate for reduced domestic production; while those of third-placed Russian Federation are forecast to change little, as exceptionally high international prices limit demand. A number of other important importers, such as Vietnam, Egypt, Canada and Venezuela may see purchases fall or stagnate in response to high prices and limited supplies.

Much of the expansion in bovine meat trade is expected to be met by growing exports from both Brazil and India, by 8 percent and 6 percent, respectively, in response to strong demand and elevated prices. The same factors may boost exports by Argentina, Paraguay and Uruguay. On the other hand, the effects of drought and herd rebuilding are anticipated to lead to a fall in exports by Australia and New Zealand, which together account for 20 percent of world trade. Elsewhere, little change is forecast for shipments by Canada, the EU, Mexico and the United States.

PIGMEAT

Growth in Asia to sustain production

Continuing several years of expansion, production of pigmeat is expected to grow by 1.1 percent to a record level of 115.5 million tonnes in 2014, assisted by lower feed costs. Most of the increase is forecast to come from developing countries, where over 60 percent of production originates, but output is also expected to expand in the developed countries. Asia is the leading pigmeat producing region, accounting for more than half of the total. Strong consumer demand and government support policies are anticipated to boost China’s output by 1.6 percent to 55.7 million tonnes, representing 48 percent of world output. Elsewhere in Asia, slight to moderate growth is forecast in Vietnam, the Philippines, Japan, Thailand and Indonesia. In the Republic of Korea, reduced output is anticipated as a result of a smaller breeding herd and the introduction of a new grading system that provides incentives for lowering slaughter weights.

In the Americas, Brazil, the world’s fourth largest producer, is set to increase output to a record 3.6 million tonnes, stimulated by improved prices and reduced feed costs. Steady growth is also anticipated for Mexico, with output underpinned by improved genetics and productivity, which are translating into more piglets per litter and higher animal weights.

Production in the EU, the second most important producer after China, at 22.8 million tonnes, is expected to grow only slightly due to limitations imposed by compliance with animal welfare regulations relating to the housing of sows. In the United States, which ranks third in world output, the spread of porcine epidemic diarrhoea (PED), which causes increased piglet mortality, is projected to bring about a 1.9 percent fall in output. Canada’s production is forecast to increase only slightly due to some smaller producers ceasing operations. In the Russian Federation, reduced feed prices and government policies favouring large-scale farms are expected to prompt a 2.9 percent expansion, building on more than a decade of growth. Investment in new farms and improved profitability should also boost production in the Ukraine.

Animal diseases and trade prohibitions take centre stage

Trade in pigmeat is expected to record a second consecutive annual fall in 2014, declining by 2.1 percent, as some of the principal exporting countries face supply constraints. Considering the major exporters, three suppliers, the United States, the EU and Canada, account for almost 80 percent of trade. Adding Brazil and China to the group raises the share to more than 90 percent. Sales by the United States are projected to fall by 2.8 percent, or 61 000 tonnes, partly as a result of PED limiting production. The EU is facing a major upheaval, as the Russian Federation, its main market, banned imports of EU pigmeat at the end of January, consequent on four cases of African Swine Fever (ASF) occurring in Lithuania and Poland. The prohibition remains in place up until the time of writing, although, in April, the EU challenged the ban and filed a complaint with the WTO. February imports of pigmeat by the Russian Federation from the EU were down almost 50 percent, compared with the same month in 2013. Third-ranked Canada, which in recent years has maintained a share of around 15 percent of trade, will not be able to substantially benefit from the additional market opportunities that the above situation has created, as its production is not anticipated to grow markedly. Conversely, following production gains, both Brazil and China are well-placed to increase exports, as are some of the smaller-scale exporters, including Belarus and Mexico.

Imports by Asian countries, representing almost half of total trade, may fall by 3.3 percent. China, the leading importer, may cut its purchases by as much as 7.5 percent, to 1.3 million tonnes. Imports by Japan, which are only slightly less than China’s, are projected to remain close to last year, as production is anticipated to be sufficient to meet a stagnating demand. Procurement by the Republic of Korea is also forecast to be little changed. In Europe, the Russian Federation is anticipated to reduce pigmeat imports further in 2014, after having already cut them heavily last year. This is a reflection of growing production, weaker domestic prices and animal health/drug-residue (in particular ractopamine) import prohibitions. Imports by Canada and Mexico may also fall, hindered by the reduced supplies in the United States, their principal source of supply.

POULTRY MEAT

Production increases

After limited growth in 2013, global poultry production is anticipated to rise by 1.6 percent to 108.7 million tonnes in 2014. Expansion is expected to be strongest among the developed countries overall, as industry challenges in China continue to weigh on developing countries’ output. Output in the United States, the principal producer, is anticipated to rise by 1.8 percent, to a record of 20.6 million tonnes. Elsewhere, many other major producers may witness gains, including the EU, Brazil and Mexico. Particularly rapid expansion rates are foreseen for the Russian Federation, at 8 percent, and for India, at 6 percent. In China, currently the second largest producer, the industry continues to suffer from the after-effects of 2013 outbreaks of H7N9 avian influenza; consequently, a production decrease of 1.7 percent is projected for 2014.

Trade recovers

Poultry, the most traded meat category, represents almost 45 percent of the total meat flows. While the volume trade in poultry meat has doubled over the past decade, growth slowed in 2012 and 2013. An increase of 2.4 percent is anticipated for 2014, based on rising production among exporting countries and poultry’s price competitiveness compared to other meats on the international market. In Africa, imports as a whole are forecast to rise by 4.8 percent. Among the main importing countries, Angola, Ghana and Benin are anticipated to purchase more, as income growth strengthens demand, while imports by South Africa, the major trade destination in the region, are forecast to remain unchanged. Imports in Asia should register a modest increase, overall. Purchases by the two major buyers in the region, China and Japan, are projected to stagnate, due to limited growth in domestic demand and adequate domestic supplies, while those by Saudi Arabia, Iraq and the United Arab Emirates may rise vigorously, with a concomitant increase in trade in halal-certified meat. In Europe, deliveries to the Russian Federation are expected to fall by 2 percent, to a level that is less than half of what they were in the mid-2000s, as the country has managed to raise domestic production considerably. Likewise, rising poultry production in the EU is forecast to forestall growth in import demand. In the Americas, Mexico is anticipated to import more, sustained by steadily increasing demand. The four leading exporters, Brazil, the United States, the EU and China, which together account for almost three-quarters of global trade, have seen little expansion in sales in recent years.

Instead, most of the growth has come from second-tier exporters, including Thailand, Turkey, Argentina, the Ukraine and Belarus. Within this grouping, the first three countries are projected to continue recording strong growth in 2014. Interestingly, each has focused on a different region or market segment: Thailand supplies mainly Japan and the EU with boneless poultry cuts, including prepared dishes; Turkey has focussed on the export of halal-certified whole birds to the Middle East, in particular Iraq, where it enjoys a logistical advantage; Argentina has made inroads in the Venezuelan market and, more recently, widened its focus to include China and South Africa, among others.

OVINE MEAT

Production growth slows

Production of ovine meat is expected to be constrained by falling output in Oceania, while showing a moderate increase elsewhere. Consequently, output for 2014 may rise by only 0.5 percent, to 14 million tonnes. Developing countries account for three-quarters of world’s output, with the largest producers being China, India, Sudan, Nigeria and Pakistan. Generally satisfactory pasture conditions have set the basis for flock rebuilding in many of the major producing areas of Asia and Africa. In developed countries, drought-imposed herd reduction in Australia and New Zealand is forecast to lead to a sharp fall in production in 2014. In the EU, the second largest producer, the long-term decline in output may be showing signs of slowing.

Trade to fall, following a surge in 2013

Trade in ovine meat, where Australia and New Zealand account for almost 85 percent of exports, is set to fall as a result of restocking in New Zealand, following exceptionally high, drought-induced slaughter in 2013, and protracted dry-to-drought conditions in 2013/2014 in Australia. Overall, trade may drop by 3.7 percent to 951 000 tonnes. In dealing with reduced availabilities, it is possible that Oceania exporters will maintain provision to the highest value markets, such as the EU and the United States, while seeking, to the extent possible, to meet the requirements of growing markets, albeit lower priced ones, including China, the United Arab Emirates, Qatar and Malaysia. Among the small-scale exporters, India is expected to see sales grow this year, mainly to the Middle East, especially the United Arab Emirates and Saudi Arabia; and Uruguay could also boost its exports, focussing on China and Brazil.

