Commodity outlook for 2005

By staff writer

- Last updated on GMT

Related tags: Fao

The FAO's predictions concerning commodity costs and production
show sustained high prices for milk and growing sugar consumption
in the developing world.

Milk

Global production of milk is set to increase in 2005, largely on the back of sustained growth in Asia.

Production of milk in 2005 is forecast 2.2 percent higher than in the previous year.

The FAO international dairy product price index, which reached a 15-year high of 165 in September 2005, declined slightly to 163 in November, but the maintenance of high prices according to FAO reflects steady demand coupled with reduced export subsidies within the European Union.

While output in developing countries is expected to reach 4 per cent, output increases in developed countries are expected to increase only marginally.

Oilseed

Oilseed prices weakened towards the end of the 2004/05 season (October/September) after strengthening mid-season, and returned to about the level a year earlier.

The FAO says that the weakening was largely due to evidence of record oilseed carryover stocks, following strong growth in production during the year, which contributed to create an excess of supplies compared to utilisation.

Latest information points to continued growth in oilseeds production in 2005/06, albeit at a much slower rate (2 per cent), than the surge in the previous season. As a consequence, the growth in meal and cake production will also slow down.

Growth in oils and fats production will also be less pronounced during the year.

During the current 2005/06 season, oil and meal inventories are expected to be reduced slightly as utilization growth will outpace that of production, but will remain relatively high.

Sugar

Sugar production will increase in 2005/06 but will remain marginally below consumption, says FAO.

World sugar production is forecast to increase by 3.7 per cent in the new 2005/06 season (October/September), to reach 147.8 million tonnes (raw sugar equivalent), and the bulk of the growth is anticipated among the developing countries.

However, continuing growth in consumption, also mostly in the developing countries, will likely lead to a total utilisation of 148 million tonnes, implying a reduction in global inventories again this year.

As a reflection of this, world sugar prices remain relatively firm and stable.

Cereal

FAO's latest forecast for the 2005 world cereal output has been raised considerably since the September report to 2,005 million tonnes, 2.4 per cent lower than last year's record crop.

The organisation says that cereal crops have been satisfactory in most regions, except parts of Africa and South America.

World cereal stocks are forecast to decrease, mostly reflecting smaller coarse grains inventory as a result of lower production this year.

Cereal trade is expected to contract in 2005/06 following improved production in several major importing countries, mainly in Asia.

International prices of cereals are generally higher than a year ago.

Related topics: Commodities, Pricing Pressures

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