UN: World food import bill set to rise this year | Sunday Observer

UN: World food import bill set to rise this year

Pic: Third World Network Features.
Pic: Third World Network Features.

The cost of importing food globally is set to reach US$1.413 trillion in 2017, representing a 6% or $86 billion rise from last year, the Food and Agriculture Organisation (FAO) of the United Nations has reported.

In its latest Food Outlook report released in Novermber, the FAO said that sharp increases in freight rates, stronger import demand and firmer prices of most food commodities are expected to elevate the global food import bill to its second highest level on record.

FAO said that of concern are the higher-than-average increases in the food import bills of many economically vulnerable nations.

“Expenditures by least-developed countries (LDCs), low-income food deficit countries (LIFDCs) and those geographically situated in sub-Saharan Africa (SSA) are set to climb considerably more than the global increase in 2017.”

For instance, the projected year-on-year rise of 12% in the aggregate bill for LIFDCs is twice the world average, while for LDCs, the most vulnerable country group, the food import bill could soar by 10% from 2016.

Freight rates

According to the FAO report, rising and volatile freight rates were a prominent feature in 2016 and also have been a characteristic over much of 2017, as evidenced by movements in the Baltic Dry Index that show average shipping charges in the ten months to October 2017 almost twice as high as in the corresponding period of last year.

“Taking wheat originating from the US Gulf ports as an example, major Asian buyers have now to pay as much as $45 per tonne to take delivery of the grain, which is $12 or 36% more than what they paid last year.”

At the product level, FAO said the import bills to undergo the largest absolute year-on-year increase are those for livestock commodities and for cereals.

At the forefront, the expected rise in global dairy import bill from last year amounts to some $38 billion, or 51%, on the back of record global demand and considerably higher unit costs.

The world dairy bill could approach $112 billion in 2017. For similar reasons, the meat import bill looks set to reach an all-time high of $176 billion, up 22% from 2016.

Stronger international demand in 2017 for maize is expected to drive up global expenditures on cereal imports by $25 billion to nearly $180 billion, said FAO.

The combination of higher volumes, higher benchmark prices and higher freights is also generally behind greater year-on-year bills for all other imported food categories, except for sugar, it added.

International purchases of the commodity are expected to decline this year and sugar prices to remain below the level of 2016. But the hike in shipping costs is likely to have an offsetting effect, with the overall sugar bill rising from last year, albeit modestly.

Cereal staples dominate imported foodstuffs for economically vulnerable countries. Improved domestic cereal production prospects, leading to lower purchases on the international marketplace, have not been sufficient to curb the strong growth in cereal import bills in 2017, as higher unit costs have driven up expenditures.

However, the US dollar – the currency in which most transactions are priced – has weakened considerably in 2017, said FAO.

This ought to have given some respite to the cost of procuring from international markets for those countries that saw their currency appreciate; but, this has not been the case for several large LIFDCs, it noted.

It said after reaching a 15-year high at the end of 2016, the US dollar has fallen considerably relative to major currencies, with the inflation-adjusted index dipping below 100 points in September and October 2017 for the first time in 34 months.

While providing respite to the cost of importing, as most international transactions are priced in USD, numerous major food importing LIFDCs (those buying more than $1 billion worth of food annually from international markets), however, have seen their currency slide against the US dollar.

Many of them, especially those situated in Africa, have experienced depreciation exceeding double-digit levels in percentage terms, FAO underlined.

The FAO biannual report on global food markets also highlighted trends in the markets of key food commodities such as cereals, coarse grains, rice, meat and diary products, and fish and fishery products.

According to FAO, world cereal markets are likely to be comfortably balanced in 2017/18, with total supplies exceeding projected demand and inventories on the rise.

Global cereal production in 2017 is forecast to surpass the 2016 peak by a small margin. Total production of coarse grains is set to reach a new record, with most of the expansion taking place in South America and Southern Africa.


However, wheat production is forecast to decline slightly from last year in spite of an upward adjustment since October driven by a larger-than-earlier anticipated harvest in the Russian Federation.

“The decline in wheat production from 2016 mostly reflects a lower harvest in the United States, as well as a projected fall in Australia’s wheat crop after a record output in 2016.”

Even though world wheat production in 2017 is forecast to fall below last year’s record level, wheat supplies in 2017/18 remain relatively large. Stocks are set to increase for the fifth consecutive season, reaching an all-time high.

Trade is expected to contract, while prices, which still exceed last year’s levels, have remained under general downward pressure since the start of the season.

Global wheat production in 2017 is forecast at 752.8 million tonnes, down slightly from 2016. Most of the decrease is associated with significant production cuts in the United States and Australia.

However, global output is still forecast to be the second highest on record. Global wheat trade is also seen to decline a slight 1.2% below the 2016/17 record level, amounting to 175.2 million tonnes.

FAO said that the forecast contraction in world trade in 2017/18 is largely the result of reduced import demand in Asia, more than offsetting higher expected imports by Europe and North America.

Inventories are forecast to increase further in 2017/18, boosted by large supplies in China. Global wheat stocks are forecast to reach 258 million tonnes by the close of seasons in 2018, an all-time high and 5% above their opening levels.

Overall, said FAO, the bulk of this season’s projected expansion in world wheat reserves is expected to take place in China, where wheat inventories are forecast to increase by at least 18 million tonnes, or 20%, to around 110 million tonnes.

As for coarse grains, FAO reported that record production in 2017 amid a slow rising utilization is likely to contribute to a further expansion in world inventories.

FAO has forecasted global coarse grain production in 2017 to exceed the previous year. Most of the increase is associated with higher maize production in Southern Africa and South America, more than offsetting the expected reduction in the United States.

While feed demand for maize is expected to remain relatively firm, declines in feed use of barley and sorghum in China and the United States are seen to push down the year-on-year growth in total feed utilization. Industrial use of coarse grains is also expected to experience a below-average increase, largely because of a weaker intake of maize for production of biofuels. Based on latest forecasts for global production and utilization, world stocks could rise to a new record level.

Maize and barley inventories are behind this projected rise, mostly in Brazil, South Africa and the United States, while sorghum stocks are heading for a decline, mostly in Argentina, Australia and China.