Question 1

Increased cereal supplies push down prices and boost world trade

The Food and Agriculture Organisation's (FAO) forecast for world cereal production in 2013 has been adjusted upward by 8.5%, a record level of output. Early prospects for crops to be harvested in 2014 are also favourable. Overall prospects for wheat production in the northern hemisphere remain good. In the southern hemisphere, maize output is likely to rise in Brazil and Argentina. The prospects for the 2014 rice crop are mixed, with Brazil expanding output, while in the rest of South America, insufficient rainfall is limiting the supply of rice. The lack of water for irrigation is also limiting rice output in Australia and Sri Lanka.

FAO's forecast for world consumption of cereals in 2013 is forecast to rise by 1.7 %. This is slightly larger than the predicted population growth. Other uses of cereals, apart from food and animal feed are expected to show a strong growth in 2013/14.

Source: adapted from Food and Agriculture Organisation

Table 1: Selected FAO Food Price Indices

(Base year 2002-2004 (average of prices) = 100)

The Total Food Price Cereals Price Dairy Product Price Index (meat, cereals, Index (includes Index dairy, vegetable oils & wheat, rice & sugar maize) 2011 229.9 240.9 229.5 2012 213.3 236.1 193.6 2013 209.8 219.2 242.7 2014 January 203.4 188.4 267.7 Source: adapted from Food and Agriculture Organisation