World food prices rose for a fourth month running in September, led by strong increases for cereals and vegetable oils, the United Nations food agency said yesterday.
The Food and Agriculture Organisation’s food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat and sugar, averaged 97,9 points last month versus a downwardly revised 95,9 in August.
The August figure was previously given as 96,1.
The Rome-based FAO also said in a statement that worldwide cereal harvests remained on course to hit an annual record in 2020, even though it slightly trimmed its previous forecasts.
The agency’s cereal price index rose 5,1 percent in September from the month before and 13,6 percent above its value a year earlier.
“Higher wheat price quotations led the increase, spurred by brisk trade activity amid concerns over production prospects in the southern hemisphere as well as dry conditions affecting winter wheat sowing around Europe,” FAO said.
Maize, sorghum and barley prices rose, while rice fell 1,4 percent as fresh demand slowed.
The vegetable oil price index climbed 6,0 percent month-on-month, thanks largely to rising palm, sunflower-seed and soy oil quotations, reaching an 8-month high.
The dairy index was little changed on the month, with moderate increases in price quotations for butter, cheese and skim milk powder offset by a fall in those of whole milk powder.
Average sugar prices fell 2,6 percent from August, reflecting expectations of a global production surplus for the new 2020/2021 season.
The meat index dipped 0,9 percent month-on-month and was down 9,4 percent year-on-year, with quotations for pig meat dropping on the back of China’s move to ban imports from Germany following the detection of African swine fever in Europe’s largest economy.
FAO revised down its forecast for the 2020 cereal season by 2,5 million tonnes, reflecting lower expectations for the output of global coarse grains.
However, despite this reduction, the agency still expected a record harvest this year of 2,762 billion tonnes, up 2,1 percent on 2019 levels.
The forecast for world cereal utilisation in 2020/21 was put at 2,744 billion tonnes, down 2,8 million tonnes since September, but still 54,5 million tonnes above the 2019/20 estimate.
The forecast for world cereal stocks by the close of seasons in 2021 was 890 million tonnes, down 5,9 million tonnes from the previous estimate but still representing a record high.
A crisis warning is in danger of being forgotten
Economies plotting their exit from the pandemic have a tough needle to thread: determining when to pivot from pumping out emergency aid to focusing on the costs.
South Korea and Australia are displaying what may prove a premature tendency to worry about their fiscal health before the patient is off life support.
Korea has been a Covid-19 star, managing to curb infections without a nationwide lockdown and containing the economic damage.
President Moon Jae-in wants to restore the nation’s reputation for budget prudence once the pandemic subsides, and this week proposed legal caps on debt and deficits.
The mooted rules are significant because the government has passed four stimulus packages this year that helped put a floor under the economy. Gross domestic product may shrink just 1 percent in 2020, according to the Organisation for Economic Cooperation and Development.
Only China, where the economy is predicted to grow, is forecast to do better.
It’s questionable whether Korea is ready for such fiscal rectitude.
The economy hardly escaped the pandemic unscathed. GDP shrank 2,7 percent in the second quarter from a year earlier, inflation is too low, and exports have only just started increasing again.
Meanwhile, the nation’s long-term demographic challenges / shrinking headcount and a population concentration in the capital area – aren’t any closer to being solved.
Against this backdrop, the government plans to limit debt to 60 percent of GDP and restrict the fiscal deficit to 3 percent from 2025.
The country’s debt ratio is expected to climb to 43,9 percent this year and hit 58,3 percent by 2024, according to next year’s budget proposal.
Some officials worry that the pace of debt increases could imperil the country’s credit rating. An untimely retrenchment in borrowing that undermines the recovery won’t help.
In Australia, the balancing act is particularly fraught. The budget was supposed to be in surplus around now, based on election campaign messages last year from Prime Minister Scott Morrison.
Instead, the government’s projection Tuesday was for a record peacetime deficit of about $150 billion, or around 11 percent of GDP.
For a centre-right government wary of excessive Keynesian pump-priming, that’s uncomfortable.
Australia’s budget contains welcome measures to prop up employment, as well as tax cuts.
Even so, debt Down Under remains well below overall OECD benchmarks and Canberra’s interest payments will actually decline in the next few years.
That’s thanks to the Reserve Bank of Australia’s ultra-easy monetary policy, consisting of near-zero interest rates and a form of quantitative easing that caps yields. The RBA foreshadowed more steps at its monthly meeting Tuesday, hours before the budget was delivered.
While Asia has embraced fiscal stimulus, the ardour has limits. That shouldn’t be surprising when the world’s largest economy is bickering over the issue.
President Donald Trump halted talks with Democrats on further government assistance, amid resistance among Republicans in Congress to a support package exceeding $2 trillion.
The US has privileges that should give it more flexibility. Having the world’s reserve currency means there’s little real limit on Washington’s ability to borrow.
Without the same printing press, governments in Asia are understandably wary of going too far down the same road.
They are fortunate that central banks are engaging in muscular stimulus, in many instances buying bonds. That doesn’t amount to outright debt monetisation in most cases, though it does help finance state spending.
The joint deployment of budgetary and monetary arsenals has been one of the remarkable things about the pandemic response worldwide.
It seems the lessons of the slow recovery that followed the global financial crisis a decade ago had been learned. They’re in danger of being forgotten again. — Reuters.