WorldWatch:

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Supply volatility to continue
[3 November 2010] Bunge, the world’s largest agricultural traders, said the shortfalls fueling the grain prices will continue into the next year as global food demand continues to rise. Chief executive officer Alberto Weisser said the slim cushion between supply and demand, and associated price volatility, was likely to continue. “There will be tightness in supply probably in the whole of next year.” He said this after releasing the company’s third quarter results. Bunge posted an increase of 40% in profits year-on-year to USD 2.26 per share.

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China increases estimate for soybean imports
[5 November 2010] China’s Ministry of Commerce recently increased the country’s estimated soybean imports for October from 4.15 million tonnes to 4.5 million tonnes, while the ministry expects the volume for November to reach 4.65 million tonnes. An announcement on its website said American soybean loaded for October shipments registered 3.6 million tonnes. The ministry also said the soy oil loaded for October imports, mostly from the US and Brazil amounted to 223,300 tonnes.

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Del Monte Pacific posts USD3.3m profits in Q3
[5 November 2010] Food company Del Monte Pacific announced a third quarter net profit of USD 3.3 million. Last year the company recorded a net loss of USD 1.7 million. Del Monte attributes its profit to increase of 16% in sales year-on-year to USD 88.4 million because of higher turnover in the Philippines and its export markets. The company also recorded better earnings for its processed and fresh business segments.

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Demand for food safety products to reach USD45.2b in 2014
[9 November 2010] Demand for food safety products in the Asia Pacific region -- including disinfection and diagnostic products, smart labels and tags, and software and tracking systems -- is projected to rise 10.3% per year to USD 45.2 billion in 2014. Advances will be stimulated by gains in food and beverage processing activity and increasingly strict food safety regulations, according to a new study from Freedonia Group Inc, a Cleveland-based industry market research firm. The new business in the regions will account for two-fifths of the world’s aggregate market value gains between 2009 and 2014. China will continue to see some of the fastest demand growth, due to mounting pressure on the part of consumers, producers and regulators to ensure the safety of the food supply.

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Philippine Halal workshop helps develop sector
[11 November 2010] The Philippines recently held an International Halal Poultry Standards Training Workshop to promote and grow its halal industry. Attended by speakers from Malaysia the workshop is expected to accelerate the development of halal standards for food commodities for the country in order to tap the multi-billion dollar global market for halal products. The industry is set to capture at least 2% of the demand for 770,000 metric tonnes per year of halal food products in Brunei, Indonesia, Malaysia and the Philippines under the Brunei-Indonesia-Malaysia-Philippines East Asean Growth Area’s proponent project.

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UN warns of food crisis
[11 November 2010] The United Nations (UN) has warned that the world may be on the verge of a major new food crisis caused by high food prices. The global food crisis brought on this threat but environmental disasters have further triggered food price inflation.  The UN’s Food and Agriculture Organization believes that both rich and poor countries will be faced with a malnutrition problem.

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World Agricultural Supply and Demand Estimates - November 2010
The forecast of total US meat production is raised for 2010 and 2011, as is that for pork production, reflecting exceptional gains in carcass weights, according to the latest USDA World Agricultural Supply and Demand Estimates.


Livestock, Poultry and Dairy
The forecast of total US meat production is raised for 2010 and 2011. Production forecasts for all major meats are raised for 2010. Beef production is raised on higher steer and heifer slaughter and the pork production increase reflects exceptional gains in carcass weights. Broiler hatchery data points toward continued gains in broiler production as the number of eggs set and chicks placed are large. The rate of decline in 2010 turkey production is slower than previously forecast. For 2011, production forecasts for beef, pork and broilers are increased. The beef production increase largely reflects slaughter of the higher-than-expected number of cattle placed on feed during the third quarter of 2010. Pork production is forecast higher in early 2011 as some of the weight gains seen in late 2010 carry into 2011. However, the increase in weights is expected to be moderated by higher costs of feed during 2011. Broiler production is also forecast higher in early 2011 as the sector carries its current expansion into 2011. However, higher expected feed costs are expected to slow the rate of increase later in the year. The turkey production forecast for 2011 is unchanged from last month as is the egg production forecast.

