Miller Magazine Issue: 151 July 2022

34 MILLER / JULY 2022 NEWS utilization is also seen down, for the first time in 20 years. However, the use of cereals for direct food consumption by humans is not anticipated to be impacted, as the decline in total use is expected to result from lower feed use of wheat, coarse grains and rice. World wheat stocks are set to increase marginally in the year, mostly due to anticipated build-ups of inventories in China, the Russian Federation and Ukraine. Word maize output and utilization are forecast to hit new records, associated with greater ethanol production in Bra- zil and the United States of America as well as industrial starch production in China. Global consumption of vegetable oils is predicted to outpace production, despite expected demand rationing. While meat production is expected to decline in Argenti- na, the European Union and the United States of America, global output is forecast to expand by 1.4 percent, led by an 8-percent foreseen increase in pig meat production in China, reaching and even exceeding the level before the dramatic spread of the African swine fever virus in 2018. Along with rising food prices – with the FAO Food Price Index (FFPI) near its all-time high and prices of several sta- ples having registered large runups in the past year – the agricultural sectors are exposed to supply limitations due to rising input costs , in particular for fertilizers and fuels, that could spur further food price rises. High food prices are typically a boon for producers, as farm profits rise. However, rapidly rising input costs – as- sociated with rising energy costs and export restrictions on key fertilizers imposed by major players in the sector – are more than offsetting that, and if protracted, this would raise concerns about whether supply responses can be both quick and sufficient. “The spike in the price of inputs raises questions about whether the world’s farmers can afford to buy them,” Josef Schmidhuber and Bing Qiao of FAO’s Mar- kets and Trade Division note in their special chapter on the dynamics of high input prices. Farmers may reduce input applications or switch to crops that are less input-intensive, which would not only lowers productivity but also have negative effects on exports of key foodstuffs to the international markets, adding to the burdens faced by countries highly reliant on imports to meet their staple food needs. This also applies to major export- ing countries, the chapter adds, noting that, for instance, some North American farmers are shifting from maize to soy, which requires less nitrogen fertilizer. The Global Input Price Index (GIPI), a new tool introduced by FAO in 2021, is now at an all-time high and has risen even faster than the FAO Food Price Index over the past 12 months. This points to low (and falling) real prices for farmers, despite the higher prices faced by consumers. That, in turn, stymies incentives for them to step up production in the future. For that to happen, however, either the GIPI has to fall or the FFPI has to rise even further – or a combination of the two. For now, and based on current conditions, the situation does “not augur well for a market-led supply response that could conceivably rein in further increases in food prices for the 2022/23 season and possibly the next,” the report says.