MILK AND MILK PRODUCTS

PRICES

Fall sharply

Internationally, dairy product prices fell sharply in April 2014, following indications of market weakness in March. Consequently, they have returned to a level similar to early 2013. The main contributors to the current situation is a strong opening to the milk production season in the Northern Hemisphere and an unusually extended season in New Zealand, which have caused a sudden rise in the availability of dairy products for export.

The FAO Dairy Price Index stood at 251 points in April, 2.8 percent below the same month in 2013. In considering the movement of the index, it should be remembered that dairy prices rose substantially, by 22 percent, in March-April 2013 and remained elevated until the recent fall. Compared to a year earlier, April 2014 prices of the main dairy commodities were: whole milk powder (WMP), down USD 679 per tonne, or 13 percent; SMP, down USD 647 per tonne, or 13 percent; butter, down USD 391 per tonne, or 8 percent; and cheddar cheese, up USD 375 per tonne, or 8 percent.

If cheese were not included, the fall in the dairy index in March and April would have been even more pronounced. Sharp price movements, as occurred in March-April 2013 and are now manifest in the same period in 2014, illustrate the extent to which the international market is exposed to sudden changes in milk production and availability of milk products for export, in particular as publicly financed inventories are at minimal levels in the EU and the United States, and almost non-existent elsewhere.

PRODUCTION

Steady growth in 2014

World milk production in 2014 is forecast to grow by 2.1 percent to 783 million tonnes. While Asia is expected to account for most of the increase, production should rise in all regions. Output in India, the world’s largest milk producing country, is set to grow by 6.8 million tonnes to 145 million tonnes. Rising disposable incomes and population are the two main dynamics behind the increase in India’s production. Expansion in herd size as well as improved productivity are important engines in the expansion. Increased output is also anticipated in Pakistan and Turkey, spurred by steady growth in consumer demand while, in the Republic of Korea, output is slowly recovering from the 2011 foot-and-mouth disease outbreak. Output in China is forecast to show a modest increase, following a fall of 5.7 percent in 2013, when a shortage of forage and high beef prices caused cattle slaughter rates to rise. In Africa, a moderate increase in milk output is anticipated for 2014, assisted by generally favourable weather conditions. Expansion in output is foreseen for Egypt and Morocco. Several countries in East Africa experienced a delay in the onset of seasonal rains and pasture and fodder and feed supplies suffered. As a consequence, production growth in some countries, including Kenya, Uganda and Tanzania, may be constrained. Furthermore, outbreaks of foot-and-mouth disease in east-central Kenya have had a negative impact on yields. A mass vaccination programme has been initiated and the movement of livestock curtailed in the affected areas.

Rising incomes and firm regional and international demand have favoured dairy production growth in several countries in Latin America and the Caribbean. Hot and dry conditions experienced by some southern-cone countries at the end of 2013 ran over into 2014, stressing pastures. However, this was followed by abundant rainfall in March and April. Overall, it is anticipated that pasture condition will recover during the year, which could underpin a 1.7 percent rise in subregional milk production, to 68 million tonnes. Gains are forecast for Brazil, Chile, Colombia, Ecuador, Paraguay and Uruguay, where the overall positive consumption outlook has stimulated investment in new technology and improved animal genetics. In Argentina, production is expected to decrease by 2 percent to 11 million tonnes, in the face of falling domestic demand and limitations on exports. In Central America, milk output in Mexico, the largest producer in the subregion, has been constrained by dry conditions in many parts of the country, leading to herd reduction and the withdrawal of a number of small-scale producers from the industry. Production in Costa Rica is expected to show a moderate increase.

In North America, milk production in the United States is forecast to increase by 2.4 percent to 93.6 million tonnes. Output is recovering from the chronically dry conditions of the previous two years. Production in Canada is set to remain stable at 8.4 million tonnes, within the limits set by the milk quota system.

In Europe, EU milk production on hold is forecast to grow by 1.5 percent to 158.9 million tonnes, stimulated by record milk prices, and facilitated by mild weather during the first months of the year, which favoured pasture. Some major producing countries within the EU, including France and the UK, could increase output substantially, as they are well below their national milk quota. Conversely, a number of countries, mainly in the northwest of the EU, are fully utilising quota allowances and can be expected to increase output further when the quota system is abolished in 2015. The expansion in 2014 is being facilitated by a one percent annual rise in the quota in preparation for its abolition, which has resulted in the EU dairy herd increasing for the first time in many years. Milk production in the Russian Federation is anticipated to move lower in 2014, as poor profitability has caused a contraction in the dairy herd, which was down by 3 percent in February compared with the same month in 2013. In neighbouring Ukraine, production is on an upward trend, with a strong start to the season (January–March output was up by 2.0 percent), assisted by government incentives which promote farm-level efficiency and the use of modern technology.

In Oceania, a run of high prices for dairy products on the international market and associated levels of profitability have stimulated the dairy sector. In New Zealand, milk production is currently well ahead of last season’s drought-reduced output and is anticipated to finish 7 percent higher – at a record level of 20.5 million tonnes. In recent months, conditions in North Island, where most dairying is located, have been dryer than average. However, generous rainfall in South Island has produced a strong close to the season, overall. In Australia, dry to drought conditions continue to weigh on milk production. A decline in milk output is forecast for the second successive season, with expectations of a 1.8 percent drop to 9 million tonnes, as increased feed costs and limited fodder supplies add to producers’ difficulties.

TRADE

Rise in export supplies behind a sharp price fall in April

Trade in dairy products is projected to rise by 1.8 percent, a slower rate than in recent years, reaching 69 million tonnes of milk equivalent. The two principal exporters, New Zealand and the EU, which together account for 50 percent of world trade, are both anticipated to record an increase in sales, while little change is forecast for third-placed United States, with 15 percent of exports, following an exceptional hike in shipments the previous year. Exports from Australia are anticipated to fall, stemming from reduced milk production.

The main centre for rising international demand in 2014 is still expected to be Asia, where increased purchases are forecast for China, The Islamic Republic of Iran, Indonesia and the Philippines. Elsewhere in the region, Saudi Arabia, the United Arab Emirates, Japan, Singapore, Malaysia and Thailand remain important markets, but the level of their imports may not change markedly and in some cases could decrease. Reduced international prices may stimulate import demand in Africa as a whole. The principal importers that could see growth are Algeria, South Africa and Ghana. Finally, imports by the Russian Federation are anticipated to increase, stimulated by strong demand for butter and SMP.

Whole milk powder (WMP) – Prices dive

World exports of WMP are projected to rise by 2.5 percent in 2014 to 2.5 million tonnes. This compares with limited growth of 1.1 percent in 2013, when a milk production shortfall constrained trade. Rising world export availabilities and adequate stocks in China, the main market, caused WMP prices to fall steeply, reaching USD 4 565 tonnes in April, 12 percent below their level in January. In 2014, China is expected to retain its position as the principal importer of WMP and witness a 7.8 percent expansion in purchases to 796 000 tonnes – or one-third of total trade. Elsewhere in Asia, lower prices may stimulate demand in several major markets, including the United Arab Emirates, Singapore, Oman, Sri Lanka, Indonesia and the Philippines. Additionally, importers in North Africa and Latin America and the Caribbean, including Algeria and Nigeria, may return more fully to the market. In Brazil, rising domestic production is expected to displace imports.

The market for WMP is very geographically diverse, stemming from its wide use in both the processing industry and for direct retail sale. Only New Zealand, among the principal exporters, with 45 percent of trade, is expected to increase the level of its sales – by 6 percent to 1.4 million tonnes. Other members of this group, which comprises the EU, Argentina and Australia, may reduce deliveries either because manufacturers find it more profitable to concentrate on other products, as in the case of the EU, or due to reduced milk production, for Argentina and Australia. Some of the smaller-scale exporting countries, such as Uruguay, Belarus and Costa Rica, may increase sales.

Skim milk powder (SMP) – Prices decline

Trade in SMP is predicted to grow by 5.0 percent to 2 million tonnes, a rate of increase similar to the previous two years. Along with those of WMP, SMP prices dropped sharply in April, to USD 4 260 per tonne down 11 percent from January. SMP is central to the milk processing industry in many countries and, as such, market demand is widespread. The principal markets are (in order of volume) China, Mexico, Indonesia, the Russian Federation, Algeria, the Philippines and Malaysia, followed by Vietnam, Saudi Arabia, Egypt, Thailand and Singapore. While China is anticipated to remain the main market, a rise in purchases is also anticipated for some other major importers, including (in order of volume) Mexico, Indonesia, the Russian Federation and Algeria.

