The United Nations cautioned over “significantly” worsened prospects for world grains production, even as it reported the decline in world food prices extending to the longest in eight years.
The UN Food Agency, the Food and Agriculture Organization, reduced by 17.2m tonnes to a three-year low of 2.77bn tonnes its forecast for world production of grains in 2022-23.
The FAO said that “persistent drought conditions in northern hemisphere countries have prompted a significant cutback” to the estimate, which would represent a decline of 38.9m tonnes year on year.
The forecast for world cereal stocks at the close of the season was cut by 9.3m tonnes to 845m tonnes – doubling to 18.5m tonnes the shrinkage in inventories expected over 2022-23.
“As a result, the world cereal stocks-to-use ratio,” a measure of the tightness of supplies, viewed as a strong indicator of price potential, “is expected to fall slightly from 30.9% in 2021-22 to 29.5% in 2022-23, the lowest level since 2013-14”, the agency said.
‘Increasing export availabilities’
However, the FAO added that the ratio was “still relatively high from a historical perspective”, with the comments coming even as it revealed a fifth successive month of decline in world food prices in August, of 1.9%.
That represents the longest such dip in prices since a six-month spree which ended in April 2014.
It is already larger in scope, cutting values by 13.6% from the record high set in March.
August’s dip was led by a drop of 3.3%, month on month, in prices of vegetable oils, “driven by lower world prices of palm, sunflower and rapeseed oils, which more than offset higher soyoil quotations,” the agency said.
“International palm oil prices fell for the fifth consecutive month in August, driven by increasing export availabilities from Indonesia, mainly thanks to lower export taxes, as well as seasonally rising outputs in South East Asia.”
Sugar prices fell by 2.1% to a 13-month low, “mainly triggered by an increase in the sugar export cap in India, and lower ethanol prices in Brazil, which raised expectations of a greater use of sugarcane to produce sugar”.
Downward price pressure was offset in part by “lower-than-earlier expected sugar production in Brazil in the first half of August due to adverse weather, along with persisting concerns over the impact of dry conditions on the 2022 crop in the European Union”.
Values of cereals themselves fell by 1.4% last month, led by a 5.1% dive in prices of wheat, “driven by improved production prospects, especially in Canada, the US and Russia, and higher seasonal availability as harvests continued in the northern hemisphere”, the organization said.
It also highlighted the “resumption of exports from the Black Sea ports in Ukraine for the first time in over five months of interruption”.
‘Exceptionally hot and dry weather’
The FAO said that, while prospects for cereal supplies overall had deteriorated, wheat had bucked the trend thanks to increased expectations for Russia’s harvest, and “conducive weather conditions” which have boosted hopes for Canadian and US yields.
The organisation lifted by 6.7m tonnes to 777.0m tonnes its forecast for world wheat output this season – a total only marginally behind the 2021-22 record high of 778.1m tonnes.
The global grain harvest downgrade instead related in the main to coarse grains, for which the FAO cut its output forecast by 17.9m tonnes to 1.48bn tonnes, mostly down to reduced prospects for corn (maize).
In the European Union, “exceptionally hot and dry weather conditions that have prevailed since late spring are estimated to push down [corn] yields by 16% compared to the previous five-year average,” the agency said.
“Similarly, prospects for maize production in the US are downgraded moderately, largely owing to unfavourable weather in the Midwest that has curbed yield prospects.”
Furthermore, “precipitation deficits also had negative impacts on expected barley and sorghum yields” in the EU and the US.