Prices to stay low on record foodgrain output, says FAO

Global food markets are likely to remain balanced with the prices of cereals under pressure on record high production.

Though cereal utilisation is expected to set a new record this year, the growth in utilisation may not support prices due to large carryover stocks from the previous year. The Food and Agricultural Organisation (FAO) of the United Nations in its latest report forecast global cereal production to set a new record at 2.56 billion tonnes in 2016-17, a rise of 1.5 per cent from the previous year. Along with carryover stocks, total cereal availability in the world is estimated to surpass consumption in 2016-17 by 664.3 million tonnes, over 25 per cent of the annual consumption.

"Global food markets will likely remain 'generally well balanced' in the year ahead, as prices for most internationally traded agricultural commodities are relatively low and stable. The benign outlook, especially for staple grains, is poised to lower the world food import bill to a six-year low in 2016-17," the FAO said in its October report released on Thursday.

The FAO raised its forecast for global wheat production to 742.4 million tonnes, led by increases in India, the US and the Russian Federation, which is poised to overtake the EU as the grain's largest exporter. Total wheat utilisation is projected to reach 730.5 million tonnes, including a big jump in use of lower-quality wheat for animal feed. Global rice production is predicted to expand for the first time in three years, increasing 1.3 per cent to an all-time high of 497.8 million tonnes, buoyed by abundant monsoon rain over Asia and sizeable increases in Africa.

Coarse grain output is seen rising 1.8 per cent on the year, buoyed by record crops in the US, Argentina and India. "As for exports, an output recovery could help India boost its sales to international markets, primarily at the expense of lower deliveries by Thailand, consolidating India's position as the world's leading supplier of rice," the FAO said.

Wheat and maize futures on the Chicago Board of Trade have both dropped more than 16 per cent since the start of the year, while quoted rice prices are at their lowest level since early 2008. The world's milk output is forecast to grow by 1.1 per cent to 817 million tonnes in 2016, with output set to expand in Asia and North and Central America, but stagnating in Europe and Africa and declining in Oceania and South America.

The removal of some excess export supplies in the EU and anticipation of tighter milk availability during the second half of the year caused international dairy prices to rebound between May and September.

At $1.17 trillion, the value of total food imports in 2016 is forecast to decline by 11 per cent, or $148 billion, from last year, marking the largest annual fall in absolute terms in recent history to a level not witnessed since 2010.

A Rabobank report said, "Despite the forecast of a 4.5 per cent lift in global corn demand for 2016-17, stocks remain historically high. We expect global stock-to-use to remain above 20 per cent for the 2016-17 season, with US corn stocks at a 30-year high."