Food prices almost unchanged

Record cereal harvest forecast

8 December 2011, Rome - The FAO Food Price Index in November was virtually unchanged from its October level. At the new level of 215 points, the Index was 23 points, or 10 percent, below its peak in February 2011 but remained two points, or one percent, above its level in November 2010.

The prices of cereals, one of the main commodity groups included in the Food Price Index, dropped by 3 points or  1 percent from October. The retreat was largely driven by wheat prices, which dropped 3 percent, while rice quotations fell only slightly and coarse grain prices remained virtually unchanged. Nevertheless, the cereals index remained 6 points higher than in November 2010.

Contributing to the downward pressure on cereal prices is the significant upward revision of the 2011/2012 global cereal supply estimate as a result of better crop prospects in some Asian countries and the Russian Federation, and larger than anticipated stocks in the latter. Other factors include deteriorating world economic prospects and a strong U.S. Dollar.

Record level of total cereals

These are among the highlights of the latest issue of FAO's quarterly Crop Prospects and Food Situation report published today. The report confirmed a record level of world cereal production of 2 323 million tonnes for 2011.  Although marginally lower than October's estimate, this represents a 3.5 percent increase on 2010 production.

At this level, the 2011 cereal crop should be sufficient to cover the expected increase in utilization in 2011/12 and also allow for a moderate replenishment of world reserves, the report said.

Among cereals, global wheat output is expected to increase by 6.5 percent, while the forecasts for coarse grains and rice were reduced slightly due to a downward adjustment for maize in the United States and a deterioration of rice prospects in Indonesia.

Animal feed up, and also stocks

Total cereal utilization in 2011/2012 was forecast at 2 310 million tonnes, 1.8 percent higher than in 2010/2011. An important feature is a sharp, 8 percent rise in the use of wheat for animal feed given its competitive price compared to coarse grains and maize in particular.

The forecast for world cereal ending stocks by the close of seasons in 2012 has been raised by almost five million tonnes since last month, to 511 million tonnes, the report said.  At this level world cereal stocks would be 10 million tonnes higher than last year and the world cereal stocks-to-use ratio would increase slightly to 22 percent.

Crop Prospects and Food Situation — which focuses on developments affecting the food situation of developing countries and in particular  Low-Income Food-Deficit Countries (LIFDCs) — noted that given their likely increased import requirements, the aggregate cereal import bill of LIFDCs for the 2011/2012 marketing season would reach a record level of US$33 billion — up 3.4 percent from 2010/2011.

Food insecurity hotspots

Reviewing the world's food security hotspots, the report said that despite some improvements in the situation in Somalia due to substantial humanitarian assistance and favourable rains food insecurity is expected to remain critical in drought-affected areas until the harvest of short-season crops in early 2012.

While famine conditions are expected to persist in Middle Shabelle and refugee populations in Afgoye and Mogadishu, the areas of Bay, Bakool and Lower Shabelle were downgraded from Famine to Emergency on 18 November

In the Horn of Africa as a whole, food insecurity remained critical for some 18 million people in most drought-affected areas, including 4.6 million in Ethiopia, 4 million each in Somalia and the Sudan, 3.75 million in Kenya, 1.5 million in South Sudan and 180 000 in Djibouti are in need of emergency assistance.

Irregular rains and civil unrest undermine food security

In West Africa, in several countries of the Sahel including Burkina Faso, Chad, Mali, Mauritania and Niger agricultural production has been hit by irregular rains and significant pest infestations. This could lead to price rises and food insecurity.

In the Near East, prolonged civil unrest in Syria and Yemen has disrupted trade and humanitarian aid distribution, limiting access to food, especially for vulnerable households.

FAO's latest estimates indicate that 33 countries around the world are in need of external  assistance as a result of crop failures, conflict or insecurity, natural disasters and high domestic food prices.

Photo: ©FAO/Vasily Maximov
2011 saw a record level of cereal production, globally 2 323 million tonnes.