FAO sees mixed outlook, El Niño poses risk

The international agricultural markets are heading into a period in which supply and demand will largely remain in balance. At the same time, weather extremes, geopolitical tensions and rising energy and fertilizer costs create uncertainty. That is shown by the latest Food Outlook from the FAO, the United Nations food organization. The FAO expects global grain production in 2026 to come in slightly lower than the record level of 2025. Wheat in particular will face smaller harvests in key exporting regions such as the European Union, the United States and Australia. El Niño threatens wheat At the same time, global stocks remain relatively comfortable, because consumption is expected by the FAO to remain largely stable. That means markets are not currently counting on a structural shortage. Weather developments, especially a possibly very strong El Niño, could quickly change the mood. The FAO is currently targeting global wheat production of 810.9 million tons. That is 3.8% less than the record of 842.6 million tons last season. Wheat consumption comes to 806.1 million tons, 0.3% more than a year earlier. In the oilseed market, the outlook is relatively strong. According to the FAO, global rapeseed production will reach a record level, thanks to recovery in Canada and the European Union. At the same time, demand for vegetable oils from the biofuel sector remains firm. As a result, markets for vegetable oils remain tight, despite growing production. That may have consequences for crop choices by European arable farmers in the coming seasons. More meat The outlook for the meat sector is positive. Global meat production will grow less strongly in 2026 than in previous years, but the supply of beef and sheep meat remains limited. Poultry meat in particular is contributing extra production. The FAO expects international meat trade to continue growing, while exportable volumes of red meat remain limited. As a result, international meat prices remain at a high level. In the first five months of 2026, the global meat price index was more than 7% higher than a year earlier. For Dutch livestock farmers, this offers a promising market, although animal diseases, trade measures and geopolitical tensions remain risk factors. Poultry production is estimated this year at 160.3 million tons, an increase of 2.5% compared with last year. Pork production also rises by 0.6% to 129.5 million tons. Beef production falls by 0.8% to 76.9 million tons and lamb meat shows the same decline to 18.6 million tons. Global meat consumption rises by 0.2% to 46.9 kilos per capita. Dairy market In the dairy market, the picture is less clear. Global milk production will also grow in 2026, but the pace is lower than in earlier years. In Europe in particular, a slight decline in production is expected as a result of environmental rules, weather effects and animal health challenges. Global trade continues to grow, with cheese as the strongest product category. Butter remains in good demand, but growth is slowing. For milk powders, the outlook is more moderate, partly because countries such as China are developing more domestic processing capacity. It is striking that the global dairy price index in the first months of 2026 was almost 20% lower than a year earlier. Butter, cheese and whole milk powder in particular posted lower prices. Only skimmed milk powder showed price increases. According to the FAO, global milk production increases by 1% to 1 billion tons. Consumption stabilizes at 121.6 kilos per capita. Prices in the first five months of this year were 19.4% below the level in the same period last year. Sugar surplus The sugar market also shows a clear shift. After several years of tightness, the FAO expects a global production surplus again for 2025/26. Larger harvests in India, Thailand, China and Pakistan are creating more supply, while consumption growth is slowing due to modest economic growth. Sugar prices are therefore under pressure. A higher oil price could support the market, because Brazilian processors would then channel more sugar cane toward ethanol production. The FAO expects global sugar production in 2025/26 of 183.2 million tons, 3.5% more than the previous season. Consumption increases by 0.9% to 179.3 million tons. In the first five months of this year, sugar prices on the futures market in New York were 20% lower than in the same period last year.