Global food trade is poised for a resilient year ahead even as international food commodity prices are set to remain high amid supply and demand uncertainties, according to a new report released by the Food and Agriculture Organization of the United Nations (FAO).
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The report notes that 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.
That has contributed to drive FAO's provisional forecast for the world food import bill in 2021 to $1.72 trillion, a 12 percent increase from its previous high of$1.53 trillion in 2020.
However, rising prices raise concerns that higher outlays may still mask deteriorating quantitative and qualitative dietary trends in vulnerable countries.
Food Outlook, issued twice a year, offers a detailed assessment of market supply and demand trends for the world's major foodstuffs, including cereals, vegetable oils, sugar, meat and dairy and fish. It also looks at trends in futures markets and shipping costs for food commodities.
Among its findings, measured by the FAO Global Food Consumption Price Indices, is that the average worldwide consumer price of protein in May 2021 was 23 percent above its May 2020 level. Calories, in prices, meanwhile, were up 34 percent year-on-year and hit their highest level since February 2013. The difference reflects stronger price rises for wheat, coarse grains and vegetable oils compared to meats, dairy products and fish.
World output of the major food commodities is expected to increase in the year ahead, with the exception of sugar, which is forecast to decline for the third consecutive year and fall short of global consumption, pointing to the need to run down inventories.
The market outlook for oilseeds and their derived products appears tight, with resumed production growth foreseen insufficient to satisfy world demand.
World supplies of wheat and rice are robust, while stocks of coarse grains are forecast to fall despite an expected record 2021 global production, reflecting large-scale utilization foreseen for livestock feed and industrial starches.
Expected global year-end stock-to-use ratios are, respectively, 38.0 percent for wheat, above the five-year average, stable at 35.1 percent for rice, and declining to 20.8 percent for coarse grains.
World meat output in 2021 is forecast to expand by 2.2 percent, to 346 million tonnes, reflecting an anticipated rebound in meat production in China, where expansions are expected across all meat types, especially pig meat, facilitated by high investments in the value chain and efforts to control the spread of African swine fever.
World fish output is expected to rebound and price rises are likely, due to recovering demand from restaurants after a year of restrictions associated with the COVID-19 pandemic. The report notes that pandemic-related restrictions catalyzed 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 from the year before, a 3.2 percent annualized expansion, with developing countries accounting for around 40 percent of the increase.
And in 2021, prospects are for the value of global agricultural trade, measured by exports, to increase by 8 percent, or $137 billion. Much of that growth reflects demand from East Asia, although the composition of the import basket there is expected to change significantly due in large part to the recovery of China's livestock sector.
The ratio of agricultural trade to non-agricultural trade reached almost 11 percent in early 2020, only a third of its level in the 1960s but nearly double its historic low in 2007.
Rising food imports as a share of all imports can be an early warning indicator for potential crises in some areas. For example, the import bills of Low-Income Food-Deficit Countries (LIFDCs) appear set to increase by 20 percent, five times as fast as the group of Least-Developed Countries. Countries where export revenues, including from tourism, have been hit hard by the pandemic, may be particularly vulnerable.
Lastly, the Food Outlook explores an innovative way of measuring food prices paid by importers that also takes into account the way demand trends change, often as a result of income shifts, and covers a broader array of foodstuffs than the FAO Food Price Index (FFPI).
The FFPI is built on benchmark export prices for key commodities, while the new measure uses Import Unit Values that capture what countries actually pay when they import food, which includes not only freight costs but also quality premia or discounts. The new index is based on flexible weights and hence captures the changing composition of imports.
As a result, the IUV index offers insight into shifts that consumers who lost income during the COVID-19 pandemic may have made, such as moving from meat to cereals, beef to chicken, or Basmati to ordinary rice. It reached its historical peak in March 2021, the last data point available. ■