FAO/GIEWS Food Outlook No. 1, Jun 2007

from Food and Agriculture Organization of the United Nations
Published on 30 Jun 2007

Food import bills reach a record high partly on soaring demand for biofuels Based on FAO's latest analysis, global expenditures on imported foodstuffs look set to surpass US$400 billion in 2007, almost 5 percent above the record the previous year. The bulk of the increase can be levelled against rising prices of imported coarse grains and vegetable oils, the commodity groups which feature most heavily in biofuel production. Import bills for these commodities are forecast to rise by as much as 13 percent from 2006. More expensive feed ingredients will lead to higher prices for meat and dairy products, raising the expenditures on imports of those commodities. In several cases, such as meat and rice, the import bills are likely to be driven higher also because of larger world purchases. On the other hand, in the case of sugar, generally high and volatile prices could lead to smaller import volumes, the net effect of which likely to be a drop in the cost of global sugar imports. The rise of international freight rates to new highs also affected the import value of all commodities, putting additional pressure on countries' ability to cover their food import bills.

Among economic groups, developing countries as a whole are anticipated face a 9 percent increase in aggregate food import expenditures in 2007. The more economically vulnerable countries are forecast to be most affected, with total expenditures by low-income food-de? cit countries (LIFDCs) and least developed countries (LDCs) anticipated to rise by 10 percent each from 2006. To put matters in further perspective, the annual food import basket for LDCs in 2007 is expected to cost roughly 90 percent more than it did in 2000, which is in stark contrast the 22 percent growth in developed country import bills over the same period.



World cereal production in 2007 is forecast to reach 2 125 million tonnes, up 6 percent from the reduced level in 2006. It would exceed world cereal utilization in 2007/08 which is forecast to grow by 2 percent, to 2 114 million tonnes. As a result, world cereal stocks are likely to rise by 10 million tonnes to 413 million tonnes, still a very low level. World trade in cereals in 2007/08 is forecast at 247 million tonnes, down slightly from 2006/07. While the prospect of a strong recovery in global cereal production in 2007 is a positive development for the 2007/08 marketing season, total supplies in the new season would still be barely adequate to meet an anticipated rising demand, not only from the traditional food and feed sectors but in particular from the fast-growing biofuels industry. a result, international prices for most cereals are likely to remain high and volatile again in 2007/08.


World wheat production in 2007 is forecast to rise by over 5 percent to 630 million tonnes. Total wheat utilization is expected to reach 632 million tonnes, up one percent from 2006/07, mostly on faster demand for feed. World wheat inventories are forecast to decline for the second consecutive season, to 148 million tonnes, resulting in a fall of the world stocks-to-use ratio to 23 percent, its lowest level since 1980. International trade in 2007/08 is set to remain almost unchanged at 109 million tonnes but export supplies in the new season may prove larger than in 2006/07 mainly because of the expected recovery in Australia's production. As a result, wheat prices in 2007/08 are likely to remain strong, but somewhat below the high levels reached in the previous season.