Food prices stable, low stocks pose risk of spikes

Updated 08 February 2013
0

Food prices stable, low stocks pose risk of spikes

ROME: World food prices stabilized in January after falling in the previous three months, the UN food agency said, but it warned that adverse crop weather could cause violent price spikes due to tight grains stocks.
Global food prices surged in mid-2012 following the worst US drought in more than half a century and dry weather in other key grains exporters, raising fears of a food crisis similar to the one in 2008.
But prices eased in the last three months of 2012 due to expectations that large South American production will replenish tight global cereals supplies.
Brazil said it would produce a record 83.4 million tons of soybeans this season due to unprecedented expansion in area planted after a disappointing harvest last year, and also forecast a record corn crop.
The Food and Agriculture Organization (FAO) said its food price index, which measures monthly price changes for a basket of cereals, oilseeds, dairy, meat and sugar, averaged 210 points in January, unchanged from December.
The Rome-based agency raised its view of world cereal output in 2012 to 2.302 billion tons, up 20 million tons from its previous forecast, but still 2 percent lower than the bumper crop in 2011.
Its outlook for world cereal stocks by end of season in 2013 remained unchanged at 495 million tons, down 3 percent from their opening level.
“We should be expecting excellent crops in 2013,” said FAO senior economist Abdolreza Abbassian. “But the weather could turn negative, and because we are in a tight situation, prices could react violently and rise,” he said.
FAO expects wheat output to increase in 2013, due to a 4-5 percent increase in the winter wheat area in the EU and good weather. However the outlook is less favorable in the US due to dry conditions in some areas.
It said that prospects were also good for the maize crop in South America’s main producing countries.
An increase in production is crucial for markets, Abbassian said, because demand is also likely to rise as economies start to recover in 2013.
FAO raised its estimate for world cereal use in 2012/13 by 0.6 percent to 2.326 billion tons, up nearly 13 million tons from the 2011/12 season.
A weaker dollar is boosting demand for dollar-denominated commodities, Abbassian said, and rising oil prices will underpin food prices in coming months, he said. Higher energy prices increase transport costs which farmers pass on to consumers.
“There could eventually be some support from the energy prices and economic growth could lead to higher animal feed use,” he said.
In January, FAO said a rise in oils and fats prices was offset by falling cereals and sugar prices. Dairy and meat prices were roughly stable.
A separate report by G20 food market body, the Agricultural Market Information System (AMIS), noted that maize prices had started to pick up in mid-January on expectations of higher feed use and concerns about weather in South America.
The FAO’s index is below a peak of 238 points hit in February 2011, when high food prices helped drive the Arab Spring uprisings in the Middle East and North Africa.
In the summer of 2012, it began surging to levels close to those seen in 2008, when riots, some deadly, broke out in several poor countries.


Harley-Davidson to move some production out of US to avoid EU tariffs

Updated 25 June 2018
0

Harley-Davidson to move some production out of US to avoid EU tariffs

  • The shift in production is an unintended consequence of Trump’s administration imposing tariffs on European steel and aluminum
  • In response to US tariffs, the EU began charging import duties of 25 percent on a range of US products

Harley-Davidson Inc. said on Monday it would move production of motorcycles shipped to the European Union from the United States to its international facilities and forecast the trading bloc’s retaliatory tariffs would cost the company $90 million to $100 million a year.
The shift in production is an unintended consequence of US President Donald Trump’s administration imposing tariffs on European steel and aluminum early this month, a move designed to protect US jobs.
In response to the US tariffs, the European Union began charging import duties of 25 percent on a range of US products including big motorcycles like Harley’s on June 22.
In a regulatory filing https://bit.ly/2tA1ru0 on Monday, the Milwaukee, Wisconsin-based company said the retaliatory duties would result in an incremental cost of about $2,200 per average motorcycle exported from the United States to the European Union, but it would not raise retail or wholesale prices for its dealers to cover the costs of the tariffs.
The company expects the tariffs to result in incremental costs of $30 million to $45 million for the rest of 2018, the filing said.
“Harley-Davidson believes the tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region,” the company said.
Struggling to overcome a slump in US demand, Harley has been aiming to boost sales of its iconic motorcycles overseas to 50 percent of total annual volume from about 43 percent currently.
In January, the company announced the closure of a plant in Kansas City, Missouri as part of a consolidation plan after its motorcycle shipments fell to their lowest level in six years.
In 2017, Harley sold nearly 40,000 new motorcycles in Europe which accounted for more than 16 percent of the company’s sales last year. The revenues from EU countries were second only to the United States.
Harley said ramping-up production at its overseas international plants will require incremental investments and could take at least nine to 18 months.
The company will provide more details of the financial implications of retaliatory EU tariffs and plans to offset their impact on July 24 when its second-quarter earnings are due, the filing said.
Trump vowed to make the iconic motorcycle maker great again when he took office last year.
In late April, Harley said Trump’s metal tariffs would inflate its costs by an additional $15 million to $20 million this year on top of already rising raw material prices that it expected at the start of the year.