Global food trade is poised for a resilient year even though international food commodity prices are set to remain high amid supply and demand uncertainties, according to a new report released today by the Food and Agriculture Organization of the United Nations (FAO).
According to the report, trade flows continued to reach new highs during the ongoing COVID-19 pandemic. In fact, on a global level, trade in agricultural products, particularly less-perishable foods, performed more robustly than the broader merchandise sectors. This contributed significantly to FAO’s provisional forecast for the world food import bill in 2021. The food import bill is forecast at $1.72 trillion, a 12% increase from its previous high of $1.53 trillion in 2020.
However, FAO indicated that rising prices raise concerns that higher outlays may still mask deteriorating quantitative and qualitative dietary trends in vulnerable countries.
The Food Outlook, issued twice a year, offers a detailed assessment of market supply and demand trends for the world’s major foodstuffs. This include cereals, vegetable oils, sugar, meat and dairy and fish. The Outlook also looks at trends in futures markets and shipping costs for food commodities.
The report finds that the average worldwide consumer price of protein in May 2021 was 23% above its May 2020 level. Meanwhile, Calories were up 34% year-on-year hitting their highest levels since February 2013. The difference, according to FAO, reflects stronger price rises for wheat, coarse grains and vegetable oils compared to meats, dairy products and fish.
Food output to increase
Furthermore, the report shows that world output of the major food commodities will increase later in the year. This excludes sugar, which is forecast to decline for the third consecutive year and fall short of global consumption.
Meanwhile, the market outlook for oilseeds and their derived products appears tight. The FAO is worried that production growth will be insufficient to satisfy world demand.
Furthermore, world supplies of wheat and rice are robust. However, stocks of coarse grains are forecast to fall despite an expected record 2021 global production. This, according to FAO, reflects large-scale utilization foreseen for livestock feed and industrial starches.
Expected global year-end stock-to-use ratio is 38.0% for wheat, above the five-year average. Also, year-end stock-to-use ratio for rice is expected to be stable at 35.1% whilst that of coarse grains will decline to 20.8%.
Moreover, world meat output in 2021 is forecast to expand by 2.2%, to 346 million tonnes. According to FAO, this reflects an anticipated rebound in meat production in China, where expansions are expected across all meat types, especially pig meat. China’s meat production is facilitated by high investments in the value chain and efforts to control the spread of African swine fever.
Fish output to rebound
Meanwhile, world fish output is expected to rebound and price rises are likely. This is due to recovering demand from restaurants after a year of restrictions associated with the COVID-19 pandemic. The report notes that pandemic-related restrictions catalysed a shift in sales trends benefiting small pelagics, such as sardines, anchovies and mackerel, as well as tuna.
At the global level, food and agricultural exports grew by almost $52 billion in 2020, a 3.2% expansion over 2019. Meanwhile, developing countries accounted for around 40% of the increase.
Meanwhile, the FAO forecast the value of global agricultural trade, measured by exports, to increase by $137 billion in 2021, representing an 8% increase. Much of that growth reflects demand from East Asia. However, the composition of the import basket is expected to change significantly due to the recovery of China’s livestock sector.
The ratio of agricultural trade to non-agricultural trade reached almost 11% in early 2020, only a third of its level in the 1960s but nearly double its historic low in 2007.