Over 70 percent of world SMP exports are supplied by the United States, EU and New Zealand. In 2014, the first two countries are predicted to increase sales, with the EU recording the strongest growth, as high butter prices in domestic markets make it more profitable to produce SMP/butter than WMP. This tendency is reflected in the EU export data, which up to February showed a 50 percent increase over the same period last year. In 2013, India entered the world market for SMP in a significant way, and its sales leapt 250 percent, to 130 000 tonnes, placing it fourth by volume among exporters. Trade data for the first two months show that strong growth has continued into 2014. India’s SMP exports in 2014 are projected to expand by 5.7 percent to 137 000 tonnes. Last year, India’s principal markets were Bangladesh, Egypt, Algeria and Saudi Arabia, with many other countries making purchases, indicating that India’s exporters are exploring wide-ranging markets throughout North Africa, the Middle East and Southeast Asia. Elsewhere, exports by fifth-place Australia are forecast to be unchanged in the face of limited milk supplies.

Butter – Prices fall along with powders

Trade in butter is forecast to increase by 0.9 percent to 919 000 tonnes, a rate similar to last year. In April, international butter prices also moved down sharply, affected by the fall in milk powders and uncertainty of future sales to the Russian Federation, the main market. Consequently, prices for April at USD 4 405 per tonne were 6 percent less than at the start of the year. Demand for butter comes mainly from Southeast Asia, the Middle East and the Russian Federation, although, as with many other milk products, China has substantially increased purchases in recent years. Additionally, as a result of trading agreements and duty-free access for inward processing (where products are imported duty free for additional processing and export), the EU is both an important butter importer (ranking fourth) and exporter (ranking second). Overall, many of the principal markets, in particular the Russian Federation, China, Saudi Arabia, the EU and the Islamic Republic of Iran, are expected to increase imports in 2014.

Four of the five principal exporters – New Zealand, the EU, Belarus and Australia – are anticipated to see a moderate increase in sales in 2014, while those of the United States could decline. In the case of New Zealand, trends in WMP prices will influence availability during the second part of the year, as processors seek to maximise returns from the new season’s milk production. Price trends will also determine the extent of United States’ participation in the international marketplace, as it has the possibility of either exporting or supplying its domestic market, which absorbs over 90 percent of production. The same factors would also apply in the case of the EU, where internal prices have remained substantially above international ones, limiting trade potential.

Cheese – Less volatile than other dairy products

While affected by the overall decline in dairy commodity prices, cheese prices in April, at USD 4 875 per tonne, were 8 percent higher than a year earlier and substantially above the average for the previous 12 months. This is a reflection of the fact that, even in the case of a generic cheese, differences in taste, consumer preference and the use of branding mean that prices are not as volatile as for milk powder and butter fat, which are destined mainly for reconstitution and other processing and, thus, are not generally visible to the individual consumer. Trade in cheese is forecast to register limited growth, increasing by 0.6 percent to 2.5 million tonnes.

The international cheese market is the most difficult dairy market to classify. One apparent anomaly is that a number of major cheese producing and exporting countries are also important importers, including (in order of volume) the United States, Saudi Arabia, the EU, Australia and Switzerland. Most often, purchases by this group of countries reflect import quotas under trade agreements and also the highly specific nature of some cheeses, including those with restrictions on the use of their names and areas of origin. Another group of the most significant importing countries, which includes the Russian Federation, Japan, Mexico, the Republic of Korea, Iraq and, now, China, focuses more on industrial cheese, both for direct consumption and for use by the processing industry, although each market has its specific requirements and preferences. Overall, four importers, the Russian Federation, Japan, the United States and Saudi Arabia, account for 42 percent of purchases. The EU remains the major cheese exporter, supplying 33 percent of world trade, not including the substantial amount of cheese that is traded among the EU countries themselves. Other important exporters are the United States, New Zealand, Australia, Saudi Arabia, Belarus, Egypt, Switzerland, Argentina, Turkey and Uruguay. Most of this group of countries are expected to maintain trade levels slightly above those of 2013. One exception could be the United States, where limited competition from other countries is expected to stimulate further growth in exports.

FISH AND FISHERY PRODUCTS

GLOBAL FISH ECONOMY

Total world supply of fish and fishery products continues to increase, thanks to a robust aquaculture sector now in the process of overtaking the wild sector in its contribution to food fish consumption. While wild harvests are largely regulated by official catch quotas set to ensure the long term sustainability of operations, the aquaculture sector has been able to respond to a growing demand in both domestic and international markets. In many countries, although far from all, aquaculture farms are regulated by licenses or maximum output limits but, in the short-term, most farms have some slack capacity and room to expand within those limits. However, in the long-term, competition for space with other users, especially in coastal areas, and for scarce water resources will necessitate massive investments in research and new technology aimed at increasing yields and ensuring robustness of operations, especially concerning aquatic animal health. Both of these investments will be necessary if the sector is to meet increased demand from a growing world population with a healthy appetite for fish and fishery products.

Overall, fish production in 2013 reached 161 million tonnes, with 90 million tonnes coming from capture fisheries and 71 million tonnes from aquaculture. It is still early to make firm predictions for 2014, although the high prices for many farmed species are likely to give an extra boost to farmed production through 2015. However, the possible arrival of the El Niño phenomenon in 2014 would reduce South American catches of small pelagic species and lead to higher feed prices.

Driven by persistent strong demand, prices for most products have been moving upwards. For a number of farmed species for which supply has been tight, quotations have reached record levels. The FAO Fish Price index reached its highest level in December 2013, driven by shrimp and salmon shortages. Prices for most other fish commodities have also been rising, including many small pelagic and whitefish species.

Whereas aquaculture producers have benefited from higher prices, processors and consumers have been less content. In many developed markets, retailers are able to move large quantities of product only through discounting, meaning additional pressure on processors to cut costs and margins. On the positive side, lower fish meal prices reduced costs for feed during 2013 and early 2014, which could translate into lower prices for some products in the short term. However, the main driver of price rises is supply shortages linked either to disease (shrimp) or government-set production limits (salmon), as processors as well as retailers encounter difficulties in substituting product in the short-run.

Following a moderately positive 2013, 2014 looks set to be a year of new growth in world trade. Traditional markets such as the United States and the EU are showing firm signs of recovery, which will boost their imports, given their limited capability of increasing production. Japan has seen its currency fall, making imports more expensive. Emerging markets continue to show strong growth, providing opportunities for domestic, regional and international producers, particularly of aquaculture products.

REVIEW BY FISH PRODUCT

Tuna

Worldwide demand for canned and non-canned tuna remained low during the first quarter of 2014 and prices were under pressure. Frozen skipjack prices were nearly 50 percent lower in April 2014 compared with April 2013, with demand from Asian canners remaining weak due to high inventories. As of March 2014, catches in the Western and Central Pacific were adequate to meet demand, but decreased in the Indian Ocean and have yet to improve on the African side of the Atlantic. For farmed bluefin tuna, supplies are currently good. Japan’s imports of fresh and frozen tuna totalled 225 873 tonnes in 2013, a record low for both. A long-term decline in demand for sashimi in Japan is continuing. Although 2013 imports of fresh tuna by the United States dropped 15 percent, consumer preference for fresh red meat tuna has remained high. Exports of frozen tuna from China, mainly skipjack, grew by nearly 41 percent in 2013. The United States’ market for canned tuna continued to be difficult with 2013 import volumes 25 percent below 2010 levels, despite early optimism that the market would revive. The demand for traditional canned tuna in brine from the United States remained flat while demand for pouched tuna increased. The European canned tuna market improved in 2013 as a result of growing demand.

Bivales

Mussel imports into the EU-27 from non-EU origins reached 45 300 tonnes in 2013, reflecting a small increase over 2012. However, when including intra-EU trade, EU-27 imports of mussels declined in 2013. As a consequence of the drastic decline in production of French oysters due to disease, in February 2014, oyster prices in France rose above EUR 10 per kg for the first time in history. The future price development of oysters will depend on production performances. Total imports of scallops in the EU-27 reached 54 300 tonnes in 2013, a 5 percent increase compared with 2012. France, which is the EU’s largest importer of scallops, bought over 21 500 tonnes in 2013, or nearly 40 percent of all EU purchases. Although this was 7.5 percent more than the previous year, the amount reflects a severe decline compared to the 2008–2011 period. In Japan, scallop production hit a five-year high in 2013 in the important Hokkaido fishery, with the total harvest in 2014 expected to reach around 310 000 to 315 000 tonnes.