The beef import forecast is lowered for 2010 as the pace of imports to date is relatively slow but the forecast for 2011 is unchanged. Beef exports in both 2010 and 2011 are raised on stronger growth to Asian markets. The forecast for pork imports is raised for both 2010 and 2011 on strong shipments from several markets. The pork export forecast is lowered for 2010 based on the pace of exports but the forecast for 2011 is unchanged. The poultry export forecast is reduced on weaker third-quarter data but the forecast for 2011 is unchanged from last month.

The cattle price forecasts for 2010 and 2011 are raised to reflect continued strong demand for cattle. Hog prices are forecast lower on larger forecast pork supplies. The broiler price forecast is unchanged. Egg prices for 2010 are forecast higher as prices recovered from their late summer decline but the 2011 forecast is unchanged.

Forecast milk production for 2010 is unchanged from last month. However, for 2011, production is lowered from last month as forecast cow numbers are reduced from last month. Milk per cow is adjusted slightly higher in early 2011 but higher feed prices and lower forecast milk prices limit the rate of growth in 2011. Exports in 2010 are forecast higher due to strong growth in butter, cheese and fluid milk/cream. For 2011, continued global economic recovery and a favorable exchange rate should support exports. Revisions have been made to historical export aggregations, resulting in higher estimated exports. Import forecasts are raised on the strong pace of imports.

Cheese and butter prices for both 2010 and 2011 are forecast lower. The 2010 forecast for nonfat dry milk is unchanged from last month but stronger expected exports support a higher forecast for 2011. The whey price forecast is unchanged. Both Class III and Class IV price forecasts for 2010 are lowered due to the lower cheese and butter price forecasts. The Class III price forecast is lowered for 2011 but the Class IV price forecast is raised as the higher nonfat price more than offsets the lower butter price forecast. The all milk price is forecast to average $16.30 to $16.40 per cwt for 2010 and $15.95 to $16.85 per cwt for 2011.

Wheat
US wheat ending stocks for 2010/11 are projected five million bushels lower this month as downward production revisions of 11 million bushels for Hard Red Spring (HRS) wheat and four million bushels for durum more than offset higher projected imports. Imports are raised 10 million bushels with increases for Soft Red Winter (SRW) wheat and durum. Exports are unchanged, but shifts among classes result in higher projected exports of Hard Red Winter and HRS wheat and reductions for SRW and durum. The projected season-average price received by producers is narrowed five cents on each end of the range to $5.25 to $5.75 per bushel. Heavy early season marketings and forward sales limit upside potential for the season-average farm price.

Global wheat supplies are projected slightly higher for 2010/11 as higher world production offsets lower carry-in, mostly reflecting higher 2009/10 wheat feeding in China. World production is raised 1.5 million tons for 2010/11 as increases for Argentina, Australia, EU-27 and Paraguay more than offset reductions for FSU-12 and the United States. Argentina production is raised 1.5 million tons as favourable returns and timely rains boost area and yield prospects. Australia production is raised 1.0 million tons as rising yield prospects in eastern growing areas more than offset reductions from extended dryness in Western Australia. Production is raised 0.6 million tons for EU-27 mostly based on higher reported area for Poland. Production for Russia is lowered 0.5 million tons as harvest results indicate lower-than-expected yields in Siberia. Production is also lowered 0.5 million tons each for Azerbaijan and Kazakhstan as the latest reports confirm higher-than-expected yield losses from the extended drought across the region.

World wheat trade for 2010/11 is raised this month with imports up 0.5 million tons each for China, Egypt and South Korea, mostly reflecting higher reported shipments so far for the marketing year. Imports are also raised for Azerbaijan and the United States. Turkey’s imports and exports both are reduced one million tons as short supplies of FSU-12 wheat limit Turkey’s wheat imports and flour exports. Kazakhstan exports are lowered 0.5 million tons with the smaller crop. Exports are raised 1.0 million tons each for Argentina and EU-27 with larger available supplies in Argentina and the strong pace of EU-27 export licensing. Russia exports are raised 0.5 million tons as flour exports will now be allowed after 31 December 2010.

