Global wheat production forecast to fall 1.4% year-over-year to 690 million tonnes in 2012--the second-highest on record--as normal yields expected in areas that saw record harvests last year, FAO says

Andrew Rogers

ROME , March 8, 2012 (press release) – FAO today forecast that 2012 world wheat production will be the second highest on record at 690 million tonnes and also announced that international food prices rose one percent in February — the second increase in two months.

Published today, FAO’s quarterly Crop Prospects and Food Situation report forecast a 2012 wheat crop 10 million tonnes or 1.4 percent down from the record 2011 harvest but still well above the average of the past five years.

Although plantings have increased or are forecast to increase in many countries this year in response to continuing strong prices, a return to normal yields is expected in areas where record highs were achieved last year, the report said. But it was still too early for a global forecast of 2012 cereal output, it added.

Impact of cold weather

Crop Prospects also noted a firming of international cereal prices in recent weeks due to tightening current wheat supplies and concerns over the impact of severe cold weather in Europe and the Commonwealth of Independent States.

Turning to the situation at regional level, the report said that adverse weather in West Africa caused a sharp drop in cereal and pasture production in large parts of the Sahel. This, combined with high food prices and civil strife, has led to high food insecurity and increased malnutrition in several countries, notably in Niger, Chad, Mauritania, Mali and Burkina Faso.

In the Near East, food security has deteriorated in the Syrian Arab Republic and Yemen following civil conflict in the two countries. In Syria about 1.4 million people have become food insecure while thousands of families have been forced to flee their homes in Yemen.

In Eastern Africa, despite some improvement, the food situation of vulnerable groups remains precarious, especially in pastoral areas affected by earlier drought. The food security situation in the Sudan and South Sudan is of concern following poor harvests.

In Southern Africa, overall crop prospects remain satisfactory despite dry spells and cyclones in some areas.

Gains in India

In Far East Asia, prospects for the 2012 wheat crop are generally favourable with output expected to reach last year’s record level due in particular to good gains in India.

In Central America, dry weather reduced plantings of the 2012 secondary maize crop in Mexico. Elsewhere, good maize harvests are estimated despite losses due to torrential rains during the recently concluded secondary seasons.

In South America, a prolonged dry spell affected the 2012 maize crop in Argentina and Brazil but above-average outputs are still forecast due to increased plantings.

The cereal import bill of Low-Income Food-Deficit Countries (LIFDCs) is expected to climb to a record level of $ 32.62 billion in 2012, slightly above the 2010/11 estimate, mainly due to a decline in production and a rise in import requirements in the major importing countries.

Food Price Index

FAO’s Food Price Index, published separately today, rose 1 percent, or 2.4 points from January to February. The Index climbed nearly two percent in January – its first increase in six months.

The increase in the February Index was mostly driven by higher prices of sugar, oils and cereals while dairy prices fell slightly after a marked rise in January. At its current level, the Index was 10 percent below its peak in February 2011.

Increased imports due to a weaker US Dollar and plunging freight rates have also characterized world markets since the beginning of 2012. This, combined with unfavourable weather conditions in major exporting countries has supported world prices in recent weeks, FAO said in a brief accompanying the Food Price Index.

Cereal prices

The FAO Cereal Price Index averaged 227 points in February, up 2 percent, or 4.4 points, from January. International wheat prices rose most followed by maize, while rice quotations were generally lower.

The FAO Oils/Fats Price Index registered another gain in February to 239 points, 2 percent or 5 points, higher than in January. Poor monthly production growth in palm oil, together with the prospect of a tight supply and demand balance for total vegetable oils were among the reasons.

The FAO Meat Price Index averaged 175 points in February, virtually unchanged from the previous month’s level. Prices of pig meat gained 3.4 percent, sustained by strong purchases in Asia and recent disease outbreaks in the Russia Federation. By contrast, prices of poultry, bovine and sheep meat lost some ground.

The FAO Dairy Price Index averaged 205 points in February, down marginally from January, The decline was mainly caused by falling skim milk powder and casein quotations. However, prices of butter, cheese and whole milk powder remained relatively steady.

The FAO Sugar Price Index rose to 342 points in February, up 2.4 percent, or 8 points, from January, but still 18 percent (76 points) lower than in February last year. Last month’s increase was largely driven by unfavourable weather conditions in Brazil, the world's largest producer and exporter of sugar.

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