Small pelagics

A five-year mackerel agreement between Norway, the EU and the Faroe Islands, reached in March 2014, has set the 2014 North Atlantic mackerel quota at 1.24 million tonnes. In 2013, Norwegian exports of frozen whole mackerel dropped by 7 percent to 245 100 tonnes, but export volume increased during the first quarter of 2014. Mackerel prices are strengthening but the higher quota may reverse this trend. In the South Pacific, fishing nations have recommended limiting the jack mackerel quota to 440 000 tonnes in 2014. The North Atlantic herring agreement reached between the EU, Norway, Iceland and Russia has set a lower 2014 quota of 418 487 tonnes. Tighter supplies should see slight price increases for herring this year. Norway experienced a slight increase in frozen herring exports in 2013, rising 4 percent to 212 400 tonnes, but exports fell again in the first quarter of 2014. In Japan, herring sold well in 2013, with imports growing by 29 percent. After a slow start, the capelin season in Norway and Iceland is now taking off, although the quota for 2014 is only 38 980 tonnes. In the South Pacific, a strong El Niño predicted in 2014 is expected to have a major effect on fisheries off the west coast of South America.

Tilapia

Production of farmed tilapia increased to 5.15 million tonnes in the major producing countries in 2013, which supported rising domestic demand and national food security programmes. Tilapia is farmed successfully in most warmer-climate regions of the world with China, Egypt, Indonesia, Philippines, Brazil, Thailand, Bangladesh being the principal producers but it is also important in Central America and increasingly so in Sub-Saharan Africa. International tilapia trade also grew due to demand from the United States and many emerging markets. Demand for frozen fillets also improved in the EU. Meanwhile, domestic demand for tilapia remains firm in most of the producing counties. Despite a decline in Chinese production in 2013, Chinese exports of frozen tilapia increased by about 10 percent in 2013 compared with 2012. The popularity of tilapia, including the high value, air-flown fresh fillet, continues to grow among US consumers, and predictions for Central American tilapia exports are promising.

Cephalopods

Outlook for octopus is bright for 2014, with improved supplies and signs of recovering demand, which could lead to firmer prices in the long term. Demand for octopus is growing in the US and Japan, while the Spanish and Italian markets are also showing positive signs. For squid, lower catches in Peruvian waters have negatively affected Peru’s exports to China, but Argentina’s squid exports increased by 92 percent to 133 082 tonnes in 2013. Japanese squid imports grew significantly in 2013, while Italian squid imports were also up. The squid market seems to be improving, trade is increasing and prices are expected to climb modestly. The cuttlefish market has remained stagnant for some time, however, and there are no real signs of improvement. Cuttlefish supplies are tight, but demand is low.

Fishmeal and fish oil

Declines in global production, combined with growing demand, pushed prices for both fishmeal and fish oil to record highs in the first half of 2013 but they have since eased. Peru and Chile saw the biggest declines in fishmeal production, dropping 26 percent to 855 000 tonnes combined, while production from Denmark, Norway and Iceland was slightly higher than in 2012. Fish oil production faced the same situation as fishmeal, with production from Peru and Chile down 39 percent to 181 000 tonnes partly offset by production increases from Denmark, Norway and Iceland. China remains the largest consumer of fishmeal, although the country is increasingly sourcing supplies from Southeast Asia while growing its domestic production. Feed producers are increasingly substituting plant-based material to reduce their dependence on fishmeal and oil, and this is expected to continue. It is anticipated that the strong El Niño effect in 2014 will impact fishmeal production in South America, but a healthy menhaden fishery stock and the EU’s introduction of a ban on discards in 2014 will likely compensate for the supply shortfall to some extent. However, prices for fishmeal and oil are expected to remain high in the long-term.

Nile perch

In 2013, the EU imported 26 100 tonnes of Nile perch fillets, mainly from Tanzania, Kenya and Uganda. This figure, 12 percent less than 2012, is part of a longer-term and more significant decline and is, in fact, 38 percent less than in 2008. On the production side, overfishing is one of the major contributors to the long-term decline in total Nile perch volume harvested. Experts have warned that if urgent measures are not taken, Nile perch may become virtually extinct in the next three to five years. In the long-term, farmed production of Nile perch may fill the gap in capture supplies.

Groundfish

In the EU, notable trends in the 2013 groundfish market included a healthy increase in UK imports of frozen cod and a significant decrease in German imports of frozen Alaska pollock fillets. In the United States, imports of cod-like groundfish increased slightly in 2013. Meanwhile, demand on the Japanese and European surimi markets has been weak. In 2014, Norwegian cod landings in the first quarter exceeded previous years and Norwegian cod exports have increased significantly. In the Russian Federation, sufficient volumes of domestically caught cod and downward trending prices have been reported for the first quarter, while catches of Alaska pollock amounted to over 120 000 tonnes in the same period. Supplies of haddock have been slowing and, as a result, prices have risen sharply, benefitting Norwegian operators. Overall, supplies of groundfish in 2014 will be marginally higher than in 2013, although with major differences from species to species. Cod is expected to have a surplus of supplies with prices predicted to decline but prices for other major species, including pollock, hake and saithe, should increase.

Pangasius

In 2013, global production of pangasius reached over 1.6 million tonnes, with nearly 75 percent supplied by Vietnam. Vietnamese pangasius exports in 2013 were worth USD 1.76 billion. The United States imported 108 676 tonnes of frozen catfish fillets, an 8 percent increase compared with 2012. The EU imported a total of 179 734 tonnes of frozen freshwater fillets in 2013, with pangasius maintaining the largest share at 79 percent. Based on official statistical data from reporting countries, imports of frozen freshwater fish fillets into Asia (mostly tilapia and pangasius) totalled more than 50 000 tonnes in 2013, up by nearly 45 percent from 2012. Of this, nearly 80 percent was pangasius, mostly from Vietnam. The growth in global production confirms the strong demand for pangasius, and official figures indicate that supply is increasing steadily from other sources in Asia. This trend is expected to continue.

Seabass and seabream

In terms of volumes, Greece finished 2013 exporting a total of 84 400 tonnes of bass and bream worth EUR 381.3 million. Compared with 2012, volume remained unchanged, but value was down 10 percent as prices fell. Turkish producers have consistently been able to undercut struggling Greek producers by a significant margin, resulting in both established and new markets looking increasingly towards Turkish suppliers. Traditional markets, such as France and Spain, also absorbed rising volumes in 2013, but at low prices. Italy remains the most important European market for bass and bream species, but demand for both has been sluggish for the past two years. Early signs in 2014, however, suggest an improved price situation this year for seabass and seabream producers.

Salmon

2013 was a landmark year for the salmon industry, particularly in Europe, where minimal production growth and strong demand saw prices, export revenues and profits reach record highs. Norwegian salmon export value was 35 percent higher in 2013 at USD 6.6 billion, while volume was approximately flat at 960 000 tonnes. Norway’s performance was based mainly on low production and strong demand in the EU, although there are now indications of some consumer resistance to retail prices. Chile’s industry also saw increased export volumes and prices, particularly towards the end of the year, but high mortality rates and production costs impacted the profitability of Chilean companies. In early 2014, high prices are continuing in most markets, while forecasts for a slow economic recovery in the Eurozone should result in continuing strong demand. Meanwhile, the United States is following a strong upward demand trend, and the situation in Japan has improved. Emerging markets in Latin America and East and Southeast Asia are continuing to display rapid growth. The Russian Federation is the most uncertain major market in the short-term. The outlook overall is good, and high prices are expected in the medium-term.

Shrimp

Annual import growth in the major markets was negative in 2013 and prices were high, following the production shortfall of farmed shrimp amid early mortality syndrome (EMS) problems for major producers. However, the 2014 forecast is for better supplies overall. Prices in international trade began to weaken in late March 2014, but demand is slow in major markets. In Thailand, EMS outbreaks meant a drastic fall in 2013 production levels, but a strong rebound is expected in 2014. Mexico was also badly affected by EMS in 2013 but other countries in Latin America performed better. In India, the rapid growth in vannamei production boosted shrimp exports significantly in 2013, while Vietnam also increased shrimp production in 2013. In China, the estimated production of farmed shrimp in 2013 was significantly lower at 1.1 million tonnes. On the market side, the US is currently holding more than adequate stocks amid low consumer demand which is pushing prices down. The United Sates imported 26 100 tonnes less shrimp in 2013 compared with 2012. Import prices for shrimp in Japan increased by 30 percent in 2013 compared with 2012, contributing to a large decline in import volume terms, but demand is expected to increase during April or May. In 2013, short supply and high prices dampened EU demand for shrimp, but softening of prices in the first half of 2014 may improve the situation in the second half of the year.