Global wheat consumption for 2010/11 is raised 2.5 million tons with much of the increase reflecting a 2.0-million-ton increase in China wheat feeding. Wheat feeding is also raised 0.5 million tons for Korea based on the pace of feed quality wheat imports. Feeding is lowered 1.0 million tons for Russia but is offset by a 1.0-million-ton increase in food use. Global ending stocks for 2010/11 are projected 2.2 million tons lower with the largest reduction for China where stocks are lowered 3.4 million tons. Ending stocks are also lowered 1.0 million tons for Russia. Partly offsetting are higher projected ending stocks for Australia, Egypt, Argentina and Paraguay.

Coarse Grains
US feed grain supplies for 2010/11 are reduced this month with lower expected corn production. Corn production is forecast 124 million bushels lower as the national average yield is lowered to 154.3 bushels per acre, down 1.5 bushels from the previous forecast. Feed and residual use is projected 100 million bushels lower with the smaller forecast crop and higher prices expected to reduce feeding. Exports are lowered 50 million bushels as higher prices trim export demand. Corn use for ethanol is raised 100 million bushels with record October ethanol production indicated by weekly Energy Information Administration data and favourable ethanol producer margins. Ethanol prices continue to track higher with corn prices, supporting returns for ethanol producers. Although small relative to domestic usage, higher ethanol exports and lower imports are also expected to add to corn use for ethanol with high sugar prices limiting the availability of ethanol from Brazil.

Corn ending stocks for 2010/11 are projected 75 million bushels lower. At 827 million bushels, ending stocks would be the lowest since 1995/96 and represent a carry-out of 6.2 per cent of projected usage. In 1995/96, carry-out dropped to five per cent of estimated usage. The season-average farm price is projected at $4.80 to $5.60 per bushel, up 20 cents on both ends of the range and well above the previous record of $4.20 per bushel in 2007/08.

Global coarse grain supplies for 2010/11 are projected 3.3 million tons lower reflecting reduced corn production in the United States, reduced barley production in China, and reduced oats and rye production in Russia. Global corn production is reduced 1.1 million tons as the US decline is partly offset by a 2.0-million-ton increase for China on higher 2010/11 area. Corn production for China is also raised 2.0 million tons for 2009/10 based on an area increase of 800,000 hectares as indicated by official government statistics. Global 2010/11 barley production is lowered 0.8 million tons mostly on a 0.7-million-ton reduction for China on lower area and yields. Other barley changes include small reductions for Belarus and EU-27, and a 0.3-million-ton increase for Australia as abundant rainfall in eastern growing areas support higher yields. Global oats production is lowered 1.3 million tons mostly on a 1.0-million-ton reduction for Russia. Global rye production is lowered with a 0.4-million-ton reduction for Russia.

Global 2010/11 coarse grain trade is lowered slightly this month with lower corn imports for the Philippines and South Korea partly offset by small increases in corn imports for Saudi Arabia and sorghum imports by EU-27. Corn exports are raised 0.5 million tons each for EU-27 and Serbia mostly offsetting the 1.3-million-ton reduction for the United States. Global coarse grain consumption for 2010/11 is lowered slightly as higher corn feeding in China and Argentina are mostly offset by reduced corn feeding in EU-27, South Korea and the Philippines. Oats and barley consumption are also lowered with reduced oat feeding in Russia and China and reduced barley feeding in EU-27 and China. Global corn ending stocks are lowered 3.2 million tons. At 129.2 million tons, world corn stocks would be the lowest since 2006/07, the first year of the rapid expansion in US ethanol production and use.

Oilseeds
Total US oilseed production is projected at 101.8 million tons, down one million from last month as lower soybean and cottonseed production are only partly offset by higher peanut production. Soybean production is forecast at 3.375 billion bushels, down 33 million from last month. The soybean yield is projected at 43.9 bushels per acre, down 0.5 bushels from the previous estimate. Soybean exports are raised 50 million bushels to a record 1.57 billion due to increased global import demand and to a record sales pace, especially to China which accounts for over 70 per cent of known US soybean export sales through October. Soybean ending stocks are projected at 185 million bushels, down 80 million from last month.

Soybean oil ending stocks for 2010/11 are raised this month due to higher beginning stocks reported by the US Census Bureau and to reduced domestic disappearance reflecting lower projected food use of soybean oil.

