|food outlook||No.1, April 2005|
|global information and early warning system on food and agriculture(GIEWS)|
Basic food commodities
FAO’s first forecast for world wheat production in 2005 is 612 million tonnes, 15 million tonnes lower than the record in 2004 but still well above the average of the past five years. Although the global wheat area may exceed that of the previous year, yields are expected to return closer to the five-year average after exceptionally high levels in 2004. At the regional level, only in Asia is output forecast to increase, but not sufficiently to offset reductions expected in all other regions.
Table 4. Wheat production (million tonnes)
With the harvest of the last of the 2004 crops now completed in the southern hemisphere, FAO’s latest estimate of the 2004 global wheat output has been further revised upward to 626.8 million tonnes, which would be 12 percent up from 2003, and a new record.
In Far East Asia, winter weather conditions have been favourable for the 2005 wheat crop in China. The winter wheat area is estimated to have expanded by some 5 percent, or 1 million hectares from last year as a result of attractive prices and favourable planting conditions. In India, the winter wheat area is reported to be marginally lower than in the previous year due to diversification towards oilseeds. Widespread rains in northern India in the past month were beneficial for the crop, which will be harvested from April. Assuming normal weather for the remainder of the season, output in 2005 is expected to rise to 74-75 million tonnes. Wheat output in Pakistan is also expected to increase, reflecting a larger area sown in response to government price support and good yield prospects due to recent widespread rains. Latest forecasts point to a crop of almost 21 million tonnes.
In the Asian CIS countries, the aggregate wheat area is estimated at 15.4 million hectares, just marginally up from the previous year, and crops are reported to be in good condition. Based on the current area, weather and crop condition information, aggregate output of these countries is expected to increase somewhat this year from last year’s 21.6 million tonnes.
In Near East Asia, prospects for the 2005 wheat crop to be harvested from April/May have improved over the winter reflecting widespread snow and rains. Output in Afghanistan is expected to increase significantly after last year’s droughtreduced crop. In the Islamic Republic of Iran, output is expected to remain close to last year’s record level: apart from very favourable weather conditions, plantings increased further in response to the government wheat self-reliance policy1/. Larger crops this year also seem likely in Iraq and Turkey, given the favourable growing conditions.
In North Africa, prospects for the 2005 winter wheat crop, to be harvested from May/June, are generally favourable. In Morocco, recent rains improved conditions in the south and west of the country previously affected by a prolonged dry spell. The subregion’s 2005 aggregate wheat output is forecast to decline from last year’s record level of 17.5 million tonnes but would remain well above the five-year average.
In Eastern Africa , the 2005 season crop is about to be harvested in Sudan. Output is expected to decline somewhat from the previous year’s good crop largely due to the constraint on production of higher fuel costs. Although it is too early to forecast the 2005 production elsewhere in the subregion, a return to normal conditions after a particularly favourable season last year, especially in Ethiopia the main producing country, would likely mean a significant reduction in output from the bumper aggregate crop of 3.5 million tonnes in 2004.
In Southern Africa, prospects for planting of the 2005 season from May are uncertain, reflecting relatively low domestic prices. FAO’s final estimate of the 2004 wheat crop, harvested last November, is put at 1.9 million tonnes, indicating a recovery of some 4 percent over the previous year’s drought-affected production. About 90 percent of the total was accounted for by South Africa, where output increased by nearly 10 percent over last year’s production, although it still remained below the average of the past five years.
In Central America and the Caribbean, harvesting of the main 2005 irrigated winter wheat crop in Mexico is about to start in the north-western producing states of Sonora and Baja California. Production in Mexico is tentatively forecast at 2.7 million tonnes, slightly above the same season’s output last year, reflecting an increase in both areas planted and yields.
In South America, the aggregate 2004 wheat crop, harvested until February in the main southern growing areas of the subregion, is estimated at a record level of over 25 million tonnes, about 7 percent above the good result of the previous year. Record or bumper crops were obtained in Argentina, Brazil, Chile and Uruguay following an increase in the areas planted and generally favourable weather during the growing season.