SPECIAL

FEATURES

PULSES

Contributed by John Heine, Pulses Analyst, Tufts University – Fletcher School of Law and Diplomacy, and the Friedman School of Nutrition Science and Policy

Introduction

Pulses, a variety of plant species belonging to the legume family, include[1]: bambara beans, broad beans, chickpeas, cowpeas, dry beans, dry peas, lentils, lupines and vetches. While varying widely in shape, color and size, they all share a significantly higher protein content-per-gram than most cereal crops, and a unique ability to enrich the soil they grow in. Pulses, while fitting easily into the category of “staple crop” for their prevalence as a crop of choice in subsistence farming, are also considered a “specialty crop” in the broader agricultural context. With some important exceptions, the narrow niche they have been assigned has not risen to the level of receiving significant government intervention to increase production and trade, nor have industrial seed hybridizers made substantial investment into their potential. In addition, because pulses remain a comparatively small market, there has been only limited progress in the adoption of industry-wide grading standards and classifications of individual pulse species, making trade complicated at times.

However, an important milestone occurred recently that will likely have lasting effects on the global market for pulses. In December 2013, the UN General Assembly declared that 2016 will be the “International Year of Pulses”. This will likely draw much needed attention to a commodity group which has, despite its many appreciable qualities, proven quite undervalued up until now.

Between 1961 and 2012, the advances of the Green Revolution led to massive gains in both yield and production of many basic foodstuffs through the industrialization of farming – hybridization, irrigation and extensive use of herbicides and pesticides. During this period maize, wheat, rice and soya all saw cumulative production gains somewhere between 200 percent and 800 percent, while pulses expanded by only 59 percent over the same timeframe (Table 1). This was in spite of the fact that pulses had proven to be – through their ability to fix atmospheric nitrogen in the soil – a greatly beneficial component of crop rotation programmes, producing significant boosts to yields of both wheat and maize crops in subsequent plantings, and reducing the need for a certain portion of fertilizers. The “International Year” designation has been very effective at drawing attention to featured commodities in the past. The Year of Quinoa in 2013, which promoted the health benefits of this commodity and its adaptability to different geographical zones, saw significant improvements in areas harvested, production, prices and import demand. While the quinoa market was nearly overwhelmed by world interest, the diversity in production and climate zones where pulses are grown means that there is real potential to increase world production and trade.

Production

Due to the wide variety of species and cultivars, pulse production is diffused throughout the world, with concentrations on all major continents, and can be found in a wide range of latitudes (Figure 1). World production of pulses has slowly and steadily increased since the 1960s at a rate of about 1 percent per year. As indicated earlier, the pace of pulses expansion has not matched that of the other basic foodstuffs (Table 1).

On the back of a bumper year in India, the world’s largest producing country, global production could increase to 72.2 million tonnes in 2014, up from the previous year’s estimated 71.7 million tonnes. For the past 30 years, the single largest producer of pulses has unwaveringly been India, which has consistently produced two to three times more than any other country. India’s huge land mass (the seventh largest nation in terms of total land mass and second in terms of arable land), diversity of terrain and climate are such that pulses are grown during both of the country’s main crop seasons (known as “rabi” and “khari”). India’s total output in 2013, put at 18.4 million tonnes, was mainly chickpeas, beans and pigeon peas (Figure 2). In 2014, official forecasts point to a record production of 19.8 million tonnes, driven by an increase in plantings, above-average yields and government support measures.

India aside, the field of major producers, traditionally relatively narrow, has broadened in recent years with more than 15 countries producing at least 1 million tonnes of pulses in 2014, as compared with just six countries in 1980 (Table 2). In Asia, Myanmar has nearly tripled its pulse production over the last decade, becoming the world’s second largest producer after India, with a forecast of 6.3 MMT in 2014. Over 70 percent of its production consists of dry beans with the bulk of total pulse production used for domestic consumption. By contrast, China has shown significant reversal in its position as a world player in the pulses market. As its population has expanded, and per capita GDP has grown, dietary preferences have shifted to include higher value foods. As a result of this development and due to a gradually shrinking of the country’s total arable land base, production has more than halved over the last 40 years, decreasing from 8.5 million tonnes in 1961 to the current forecast of 4.2 million tonnes in 2014 (almost equal parts dry beans, peas and broad beans).

In the Americas, Canada is a major producer that has made rapid gains in the expansion of pulse area and production over the last two decades. In 1990, Canada produced just 500 000 tonnes while, in 2013, it harvested a record crop of 6 million tonnes (mainly peas and lentils), the bulk of which is destined for exports. A slight decline to 5.5 million tonnes is currently anticipated for 2014, but Canada would still remain the third largest producer after India and Myanmar. For the last two seasons, the United States has shown steady production of around 2.2 million tonnes, with approximately half shipped abroad (mainly peas, dry beans and lentils). In 2014, production could decline marginally, mostly due to reduced seeded area for lentils. Production in Brazil has also increased over time, supported by a growing domestic demand for dry beans, which account for more than 98 percent of total pulse supply in Brazil. Similar to India, large tracts of arable land, good geographic position and favourable climate enable Brazil to have three distinct harvests for beans, with the bulk coming from the central and southern parts of the nation. A bumper crop of 3.4 million tonnes is projected for 2014 following two consecutive years of below average results.

In Oceania, Australia has been a major producer (primarily chickpeas, lentils, lupines and broad beans) since the mid-1980s in spite of cyclical weather-related fluctuations in output (between 1.5 and 3 million tonnes), with 50 to 65 percent of domestic production exported. Early estimates would indicate that the 2014 crop will be relatively stable, at 2.5 million tonnes, on slightly higher seeded area but marginally lower yields.

In Africa, the main producers of pulses are Ethiopia, the United Republic of Tanzania, Nigeria and Niger. All have boosted production significantly over recent years, but none more effectively than Ethiopia. Through a mixture of government support measures, partnership with members of the CGIAR consortium and others, Ethiopia has successfully doubled yields (chickpea) and production, with only limited additions to area seeded. Ethiopia is now one of the top ten chickpea exporters. Nigeria and Niger have doubled output since 1990, with average production now close to 3 million tonnes and 1.5 million tonnes respectively, largely composed of cowpeas. While flooding severely hampered production in 2012 in both countries, output appears to have been above average in 2013. Tentative early forecasts for 2014 would suggest that weather woes could again negatively influence production in Niger, but leave Nigeria unaffected.

Consumption

A documented shortcoming of the Green Revolution was an overemphasis on ending hunger through the provision of calories alone. While adequate caloric intake is of undeniable importance, the macro/sub-macro/micro-nutrient profiles of diets consumed have been proven essential for human health. For example, pulses and cereals offer distinct protein profiles, which by themselves are considered “incomplete”. However, when consumed in tandem, their complementary supply of essential amino acids represents a nutritionally balanced substitute for the “complete” proteins found in meat and dairy products. Further, due to a significant price differential between pulses and livestock products, pulses qualify as staple source of protein for low-income consumers around the world.

As the world’s single largest consumer of pulses (by a factor of 3), India’s domestic market exerts significant influence over the world pulse situation and outlook. World Bank data indicate that during the period 2002–2012 India’s GDP grew more than 250 percent, from USD 500 billion to USD 1.8 trillion, which has resulted in a shift in average diets. According to FAOSTAT, during the period 1969–2009, India’s portion of per capita calorie intake from animal products rose from 5 percent to 10 percent, while for pulses it fell from 5 percent to 3 percent. Similar tendencies to include more animal-sourced protein also prevailed, under similar circumstances, in China. Together, these two countries host about 37 percent of the world population, and despite the above-mentioned changes in diets, still account for 40 percent of the world consumption of pulses for food and for 30 percent of the world consumption of pulses for feed. In the near-term, the rise of population and the decline of per capita pulse intake tend to cancel each other out, leaving apparent consumption fairly level. Elsewhere, consumption is forecast to remain relatively stable, as most of the major producers are also major consumers.

Pulses are also used as a supplement for animal feed. While the majority of world feed requirements are satisfied with soyabean meal/cake and coarse grains, pulses (peas in particular) can serve as a low-cost alternative. Typically about 15–20 percent of world pulse production ends up as feed. However, one emerging trend in the consumption of pulses relates to its utilization in processed foods. As food manufacturers are becoming more concerned about the macro/micro nutrient composition of the products they offer, pulses have become a commodity of interest due to their unique protein composition profile. This profile complements the protein composition of cereals, making pulse flours an excellent companion ingredient for traditionally wheat-and maize-based processed foods.