Prices for soybeans and products are projected higher for 2010/11. The US season-average soybean price range is projected at $10.70 to $12.20 per bushel, up 70 cents on both ends. The soybean meal price is projected at $310 to $350 per short ton, up 20 dollars on both ends of the range. The soybean oil price range is projected at 42.5 to 46.5 cents per pound, up three cents on both ends of the range.

Global oilseed production for 2010/11 is projected at 440.7 million tons, up 0.1 million from last month. Increased soybean production is mostly offset by lower sunflower seed, rapeseed, peanut and cottonseed production. Global soybean production is projected higher with increases for Brazil, Argentina, India and South Africa only partly offset by a reduction for the United States. Argentina soybean production is raised two million tons to 52 million due to increased area as producers respond to relatively high soybean prices. Brazil soybean production is projected at 67.5 million tons, up 0.5 million from last month due to increased area. Global sunflower seed production is projected lower due to reduced estimates for Russia, Argentina, India and EU-27. Other changes include lower rapeseed production for Australia, lower peanut production for India and lower cottonseed production for China.

Oilseed trade is projected at 111.4 million tons, up 1.8 million. China soybean imports for 2010/11 are raised to 57 million tons, up two million from last month. EU-27 imports of soybeans and soybean meal are raised this month to offset lower sunflower seed and rapeseed availability.

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Philippines to apply for full FMD-free status
[15 November 2010] The Philippines plans to submit to the World Organisation for Animal Health (OIE) its application to have the remaining areas of Luzon certified “foot and mouth disease (FMD)-free without vaccination”. In May 2010, most areas in Luzon were granted this status, however Zone  2, which include the major pig producing regions of Southern Luzon and Central Luzon, were not included because of the continued use of the FMD vaccines in these areas. However, Dr Davinio Catbagan, Agriculture Assistant Secretary for Livestock said he expects that the whole country will finally be declared FMD-free during OIE's next general assembly in May 2011. The FMD-free status will help open doors for Philippine pork products into the international market.

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Jollibee post USD 16.31M proft in  3rd qtr
[18 November 2010] Philippine fast food giant Jollibee Food Corp (JFC) posted nearly USD 16.31 million in profits in the 3rd quarter of 2010, thanks to bigger sales in both the local and overseas operations. This boosted the company's net profit by 16.2% to USD 49.31 million from in the first nine months of the year. Sales from local and overseas operations rose to more than USD 1.16 billion by end-September 2010, or 9.7% from the same period last year. JFC has a total of 1,555 stores in the Philippines, made up of the flagship Jollibee outlets, Chowking, Greenwich Pizza Red Ribbon bakeries, and Manong Pepe restaurants. Recently, the company announced its decision to acquire a 70% stake in the Mang Inasal Philippines chain of restaurant that has 303 stores nationwide.

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CME: Effect of Growing Risks in Europe and Asia
US - Livestock and grain commodity markets were sharply lower on Tuesday as large traders sought to trim their long positions in light of growing risks in Europe and Asia, write Steve Meyer and Len Steiner.



Last spring, fears of a Greek debt default sowed panic in markets, not so much because of the size of the potential Greek default but rather the implications that it would have for the Euro Zone as a whole. The situation in Greece is far from resolved and it remains to be seen whether Euro members are willing to bankroll an ever expanding tab of Greek profligacy.

More recently, debt markets have been rattled by reports that the budget hole in Ireland, another country suffering from the post-bubble hangover, appears to be much deeper than previously thought. This has begun to tinge the credibility of other EU countries thought to have heavy debt burdens. Adding to the renewed panic about debt defaults in Europe, market participants responded to reports that China, a significant buyer of global raw materials, would impose price controls on a number of food staples and production materials. Based on overnight trading, it appears that the markets may open higher on Wednesday but volatility will remain high for the foreseeable future.

The panic selling of commodities on Tuesday overshadowed news that the US would lift the ban on imports of beef and pork products from the Brazilian state of Santa Catarina. The so called final rule was published in the Federal Register on November 16 and it comes into effect on 1 December. As we have discussed in the past, the rule is much more important with regard to the precedent that it sets rather than the actual impact on the supply of imported beef and pork in the US market.

