By Sara Wyant

© Copyright Agri-Pulse Communications, Inc.

ROME, June 7- With weather problems threatening grain and oilseed production around the world, global commodity prices are likely to remain high for the rest of this year and into 2012 according to the latest analysis published today by the United Nation’s Food and Agriculture Organization’s (FAO).

Low-Income Food Deficit Countries (LIFDCs) and Least Developed Countries (LDCs) that depend on imports would be hardest-hit since they would likely have to spend respectively 27 and 30 percent more on food imports than last year, FAO reported in its biannual “Food Outlook.”

"The general situation for agricultural crops and food commodities is tight with world prices at stubbornly high levels, posing a threat to many low-income food deficit countries," according to David Hallam, Director of FAO's Markets and Trade Division.

The report cites a sharp rundown on inventories and only modest overall production increases for the majority of crops as reasons for continuing strong prices.

International food prices, which earlier this year soared to levels seen in the 2007-8 food crisis, dropped a modest one percent in May. The FAO Food Price Index averaged 232 points in May---down slightly from a revised estimate of 235 points in April but still 37 percent above May 2010.

Although crop production prospects are encouraging in some countries such as the Russian Federation and Ukraine, weather conditions, featuring too little and in some cases too much rain, could hamper maize and wheat yields in Europe and North America, the report notes.

Photo: The impact of high food prices will hit countries dependent on food imports the hardest. In this photo,  U.S. Ambassador to Afghanistan Karl Eikenberry (front in white) and Afghan Agriculture Minister Asif Rahimi (on truck) load seed At Badam Bagh Farm in Kabul in an effort to boost food production. Photo courtesy of USDA.

High feed prices, disease outbreaks and depleted animal inventories were forecast to limit the expansion of global meat production to 294 million tonnes in 2011 — only one percent more than 2010. The international meat price index hit a new record at 183 points in May 2011 and a combination of strong import demand and limited export availability pointed to a further firming of prices in the next few months.

Even with record production in 2011, demand for cereals has also been increasing so that the 2011 crop is expected to barely meet consumption. But "the Russian Federation's announcement that it will remove its cereals export ban from July 2011 could help relieve some of that pressure," according to FAO's grain analyst, Abdolreza Abbassian.

In the oilseeds market, supplies in 2011/12 may not be sufficient to meet growing oil and meal demand, implying further reductions in global inventories.

Global wheat output is expected to be 3.2 percent up from last year's reduced crop, mostly reflecting improved yields in the Russian Federation.

World production of coarse grains is set to climb 3.9 percent, exceeding the record set in 2008. Most of the increase is expected from the Russian Federation and the other members of the Commonwealth of Independent States (CIS).

Although preliminary, world paddy production prospects are for a record harvest of 463.8 million tonnes — a two percent increase over last year on expectations of improved weather conditions.

The global supply and demand balance for sugar points to some improvements, supported by large anticipated production in 2010/11, which is likely to surpass consumption for the first time since 2007/08.


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