In North America, early prospects point to a decline in wheat output in 2005. In the United States, the USDA’s 31 March Prospective Plantings Report put the winter wheat area down by 4 percent on the previous year, mostly due to adverse weather during planting last autumn. However, farmers have indicated that they will increase spring wheat area by about 4 percent and durum area by about 2 percent. As a result, the total United States wheat area is expected to be about 2 percent down on the previous year. Assuming yields are about the average of the past five years, which is a likely scenario based on the conditions so far, FAO forecasts aggregate output at about 55 million tonnes compared to the 58.7 million tonnes crop in 2004.
In Canada, the wheat crop is mostly spring sown in May/June. Early forecasts point to an increase in the overall wheat area. However, a return to average yields is expected after last year’s high levels, and the aggregate wheat output in 2005 is tentatively forecast to fall by about 6 percent to some 24 million tonnes.
In Europe, early indications point to a reduction in the aggregate 2005 wheat output by about 5 percent from the bumper crop last year, assuming that yields will return to average levels.
In the European Union, with the exception of Spain and Portugal, winter weather has been satisfactory so far. In Spain and Portugal, where drought conditions have prevailed since planting last autumn, the arrival of some rain in late February and March has improved moisture conditions slightly. The aggregate wheat area of the 25 member countries for the 2005 harvest is forecast to decrease marginally from the previous year, with an increase in soft wheat plantings nearly offsetting a significant reduction in the durum area.
In the Balkan subregion, winter weather conditions were reported as generally satisfactory. However, in Romania, severe frosts in early March caused some crop damage. Larger winter wheat plantings were estimated in both Bulgaria and Romania but the final area for harvest in the latter country is now somewhat uncertain. Yields in both countries are expected to decline from bumper levels last year.
In the European CIS countries, winter weather conditions have been generally favourable for dormant crops. Above-average snowcover protected the winter cereals from winterkill and will provide ample moisture for spring crop development. The aggregate area under wheat (winter and spring) for the 2005 harvest is forecast to cover a total of 31.2 million hectares, nearly 1 million hectares up on last year. Early indications also point to the likelihood of yields remaining above the five-year average and thus all indications currently point to another good output in the subregion, similar to last year’s level of about 65 million tonnes.
In Australia, the recently completed 2004 wheat harvest is officially estimated at 20.4 million tonnes, about 20 percent down from the previous year’s record. Planting for the 2005 wheat crop in Australia will begin in April/May.
World trade in wheat2/ in the current 2004/05 marketing year (July/June) is now forecast to reach 103 million tonnes, 2.5 million tonnes higher than was earlier anticipated and now much closer to the previous season’s level. This month’s upward revision mostly reflects higher forecasts of imports by Afghanistan, the EU, and the Russian Federation. For the developing countries as a group, total wheat imports are put at 82 million tonnes, 7 million tonnes higher than in the previous season.
In Asia, aggregate wheat imports are put at nearly 50 million tonnes, up almost 9 million tonnes, or 21 percent, from the previous season and marginally below the record reached in 1999/2000. Wheat imports by China (Mainland), which are forecast to double this season, account for almost one-half of the expected rise in imports by all the countries in Asia. In spite of an increase of 6 percent in China’s wheat production in 2004, strong demand for quality wheat as well as relatively low international prices continue to favour larger foreign wheat purchases. Wheat imports by Afghanistan are forecast to approach 1.6 million tonnes, up 1.3 million tonnes from 2003/04. The reason for higher imports this season is the sharp drop in domestic wheat production after a record harvest in 2003. Pakistan is another country in Asia where imports are forecast to rise sharply this season, by 1.3 million tonnes to 1.5 million tonnes, which is the highest since 1999/2000. This is mostly due to low carryover stocks from the previous season and a below-target production in 2004. By contrast, wheat imports by the Islamic Republic of Iran, traditionally among the world’s leading importers, are likely to remain negligible due to another bumper harvest in 2004 (see special feature on page 9).
Contrary to the situation in Asia, wheat imports in Europe are forecast to decline significantly this season, following a strong recovery in production in several countries in addition to the EU enlargement from 15 to 25 countries3/. Total imports into EU25 are forecast at 5.5 million tonnes, up 1 million tonnes from the previous report. The increase since the previous report is based on higher import commitments, which by early March approached 5 million tonnes.
In Africa, total wheat imports are put at 25 million tonnes, unchanged from 2003/04. As a result of generally good harvests in nearly all major wheat producing countries, imports by most countries in Africa are seen to remain at below the level of the previous year. One exception is Kenya, where higher wheat imports are evidenced in the significant wheat purchases from Argentina (400 000 tonnes) so far this season.