Trade

International trade in pulses has expanded an average 5.5 percent per annum since 1961. However, when trade is observed as a percentage of total production, an interesting pattern emerges (Table 3). While production itself has not increased at the same pace as other commodities such as cereals, the percentage of total production which has been traded on the market has risen significantly since 1961, indicating a progressively integration of pulses in world commerce. In the past, international trade was relatively evenly distributed among the various types of pulses but, in the last decade, has evolved into mainly dry beans and peas, with lentils, chick peas and broad beans taking a lesser role (Figure 3).

World pulse trade in 2014 is forecast at 12.5 million tonnes, down slightly from the previous year’s estimate of 12.9 million tonnes. Imports by India, which represent more than one-fourth of the world total, are forecast to fall to 2.8 million tonnes in 2014, down from 3.1 million tonnes in 2013, as the country is expected to harvest a bumper crop this year. At the same time, India also exports small quantities of chickpeas to Pakistan, Algeria and Turkey.

An emerging feature in the pulses market is the reversal in China’s historical position of “net-exporter”. Recent acquisitions of yellow peas from Canada (for use in the production of vermicelli noodles) have led traders to speculate that China’s imports in 2014 might be more than 1 million tonnes for the second year in a row. If confirmed, China would overtake India as the number one importer of yellow peas, and its pea imports would surpass its own exports of beans (800 000 tonnes in 2013 and 2014) by 200 000 tonnes. This would mean China’s status would switch from net-exporter of pulses to net-importer. China’s export position has weakened in recent years, due to slowing growth in domestic production.

Official forecasts indicate that Canada will continue as the world’s leading exporter in 2014, exporting 6.2 million tonnes of pulses (primarily peas), followed by Australia (1.7 million tonnes), Myanmar (1.2 million tonnes), United States (1.1 million tonnes) and China (800 000 tonnes), with India being a primary destination for each. However, transportation difficulties across Canada and the US northwest corridor created significant delays in the supply chain in 2013, making the export of 5.3 million tonnes of Canadian pulses in 2013 challenging. Canada produced bumper crops of wheat and maize in 2013 which, as higher value crops, have taken precedence for deliveries. In addition, the particularly harsh winter in North America slowed down rail shipments across the northern US and Canada. The US also has a significant lack of transport infrastructure for agricultural goods in North Dakota and Montana, home to both highly active oilfields and extensive pulse cultivation. All available local transportation has been diverted from previous uses to supply high-value non-agricultural commodity chains. As a result, this season North American farmers are holding higher than average stocks of pulses on farms, waiting for the gluts to ease and transport prices to decline.

Policy

While not a heavily regulated industry, there are several countries with active pulse policy. Of recent interest is the newly approved United States Farm Bill (the Agricultural Act of 2014), which includes specific language advancing this commodity class in a variety of ways. Until now, the US provided relatively meager support for pulses. However, this Farm Bill has earmarked funding to pulses in two programmatic areas. First, allocation of USD 10 million to encourage the use of pulses in school feeding programmes. This is in response to recommendations from the 2010 Dietary Guidelines for Americans, which indicated an “urgent need to focus on children.” Another is the “pulse crop health competitive research and extension initiative”, which addresses the critical needs of the pulse crop industry by developing and disseminating science-based tools and information, and is expected to disburse USD 100 million over a five-year period. While, this may appear a relatively small sum when compared with the support to wheat and maize, it would still represent a significant new boost to the development of the sector. At the same time, several humanitarian and multilateral organizations have selected pulses as a focus area for development. USAID has made several significant allocations around the world to promote pulses (notably the Legume Innovation Lab at Michigan State University), and the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) has the Tropical Legumes II Project as one of its four major flagship initiatives. Both of these entities are seeking to stimulate production, improve value chains, enhance nutritional properties and coordinate research activities.

Conclusion

As we draw closer to the “International Year of Pulses” in 2016, there is likely to be more interest in this specialty crop. There is much to be considered – from their versatile growing ranges, including varieties with proven drought tolerance, to the mounting body of scientific literature reinforcing not only the demonstrated horticultural benefits of crop rotations with pulses, but the health and nutrition benefits of a human diet containing a weekly ration of pulses as well. Best practices from success stories such as Ethiopia should be studied and scaled-up to whatever extent possible. Given the long term trends evident in this research, it is likely that production, consumption and trade will all continue to rise in the coming years, indicating that the sector deserves more robust support and attention from the international community and national governments than it has received so far.

Sources: FAOSTAT, StatPub, International Food Trader, National Statistical Agencies, Commodity Marketing Boards, and personal interviews.

[1]In botanical terms, soybeans and groundnuts also belong to the pulses family. However they are conventionally classified as oilseeds as they are primarily used to extract oil and meal.

THE GEOGLAM CROP MONITOR

(Contributed by GEOGLAM)

The Group on Earth Observations developed the Global Agricultural Monitoring (GEOGLAM) initiative in response to the growing calls for improved agricultural information. GEOGLAM and the Agricultural Market Information System (AMIS) were endorsed by the G20 Heads of States’ Declaration (Cannes, November, 2011) as part of the Action Plan on Food Price Volatility and Agriculture. The goal of GEOGLAM is to strengthen the international community’s capacity to produce and disseminate relevant, timely and accurate forecasts of agricultural production at national, regional and global scales through the use of Earth observations. Within this framework, GEOGLAM developed the Crop Monitor reports. The objective of the Crop Monitor is to provide AMIS with an international and transparent multi-source, consensus assessment of crop growing conditions, status, and agro-climatic conditions, likely to impact global production. This activity covers the four primary crop types (wheat, maize, rice, and soy) within the main agricultural producing regions of the AMIS countries. These are monthly assessments that have been produced operationally since September 2013 and are published in the AMIS Market Monitor Bulletin. The Crop Monitor reports provide cartographic and textual summaries of crop, according to crop type.

The GEOGLAM approach is to bring together international experts from national, regional, and global monitoring systems, space agencies, agriculture organizations and universities, that can share and discuss information from a variety of independent yet complementary sources, enabling them to reach a consensus on global crop conditions. In order to facilitate this process, monthly crop assessment telecons are held and an online crop assessment interface was developed, where the crop analysts log-in on a monthly basis to fill out crop condition information for their regions. Representatives from 30 different agencies and organizations are participating in the Crop Monitor assessments, which are coordinated by the Global Agricultural Monitoring Center, in the Department of Geographical Sciences at the University of Maryland (UMD). The current Crop Monitor contributors are listed in the table below (in alphabetical order by country).

Crop Condition Maps

At the request of AMIS partners the GEOGLAM Crop Monitor developed a series of customized crop condition maps and chart products. These include synthesis maps that provide information on all four crops within a single map, as well as crop specific condition maps and pie charts. These new GEOGLAM products are being released starting in the May 2014 issue of the Market Monitor.

The synthesis maps were developed to provide a simplified overview of current global crop conditions for the four AMIS crops. Three versions of these maps were developed providing varying levels of information including crop conditions, crop type affected, and the climatic drivers affecting crop conditions.

The cropped areas in the synthesis maps are displayed as the total area for all four crops and are based on an aggregation of crop type maps depicting the major growing regions. (Crop type map sources: IFPRI/IIASA SPAM 2005 beta version in combination with national level products where available, including USDA/NASS CDL 2013, AAFC Annual Crop Inventory Map 2013, SIAP (Mexico) Crop Type Maps, GLAM & GLAD UMD wheat and soy masks, Australian and Use and Management Classification (Version 7), and EC JRC MARS crop type masks). Crop calendar information is also provided as context and is based on GEOGLAM partner inputs as well as FAO and USDA calendars. (Both of these layers are continuously being updated with national level information as it becomes available). Crop conditions are depicted in the maps according to categories in the box below.

Crops classified as having other than Favorable conditions are displayed using crop symbols to identify the specific crop type affected. Areas that are out-of-season are in very dark gray. Non-AMIS countries are identified in light gray and are not covered by the Crop Monitor.

Crop condition categories

Exceptional:

Conditions are much better than average* at time of reporting. This label is only used during the grain-filling through harvest stages.

Favorable:

Conditions range from slightly lower to slightly better than average* at reporting time.

Watch:

Conditions are not far from average* but there is a potential risk to production.

Poor:

Crop conditions are well below average*. Crop yields are likely to be more than 20% below average. This is only used when conditions are not likely to be able to recover, and impact on production is likely.

*”Average” refers to the average conditions over the past 5 years.

