The global food trade will reach an all-time record high in both volume and value terms by the end of 2021, according to a new report released by the United Nations Food and Agriculture Organization (FAO).
FAO indicated that the import bill should extend beyond $1.75 trillion, marking a 14 percent increase from the previous year, and 12 percent higher than the previous forecast.
According to FAO’s new Food Outlook, trade-in food items have shown “remarkable resilience” to disruptions throughout the pandemic, but rapidly rising prices, pose significant challenges for poorer countries and consumers. The increase is driven by higher price levels of internationally traded food commodities and a threefold increase in freight costs.
Developing countries account for 40 percent of the total and their food import bill is expected to rise by 20 percent compared to the year before. Even faster growth is expected for Low-Income Food Deficit Countries (LIFDCs).
In terms of products, the price of basic commodities including cereals, animal fats, vegetable oils, and oilseeds is skyrocketing in developing countries. High-value foods, such as fruits and vegetables, fishery products, and beverages, are driving the majority of the rises in developed regions.
World output prospects for major cereals remain robust, with record harvests expected for maize and rice. Cereals for consumption, and animal feed, should grow even faster. The forecast expects some improvements in the supply situation for oilseeds and derived products, but their end-season stocks could remain below average.
After three years of decline, global sugar production is expected to rise, but it will still fall short of global consumption. Because of lower supply in key exporting countries and increased prices, trade is expected to decline marginally overall.
The report says that meat production would increase as a result of China’s rapid recovery, especially pig meat. A growth slowdown in trade is likely, caused by declines in leading importing regions, mostly Asia and Europe.
Milk production is expected to grow in all major producing regions, with Asia and North America leading the way. Global trade should also go up, even with the slowdown in the import growth rate of the last few months.
Finally, fisheries and aquaculture output is expected to increase 2 percent. According to FAO, this highlights that new market dynamics resulting from the pandemic are likely to endure. Despite high freight costs and logistical delays, the fish trade is also bouncing back. To examine the impacts of rising input costs on food prices, FAO experts constructed a new tool called Global Input Price Index (GIPI).
According to the report, since 2005, the new GIPI has moved in sync with the Food Price Index (FFPI), implying that rising input costs lead to higher food prices. The FFPI jumped by 34 percent this year until August, while the GIPI increased by 25 percent. The report also notes that sectors and regions are affected differently.
Soybean producers, for example, have lower demand for expensive nitrogen fertilizer, so they should benefit from higher product prices. On the other hand, pig producers face high feed costs, and low meat prices, narrowing their margins. The analysis also points to a growing number of countries, currently 53, where households spend more than 60 percent of their income on necessities such as food, fuel, water and housing.