World food prices set to remain high into next year, says UN report

Citing dwindling stocks and only small production increases for the majority of crops, a new United Nations report released today says world food prices are likely to remain high for the rest of this year and into 2012.

The biannual Food Outlook published by the UN Food and Agriculture Organization (FAO) states that the next few months will be critical in determining how the major crops will fare this year, according to a news release issued by the Rome-based agency.

“The general situation for agricultural crops and food commodities is tight with world prices at stubbornly high levels, posing a threat to many low-income food deficit countries,” according to David Hallam, Director of FAO’s Markets and Trade Division.

FAO’s monthly food price index showed that global food prices, which earlier this year soared to levels seen during the 2007-08 food crisis, dropped by one per cent in May. Declines in the prices of cereals and sugar were responsible for the slight decrease in the May index, says FAO, adding that this offset increases in meat and dairy prices.

The agency says current prospects for cereals in 2011 point to a record harvest of 2,315 million tons – a 3.5 per cent increase over 2010, which marked a one per cent drop over 2009.

Global wheat output is expected to be 3.2 per cent up from last year’s reduced crop, mostly reflecting improved yields in Russia.

World cereals stocks at the close of the crop seasons in 2012 are put at 494 million tons, up only two per cent from sharply reduced opening levels.

“Demand for cereals has also been increasing so that the 2011 crop, even at record levels, is expected to barely meet consumption, providing support to prices,” notes FAO.

In the oilseeds market, supplies in 2011-12 may not be sufficient to meet growing oil and meal demand, implying further reductions in global inventories, the agency adds.

Meanwhile, the global supply and demand balance for sugar points to some improvements, supported by large anticipated production in 2010-11, which is likely to surpass consumption for the first time since 2007-08.

Turning to global meat production, the agency says that high feed prices, disease outbreaks and depleted animal inventories were forecast to limit the expansion of production to 294 million tons in 2011 — only one per cent more than 2010.

The international meat price index hit a new record in May and a combination of strong import demand and limited export availability pointed to a further “firming of prices” in the next few months, FAO points out.