Hopes that this year’s world grains harvest will significantly ease squeezed supplies received a dent as the United Nations trimmed its production forecast, citing “persisting drought conditions” harming the US crop.
The UN food agency, the Food and Agriculture Organization (FAO), said it had “scaled back moderately” its hopes for 2022-23 global wheat production, by 8m tonnes to 782m tonnes.
While still a record figure, the downgrade shrank to only some 5m tonnes the output increase expected over 2021-22.
The FAO said that its downgrade “mostly concerns the US, where persisting drought conditions have impaired yield prospects of the winter wheat crop and curbed overall production expectations”.
The US winter wheat crop entered this month rated 27% “good” or “excellent”, according to the US Department of Agriculture, the lowest rating since 1996.
The five-year average for the start of May is 51%, on GrainPriceNews calculations.
The FAO pegged the US all-wheat harvest at 50m tonnes – below the 52.8m-tonne estimate made last month, although still an improvement on last year’s 44.8m-tonne result.
The agency said it was still expecting too a “substantial production recovery” in Canada’s performance after the drought-ravaged 2021 crop, and lifted its forecast for this year’s European Union harvest to 139.5m tonnes, taking it narrowly above last year’s result.
The organisation cited European Commission data “indicating a small year-to-year increase in wheat sowings”.
However, it stood by a forecast for a Ukraine harvest down 4.0m tonnes year on year at 28.0m tonnes, “reflecting the effects of the conflict that are foreseen to reduce the harvested area by at least 20%.
“Yields are also expected to decline in 2022 due to conflict-related disruptions to agricultural operations prior to the harvest period.”
The comments came as the FAO lifted by 5.2m tonnes to 855.9m tonnes its forecast for world stocks of grains, including rice, at the close of 2021-22, largely reflected official data showing bigger Indian wheat inventories than had been thought.
The FAO also revealed that food prices had eased slightly, by 0.8%, from last month’s record high, led by a 5.7% month-on-month decline in vegetable oil prices.
“The decline was driven by lower world prices of palm, sunflower and soy oils, which more than offset higher rapeseed oil quotations,” the agency said, flagging in particular a drop in aplm oil values on “subdued global import purchases amid high costs, as well as a weakening demand outlook in China”.
Cereal prices eased by 0.4%, with the market “moderated by larger shipments from India, higher-than expected exports from the Russian Federation, and slightly dampened global demand as a result of high prices”.
Dairy, meat price growth
Máximo Torero Cullen, the FAO chief economist, termed the index decline a “welcome relief, particularly for low-income food-deficit countries”.
However, he added that “still food prices remain close to their recent highs, reflecting persistent market tightness and posing a challenge to global food security for the most vulnerable”.
Meat prices rose by 2.2% month on month to a record high, as disruptions to Ukrainian exports lifted poultry prices, while a “prolonged low supply of slaughter pigs in Western Europe and high internal demand in large producing countries” lifted pork values.
Dairy prices increased by 0.9% to an eight-year high, “driven by the persistent global supply tightness, as milk output in Western Europe and Oceania continued to track below their seasonal levels”.
Butter values “rose the most, reflecting tight supplies, including low inventories, especially in Western Europe, amidst a surge in demand for near-term deliveries, partly induced by the current shortage of sunflower oil and margarine”. War-torn Ukraine has historically been the top sunflower oil exporter.
Sugar prices rose the most month on month of any of the FAO’s food groups, by 3.3% to a five-year high.
“Higher ethanol prices in Brazil, coupled with the sustained strengthening of the Brazilian real against the US dollar, continued to underpin the increase in world sugar prices,” the agency said.
“Additional support was provided by concerns over the slow start of the 2022 [cane] harvest in Brazil.”