Crop-specific Maps and Charts

Crop-specific pie charts were designed to accompany the synthesis maps and to provide additional crop-specific information. A country’s slice of the pie chart is representative of the country’s portion of the 5 year average of the total AMIS countries’ production for each crop. The Producers responsible for 90% of AMIS country production are individually shown with the remaining 10% of producers grouped into the “Other AMIS Countries” category. The area within each pie slice is divided between crops in season (color) and out of season (gray). The in-season portion is colored according to the various crop conditions within that country. When conditions are labeled as ‘poor’ or ‘watch’, icons are added that provide information on the key climatic drivers affecting conditions. The crop calendar, crop condition and climatic driver information are based on inputs provided by the crop monitor analysts on a sub-national division basis and therefore reflect crop conditions by area rather than overall national production.

In addition to the pie charts, crop specific maps are available on the Crop Monitor website (www.geoglam-crop-monitor.org). Growing areas within these maps are specific to the main growing regions of each crop. In addition to the crop conditions and drivers, these maps also include a crop calendar insert map. This insert map provides important context for interpreting crop conditions (i.e. potential impacts of various climatic drivers on final production can be better evaluated in the context of the crop development stage).

Further information on the Crop Monitor can be found on: www.geoglam-crop-monitor.org

MARKET

POLICY

DEVELOPMENTS

Statistical appendix tables

Appendix Table 1 (a) & (b) Cereal statistics

Appendix Table 2 (a) & (b) Wheat statistics

Appendix Table 3 (a) & (b) Coarse grains statistics

Appendix Table 4 (a) & (b) Maize statistics

Appendix Table 5 (a) & (b) Barley statistics

Appendix Table 6 (a) & (b) Sorghum statistics

Appendix Table 7 (a) & (b) Other Coarse grains statistics

Appendix Table 8 (a) & (b) Rice statistics

Appendix Table 9 Cereal supply and utilization in main exporting countries

Appendix Table 10 Total oilcrops statistics

Appendix Table 11 Total oils and fats statistics

Appendix Table 12 Total meals and cakes statistics

Appendix Table 13 Sugar statistics

Appendix Table 14 Total meat statistics

Appendix Table 15 Bovine meat statistics

Appendix Table 16 Ovine meat statistics

Appendix Table 17 Pigmeat statistics

Appendix Table 18 Poultry meat statistics

Appendix Table 19 Milk and milk products statistics

Appendix Table 20 Fish and fishery products statistics

Appendix Table 21 Selected international prices for wheat and coarse grains

Appendix Table 22 Wheat and maize futures prices

Appendix Table 23 Selected international prices for rice and price indices

Appendix Table 24 Selected international prices for oilcrop products and price indices

Appendix Table 25 Selected international prices for sugar and sugar price index

Appendix Table 26 Selected international prices for milk products and dairy price indices

Appendix Table 27 Selected international meat prices

Appendix Table 28 Selected international meat prices and FAO meat price index

Appendix Table 29 Fish price indices

Appendix Table 30 Selected international commodity prices

NOTES

General

•

FAO estimates and forecasts are based on official and unofficial sources.

•

Unless otherwise stated, all charts and tables refer to FAO data as source.

•

Estimates of world imports and exports may not always match, mainly because shipments and deliveries do not necessarily occur in the same marketing year.

•

Tonnes refer to metric tonnes.

•

All totals are computed from unrounded data.

•

Regional totals may include estimates for countries not listed. The countries shown in the tables were chosen based on their importance of either production or trade in each region. The totals shown for Central America include countries in the Caribbean.

•

Estimates for China also include those for the Taiwan Province, Hong Kong SAR and Macao SAR, unless otherwise stated.

•

Up to 2012/13, the European Union includes 27 member states. From 2013/14, the European Union includes 28 member states.

•

‘-‘ means nil or negligible.

Production

•

Cereals: Data refer to the calendar year in which the whole harvest or bulk of harvest takes place.

•

Sugar: Figures refer to centrifugal sugar derived from sugar cane or beet, expressed in raw equivalents. Data relate to the October/September season.

Utilization

•

Cereals: Data are on individual country’s marketing year basis.

•

Sugar: Figures refer to centrifugal sugar derived from sugar cane or beet, expressed in raw equivalents. Data relate to the October/September season.

Trade

•

Trade between European Union member states is excluded, unless otherwise stated.

•

Wheat: Trade data include wheat flour in wheat grain equivalent. The time reference period is July/June, unless otherwise stated.

•

Coarse grains: The time reference period is July/June, unless otherwise stated.

•

Rice, dairy and meat products: The time reference period is January/December.

•

Oilseeds, oils and fats and meals and sugar: The time reference period is October/September, unless otherwise stated.

Stocks

•

Cereals: Data refer to carry-overs at the close of national crop seasons ending in the year shown.

Price indices

•

The FAO price indices are calculated using the Laspeyres formula; the weights used are based on the average export value of each commodity for the 2002-2004 period.

COUNTRY CLASSIFICATION

In the presentation of statistical material, countries are subdivided according to geographical location as well as into the following two main economic groupings: “developed countries” (including the developed market economies and the transition markets) and “developing countries” (including the developing market economies and the Asia centrally planned countries). The designation “Developed” and “Developing” economies is intended for statistical convenience and does not necessarily express a judgement about the stage reached by a particular country or area in the development process.

References are also made to special country groupings: Low-Income Food-Deficit Countries (LIFDCs), Least Developed Countries (LDCs). The LIFDCs include 55 countries that are net importers of basic foodstuffs with per caput income below the level used by the World Bank to determine eligibility for International Development Aid (IDA) assistance (i.e. USD 1 945 in 2011). The LDCs group currently includes 48 countries with low income as well as weak human resources and low level of economic diversification. The list is reviewed every three years by the Economic and Social Council of the United Nations.

DISCLAIMER

The designations employed and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.

MARKET

INDICATORS

INVESTMENT FLOWS

Ann Berg, Senior Commodity Analyst

Futures prices for wheat, maize and soybeans rose steadily between January and May 2014. Wheat exhibited the highest gain (25 percent), followed by maize (18 percent) and soybeans (15 percent). Hard and soft wheat displayed the largest price rises during February and March, both appearing to be affected by political tensions in the Black Sea region. Persistent dryness in the US southern plains region also sustained higher wheat prices. Maize was buoyed by rising export projections owing to its global competitiveness. Maize feed usage was also raised because of the severe cold that persisted through the winter in the US central corridor, while maize for ethanol usage looked to increase based on strong positive margins. Soybeans rose on continued strong export and domestic demand as well as tight farmer holding, causing interior prices in many areas to exceed futures prices.

Futures volumes rose 17 percent for maize y/o/y, possibly a result of increased hedging due to the US bumper crop, while volumes rose marginally for wheat and soybeans y/o/y. Volumes however are lower than 2012 when maize and soybeans reached record high prices. Implied volatility rose from subdued levels exhibited late 2013, with wheat showing the greatest increase and soybeans the smallest increase (see Implied volatility chart).

Forward curves for wheat, maize and soybeans exhibit variable patterns. The wheat market displays a slight upward sloping or contango configuration while soybeans remains in a steep downward sloping configuration or backwardation, reflecting a USD 100/tonne discount between the July (old crop) and November (new crop) 2014 contracts. This wide variation between old and new crop prices derives from continued high demand for 2013/2014 soybeans and projections of larger soybean production for 2014/2015 – owing to acreage switches from maize to soybeans. Despite the 2013/2014 bumper crop which is normally predictive of contango, maize forward curves exhibit a flat configuration. Following a record drop in prices between July 2013 and January 2014, producers withheld maize from the market, gradually forcing spot prices and basis levels to rise to levels commensurate with deferred months.

INVESTMENT FLOWS

After retreating from trade participation during most of 2013, managed money has appeared active since the beginning of 2014. In both wheat and maize, managed money reversed its net short position to net long during February and March, and now holds a sizable net long in maize, approximating 20 percent of open interest. In soybeans, managed money added to its net long which it has maintained almost continuously for seven years, now holding about 25 percent of the open interest. In sum, managed money seems to have reverted to its former strategy of price trend following, particularly in wheat and maize, which have recovered significantly from recent lows. Conversely, in 2013, managed money overstayed its net long positions in maize and soybeans as markets declined (USD 80/tonne and USD 120/tonne respectively) from July through October. Overall, managed money trading performance in commodities registered negative results for 2012 and 2013. Swaps dealers, including index fund providers, showed limited activity, but also displayed some additional long position taking in wheat.