 


We do not expect any beef imports of any appreciable quantity to come into the US anytime soon and Brazilian officials indicated that they expect only about 10,000 MT of pork to come into the US next year, less than 0.05 per cent of the 8.5 million MT of pork that will be consumed in the US in 2011. The precedent, however, is important as it does open the door to more beef and pork coming into the US from markets that are currently closed to US importers. APHIS, (USDA’s Animal and Plant Health Inspection Service) has worked in recent years to develop policies based on the concept of regionalization.

The basic premise is that political boundaries do not properly reflect disease risk and APHIS “will consider the importation of a commodity from a specific region of a country even though other parts of that country may be affected by an animal disease.” This is especially important for large countries, such as Brazil, with areas (e.g. the Amazon) where certain animal diseases will likely never be eradicated. Based on the concept of regionalization, we could see more Brazilian beef and pork coming into the US in the coming years, however, the process will likely be quite lengthy and deeply political. Finally, keep in mind that while most larger protein producing countries do want access to the US market, most of the growth in global protein consumption is not taking place in the US but rather Asia and developing economies. And the focus of US industry should be on expanding access for US exports, rather than erecting barriers to imports.

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World poultry and livestock growth up 2%
[29 November 2010] The US Department of Agriculture (USDA) reports that world pork production is forecast to rise about 2% to 103.4 million tonnes with China accounting for 80% of this increase. Broiler production is forecast up 2% to a record 76.2 million tonnes, thanks to record levels from all top producing countries. China and Thailand are expected to expand exports, particularly to other Asian markets. The USDA advises Asian producers to look into cost control to cope with rising feed costs and food safety in response to consumer demands, through better technology and business solutions.

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FAO calls for higher investment in agriculture
[24 November 2010] The global food import bill could pass the one trillion dollar mark in 2010, a level not seen since food prices peaked at record levels in 2008 said FAO Director-General Jacques Diouf. "The food price and economic crises have had a severe impact on millions of people in all parts of the world," he said. In recent months the international prices of most agricultural commodities have increased, many of them sharply. The key to long-term food security lies in boosting investment in agriculture, particularly in low-income food-deficit countries. He aded that structural changes can improve food security. In the short term, this means targeted safety nets and social protection programs as well as reliable and timely information on food commodity markets. In the medium and longer terms, however, investment in agriculture is the answer.

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Foreigners’ access to farmland must follow guidelines
[30 November 2010] UN Special Rapporteur on the Right to Food Olivier De Schutter recently warned of risks in unbridled foreigners’ access to farmlands. He said that efforts must be made to ensure that foreign access to local agricultural lands follow strict guidelines. Countries like China, India, South Korea, Saudi Arabia and Kuwait, as well as Wall Street banks like Goldman Sachs and Morgan Stanley have been in the forefront of acquiring large tracts of lands in Asia and Africa, which had become even more intense following the spike in food prices in 2008. Foreigners’ access to farmland must follow guidelines

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FAO Food Outlook - November 2010
The latest Global Market Outlook for animal products from the UN Food and Agriculture Organization (FAO).


Focus
International prices of most agricultural commodities have increased in recent months, some sharply. The FAO Food Price index has gained 34 points since the previous Food Outlook report in June, averaging 197 points in October, only 16 points short from its peak in June 2008. The upward movements of prices were connected with several factors, the most important of which were a worsening of the outlook for crops in key producing countries, which is likely to require large draw downs of stocks and result in tighter global supply and demand balances in 2010/11. Another leading factor has been the weakening of the United States Dollar (US Dollar) from mid-September, which continues to sustain the prices of nearly all agricultural and non-agricultural traded commodities. The increase in international prices of food commodities, all of which accruing in the second half of 2010, is boosting the overall food import bill in 2010 closer to the peak reached in 2008.

The pressure on prices to rise was first felt in the cereal market, most notably for wheat and barley, in August. This prompted FAO to call for an extraordinary meeting on 24 September 2010 to discuss the underlying causes and possible remedies. The meeting clearly identified the importance of reliable and upto- date information on crop supply and demand to cope with unexpected developments in world markets. More transparency and a better understanding of the role of commodity futures markets and government responses were also viewed as necessary to address price volatility. The full report of the meeting is included in the Special Feature section of this issue of Food Outlook.



