The United Nations lifted its forecast for world cereals production as it revealed that food prices had fallen to their lowest in nearly six years – encouraged by a stand-off by grain buyers in anticipation of strong harvests.
The UN food agency, the Food and Agriculture Organization, lifted its forecast for world output of cereals, including rice as well the likes of corn and wheat, in 2015-16 by 14.9m tonnes to 2.52bn tonnes.
The upgrade took the estimate the world grains harvest to within 26m tonnes of last year’s record production, and meant that world inventories will fall over the season by roughly half the pace previously expected, by 12.2m to 634.3m tonnes.
The world cereals stocks-to-use ratio, a key measure of crop availability, and therefore of pricing potential, was seen at 24.7%, down 0.8 points on the 2014-15 number, but “well above the low of 18.5% registered in 2007-08”, when grain prices soared.
Subdued trade prospects
Indeed, a drop in grain values led a decline in world food prices fell last month of 1.4% to their lowest since September 2009, the FAO said. Food prices are now down 22% from a high reached in March last year.
Grain prices dropped by 3.8% last month, weighed by “ample stocks combined with generally favourable crop outlooks for this year”, which had spurred many buyers to delay orders.
“Subdued trade prospects, with many importing countries postponing purchases to later this year, contributed to the general decline in prices,” the agency said.
Dairy prices were also notably weak, falling 2.9% in May, taking to 39% their decline from a high in February last year.
The latest drop “reflects large unsold stocks in New Zealand and the build-up of export supplies in Europe, as production in the northern-hemisphere reaches its seasonal peak,” the FAO said, noting also “uncertainty over the level of China’s purchases of milk powder in 2015”.
‘Bigger anticipated harvests’
The FAO’s raised estimate for world grains production prospects reflected in part a 4.3m-tonne upgrade to 723.4m tonnes for the wheat harvest forecast.
The revision, which reduced below 6m tonnes expectations for the drop in world output this year from last year’s record high, “mostly reflects bigger anticipated harvests in Africa and North America”, the FAO said.
For coarse grains, such as barley, corn and sorghum, the production estimate was lifted by 10.3m tonnes to 1.30bn tonnes.
The upgrade was “mainly on improved prospects for corn, in China and Mexico, and sorghum, in the US,” the agency said.
“Despite this month’s increase, world coarse grain production would remain 2%, or 26m tonnes, smaller than in 2014, largely on account of lower projected corn and barley outputs.”
(Source – http://www.agrimoney.com/news/un-flags-grain-price-falls-as-it-ups-world-harvest-forecast–8417.html)