Fundamental changes are occurring in the banking sphere as Morgan Stanley, JPMorgan, Deutsche Bank, UBS, Royal Bank of Scotland and Barclays are exiting the commodities business. Goldman Sachs, however, is maintaining its commodity trading arm of J Aaron. Most banks cite cost burdens, resulting from regulatory reform and the potential for the US Federal Reserve to reverse its 2003 ruling that allowed banks to own commodity infrastructure. However, banks report that commodities trading has shrunk in profitability, due to the lower levels of volatility in energy markets and languishing prices in industrial metals, such as copper and aluminum.

OCEAN FREIGHT RATES

Contributed by the International Grains Council (IGC) www.igc.org.uk

OCEAN FREIGHT MARKET (NOVEMBER 2013 - MID-APRIL 2014)

Dry bulk ocean freight rates remained volatile during the past five months. After initial growth in November/December, mostly sparked by renewed demand for commodities and raw materials, rates for larger and medium-size vessels fell sharply through January, due to slowing chartering activity and an oversupply of tonnage. Poor weather conditions have also affected the freight market, particularly in the US and in Europe. Handysize rates were less affected, notably on routes from the US Gulf, underpinned by shipments of commodities, including grains and soyabeans.

Rates in the grains-carrying sectors have remained under pressure since mid-December, notably in the Atlantic Panamax market, due to surplus tonnage, exacerbated by ballasters from the Pacific. Freight rates in the medium and smaller-size categories have been less affected, helped by an increase in chartering activity for shipments of grains and soyabeans on routes from South America. However, April saw an acceleration in the decline in all market sectors due to poor demand.

The average of the Baltic Indices of the three grains-carrying sectors has fallen by 37% since the beginning of November 2013, and by 12% y/y, with the biggest decline in the Panamax sector. The Baltic Dry Index, which also includes the Capesize sector, was down 36% from early November, but is 11% higher y/y due to firmer Capesize values.

Following some rebound in early December, with shipments from the US Gulf the main driving force, Panamax rates fell sharply, firstly, in sympathy with initially weak Capesize sector, and secondly, due to surplus tonnage and insufficient demand. The decline continued through to mid-April, notably on transatlantic routes. Grains chartering demand on routes from South America to Far East Asia was largely serviced by ballasters from the Pacific, where, negative sentiment continued to weigh on rates. Tonnage oversupply and thin cargo availabilities further pressured in the region. Over the November to mid-April period, the Baltic Panamax Index (BPI) plummeted by 52%.

Rates in the Supramax/Handysize sectors rose steadily from November to mid-December, on good demand for commodities, including grains and soyabeans, notably on routes from the US Gulf, South America and the Black Sea. Rates in the Pacific were supported by mineral business from Indonesia, mostly to China. However, from January, rates started to ease, reflecting an oversupply of tonnage, notably on routes from South America to Far East Asia, although those from the US Gulf to Europe remained mostly steady. In April, the decline was more evident, with a softer South American market, an excess of vessels in the US Gulf and a heavy drop in transatlantic round voyages. Over the November to mid-April period, the Baltic Handysize Index (BHSI) fell by nearly 20%, while the Baltic Supramax Index (BSI) lost 28%.

Since mid-December, Capesize rates have suffered from generally weaker mineral demand, although there were brief periods of relative firmness. Overall, the sector has lost one-quarter of its value during the past five months. Year-on-year, however, the Baltic Capesize Index (BCI) advanced by 37%.

FOOD IMPORT BILLS

Global food import bills expected to stabilize in 2014

At USD 1.29 trillion, world expenditures on imported foodstuffs in 2014 are tentatively forecast to remain close to last year’s revised level, but 6 percent below the record of 2012, also revised. However, for the fifth year in succession, the world bill has surpassed USD 1 trillion.

The stability of global imported food costs masks considerable movements across individual product bills. Freight costs, which are not expected to vary significantly from 2013 levels, also contribute to stability. Of the commodities foreseen to undergo the largest changes, products in the animal protein category, including meat, dairy and fish, could rise together by as much as 10 percent to around USD 434 billion. The expected increase in these bills is based on much larger volumes of imports as well as higher world quotations, especially for dairy products. Similarly, rising prices of coffee are expected to result in an increase of 12 percent in total expenditures on tropical beverages.

By contrast, lower international prices anticipated for sugar combined with lower import demand could result in bills falling by 7 percent for this product group. Expenditures on imported vegetable oils are expected to remain virtually unchanged from last year.

As for cereals, reduced import volumes, bar rice, and lower quotations could bring cereal bills down by USD 30 billion or 15 percent from 2013 levels. The share of staples in food import bills continues to decline and is expected to account for under 13 percent of the world bill in 2014 compared to over 15 percent last year.

The tendency for global import bills to be steady in 2014 extends to many of the most economically vulnerable nations, such as those in the groups of Least Developed Countries (LDCs), Low Income Food Deficit Countries (LIFDCs) and those geographically situated in sub-Saharan Africa (excluding South Africa). Prospects for abundant domestic crops in these countries in 2014, particularly for staples, are expected to limit their need to rely on foreign supplies. With higher international prices for key export primary commodities, such as coffee and cocoa, the terms-of-trade in food and agriculture for commodity-dependent countries is expected to improve.

FAO PRICE INDICES

FAO Global Food Consumption Price Index remains stable[1]

The FAO Global Food Consumption Price Index Index tracks changes in the cost of the global food basket as depicted by the latest FAO world food balance sheet (see http://faostat3.fao.org/faostat-gateway/go/to/download/FB/FB/E).

At the beginning of the year, the index increased sharply, rising to a 10 month high in March before retreating slightly in April. Rising international prices of most foodstuffs, notably cereals, products that carry a much higher weight in total consumption than in trade (65 percent versus 27 percent), was behind its strengthening. The index’s recent convergence with the FAO Food Price Index (FPI) is a result of upward trending quotations for livestock products, which by contrast, are more influential in determining the FPI.

Contact

Adam.Prakash@fao.org

FAO Food Price Index fell in April

The FAO Food Price Index[2] averaged 209.3 points in April 2014, down 3.5 points, or 1.6 percent, from March and 7.6 points, or 3.5 percent, below April 2013. Last month’s decline was mostly caused by a sharp drop of dairy prices, although sugar and vegetable oil also fell. By contrast, cereals and meat prices firmed slightly.

The FAO Cereal Price Index averaged 206.9 points in April, up only 1 point (or 0.5 percent) from March but still 24 points (or 10.3 percent) below its value in April 2013. The monthly increase was less pronounced than those registered in February and March, as weather conditions improved in the United States and tensions in Ukraine had little effect on the country’s pace of grain shipments. Rice prices tended to weaken in the various market segments, with the exception of aromatic rice varieties, where they remained stable.

The FAO Vegetable Oil Price Index averaged 199 points in April, down 6 points (or 2.8 percent) from March. The slide in the index is driven by palm oil, whose values dropped following reports of lower than anticipated import demand, most notably from the European Union. Furthermore, Malaysia’s exports have been hit by the persistent strength of the country’s currency. Soybean oil prices, on the other hand, appreciated slightly as the market responded to the lingering tightness in global soybean supplies.

The FAO Dairy Price Index averaged 251.5 points in April, a sharp fall of 17 points, or 6.9 percent, over March. The market of all dairy products has been affected by reduced purchases by China (the main importer of Whole Milk Powder and second largest importer of Skimmed Milk Powder) and the Russian Federation (the main importer of butter). Additionally, an extended season in New Zealand and a good start to the dairy-year in the northern-hemisphere have meant that supplies for export have increased. Prices of all dairy commodities subsided, but particularly butter and milk powder.

The FAO Meat Price Index averaged 185.8 points in April, 0.8 points, or 0.4 percent, above March. The marginal increase was a result of stronger prices for pigmeat, in part on concerns over the effect of Porcine Epidemic Diarrhea virus on export supplies in the United States. Although little changed, bovine meat prices are close to historic highs, due to dry weather conditions affecting production in Australia and the United States. Prices of poultry and ovine meat were also stable.

The FAO Sugar Price Index averaged 249.9 points in April, down 4.1 points, or 1.6 percent, from March. Prices declined amid reports of large sugar availabilities in the main producing regions, including Thailand, India, and Australia. Generally Dry weather in most producing countries, which should boost the sucrose level, also weighed on prices.

[1]The FAO Global Food Consumption Price Index is published twice a year in Food Outlook.

[2]The FAO food price indices are updated on a monthly basis and are available on: http://www.fao.org/worldfoodsituation