FAO Food Price Indices
(October 2009 - October 2010)
Attention is now turning to plantings for the next (2011/12) marketing season. Given the expectation of falling global inventories, the size of next year’s crops will be critical in setting the tone for stability in international markets. For major cereals, production must expand substantially to meet utilization and to reconstitute world reserves and farmers are likely to respond to the prevailing strong prices by expanding plantings. Cereals, however, may not be the only crops farmers will be trying to produce more of, as rising prices have also made other commodities attractive to grow, from soybeans to sugar and cotton. This could limit individual crop production responses to levels that would be insufficient to alleviate market tightness. Against this backdrop, consumers may have little choice but to pay higher prices for their food. With the pressure on world prices of most commodities not abating, the international community must remain vigilant against further supply shocks in 2011 and be prepared.

Meat and meat products market summary
World meat trade is forecast to grow by 2.8 per cent in 2010, to 26.1 million tonnes, sustained by a brisk growth in pig meat, but also by gains in bovine and poultry meat. However, in the case of poultry, the most widely traded meat, the expansion of world exports is likely to be constrained by the imposition of sanitary restrictions by major importers. Increased purchases from Asian countries are expected to fuel much of the expected increase of meat trade, more than compensating for a 15 per cent reduction of imports by the Russian Federation, which had emerged as the second largest meat importer in 2009, after China.



World meat markets at a glance
According to the FAO Meat Price Index, world meat prices between January and October 2010 averaged 14 per cent higher than in the same period in 2009, and similar to the levels witnessed in 2008.



FAO international meat price indices
(2002-2004 = 100)
Dairy market summary
Strong import demand from Asian countries and the Russian Federation has driven dairy product trade to historically high levels in 2010, with the demand largely met by higher exports from New Zealand and the United States. Dairy product prices in international trade have remained firm, in particular butter, which in October reached an all-time high.



FAO international meat price indices
(2002-2004 = 100)
FAO’s latest forecast of world dairy production for 2010 stands at 710.7 million tonnes, 1.7 per cent more than last year. Production in developed countries is forecast to grow by around 1 per cent, while that of developing countries may increase by 2.4 per cent. On a per capita basis, consumption of milk and milk products in developing countries may increase by 1 kg per capita in 2010, from 66.4 to 67.5 kg, fuelled by strong economic growth in Asia.



FAO international dairy price index
(2002-2004=100)
Fish and fishery products market summary
On average, the latest trade information indicates that two years after the drastic fall at the end of 2008, prices in September 2010 were only 1 per cent below the peak of September 2008, with aquaculture prices 11.6 per cent higher whereas prices of wild species were 10 per cent lower. According to the FAO Fish Price Index, prices over January to September were, on average, 8.5 per cent higher year-on-year.

Aquaculture producers of many of the exported commodities responded to the economic crisis in late 2008 and throughout 2009 by reducing stocking levels, thus affecting future production. Since then, demand in many developing countries has rebounded, especially in Asia and South America. Developed country demand for farmed products is picking up, and prices for products such as shrimp, catfish, tilapia and salmon have risen significantly in 2010. For capture fisheries, the picture is more mixed with some prices negatively affected by large harvests, whereas others have strengthened as lower fishing quotas resulted in reduced supply.



World fish market at a glance
The price outlook for the rest of 2010 and early 2011 is positive, with demand firming in most markets and supply expected to remain stable.



The FAO fish price index (2005=100)

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Philippine buffalo meat imports down
[2 December 2010] Philippine imports of buffalo meat fell 3.72% in the first ten months of 2010, the Philippine Association of Meat Processors Inc (PAMPI) said. Data from the Bureau of Animal Industry shows that from January-October 2010, imports of buffalo meat was 35,680 tonnes, down from 37,060 tonnes year-on-year. PAMPI Executive Director Francisco Buencamino said that the Filipinos’ purchasing power remains low, which has led to lower demand for canned goods like corned beef and meat loaf. He added that the USD 2-3/kg increase in the price of buffalo meat may have discouraged importation. The meat processing industry is hoping that demand will pick up during the Christmas season, which traditionally is when demand for products like ham are at their peak.