Global food supply gradually steadying
Shocks could still be in store:
With the second-highest recorded cereals crop expected this year and
stocks replenished, the world food supply looks less vulnerable to
shocks than it was during last year's food crisis, FAO said in its Food
Outlook report published recently.
But some potential dangers remain, it also said. "In spite of strong
gains in recent weeks, international prices of most agricultural
commodities have fallen in 2009 from their 2008 heights, an indication
that many markets are slowly returning into balance," the twice-yearly
Apparent easing of market conditions was reflected in the benchmark
FAO Food Price Index, which had fallen by one third since its peak in
June 2008 at the height of the world food crisis.
But food prices remained high in many developing countries, and
access to food by the poor also continued to be threatened by loss of
employment, income and other effects of the global economic crisis.
So far the improvement largely concerned cereals - the critical
sector for food security - after record production in 2008 overshot
original forecasts, the report said. The bumper crop had also
facilitated replenishment of global reserves to pre-crisis levels.
"With the new 2009-2010 marketing season commencing, prospects
continue to be positive as world cereal production is expected to be the
second largest, after last year's record," it said. World production was
forecast at 2219 million tonnes as compared with 2287 million tonnes in
2008/09. FAO's first forecast for world cereal utilization in 2009/10
suggested a relatively weak growth of around 1.3 percent from the
estimated 2008/09 level, to 2230 million tonnes. This compared with
nearly four percent growth in the previous season.
First forecast for world cereal trade in 2009/10 was 257 million
tonnes, down by nearly four percent from last year.
This contraction mostly concerned wheat imports, which could fall by
as much as 10 million tonnes in the new season, reflecting a strong
anticipated recovery in production in several major wheat-importing
Oilseeds production in 2008/09 was forecast at 405.9 million tonnes,
0.7 percent more than the 403.1 million tonnes estimated for the year
"The surge in soybean quotations in recent weeks, on the back of
shrinking world reserves, is emerging as a cause for concern given its
strong bearing on food and feed prices," Food Outlook noted.
Sugar demand up
World sugar consumption was set to expand, albeit at a slower rate
than in the past two years, propelled by sustained demand in the
developing countries. As a result, consumption was expected to outstrip
2008/09 production of 158.5 million tonnes for the first time since
2005/06, bringing global carry-over inventories down.
On the other hand fish, meat and milk prices have tumbled, driven
down by faltering demand as economies slowed and by recurring outbreaks
of animal diseases. Prices have plummeted in the dairy sector in
While a welcome development was that falling prices were expected to
save importing countries as much as $226 billion in food imports in 2009
as compared with 2008, "the deteriorating economic environment ... could
offset much of the benefit," the report warned.
Eroding purchasing power through a combination of falling incomes and
real exchange rates over much of the past 12 months afflicts the
affordability of food, however cheap it has become on the international
marketplace, it said.
Concern had now shifted from high food prices to the global economic
downturn's potential impact on demand for food, especially
higher-value-products, Food Outlook said. But growing linkages between
the agricultural sector and the energy, financial and currency markets
made food prices increasingly vulnerable to external shocks.
Specifically, a continuation of the weakening of the US Dollar and
the sharp rebound in energy prices witnessed in recent weeks could exert
renewed upward pressure on international prices, the report said.
"However, barring major crop setbacks, with world staple food stocks
at more comfortable levels than in 2008, the food economy looks less
vulnerable to those external developments than it was last year," the