In Central America and the Caribbean, slightly higher imports by Mexico are likely to offset smaller purchases by Brazil. In Mexico, lower output in 2004 is the main reason for higher imports this season. In Brazil, where production declined from the previous year’s record, imports are expected to reach 4.8 million tonnes, down 300 000 tonnes from the previous report and 800 000 tonnes below the previous season. Reduced wheat exports from Brazil are expected to keep its domestic market in balance even with lower imports and production.
Wheat shipments from the five major wheat exporters are forecast to recover significantly this season, with larger exportable supplies in all countries with the exception of Australia and the United States, where production fell sharply in 2004. Exportable supplies in the EU have increased significantly in view of a strong recovery in all wheat producing member countries. However, a strong Euro coupled with high transport costs has made EU wheat less competitive in world markets, prompting a steady increase in EU export subsidies.
Exports from Argentina have surged this season due to larger supplies. Wheat sales from Australia are likely to decline slightly from the previous year because of lower production but would still remain high due to very large carryover stocks from the previous season. Among other exporters, Ukraine and the Russian Federation are able to export more wheat this season, following a strong rebound in their production after poor harvests in 2003.
The forecast for total wheat utilization in 2004/05 has been raised by 4 million tonnes since the previous report to 618 million tonnes, up 17 million tonnes from the previous season and now slightly above the 10-year trend. Total food use remains unchanged from the previous report, at around 434 million tonnes, but up more than 1 percent from the previous season, thus resulting in the average per caput food consumption remaining stable at 68 kg for the world as a whole, 61 kg for the developing countries and 95 kg for the developed countries. Feed usage of wheat is expected to reach 114 million tonnes, nearly 10 percent higher than in the previous season. The increase is mostly driven by larger supplies of lower quality feed, following an increase in world production and lower prices.
The forecast for global wheat stocks for crops ending in 2005 has been raised by 2.2 million tonnes since the previous report to 164 million tonnes. This would represent nearly 4 million tonnes increase from the reduced opening levels and point to the first global stock expansion in 5 years.
Total wheat stocks of the 5 major exporters are put at close to 49 million tonnes, up 2 million tonnes from the previous report. At this level, the global share of major wheat exporters’ stocks by the close of the seasons in 2005 approaches 30 percent against only 24 percent at the start of the seasons, pointing to a considerable improvement in world supplies.
It is in Europe that most of this season’s increase in wheat stocks is expected to occur, following a recovery in wheat production in several countries. Total wheat stocks held in Europe are forecast to reach 32 million tonnes, up 12 million tonnes from the previous season. In the EU alone, wheat inventories are forecast to reach 20 million tonnes. Large wheat production among the new EU Members, Hungary in particular, has given rise to increased offers to the EU intervention, which by early March exceeded 5 million tonnes.
Higher ending stocks are also anticipated in Ukraine and the Russian Federation in view of bumper crops. By contrast, wheat stocks in China are likely to reach 49 million tonnes, some 5 million tonnes lower than their reduced opening levels. The recovery in China’s wheat production in 2004 and increased imports may not be sufficient to meet total domestic demand, hence requiring a further drawdown of its inventories this season.
This season’s large exportable supplies following a record world wheat crop coupled with generally subdued world import demand continue to depress international prices. In March, the US wheat No. 2 (HRW, fob) averaged US$157 per tonne, down US$5 per tonne since November and also US$14 per tonne, or 8 percent, below the corresponding period in 2004. In the EU, following a rapid increase in offers to the intervention, the EU Commission reintroduced export refunds (subsidies) for the first time in two years. The EU export refunds were initially (in early February) granted at €4 per tonne, but, with world prices remaining low and the Euro strengthening, were increased to €6 per tonne and then €10 per tonne by early March. Following a slight strengthening in the US dollar later in the month, the EU lowered the export refund to almost €9 per tonne.
Wheat futures at the Chicago Board of Trade (CBOT) continued to trade below the previous year’s levels. However, a generally tighter supply and demand wheat balance in the United States lent some support to wheat futures in more recent weeks. By late March, the July 2005 wheat futures contracts were quoted at US$126 per tonne, still US$25 per tonne below the corresponding period in 2004.
World coarse grains output in 2005 is forecast at 944 million tonnes, 8 percent down from last year’s record level but still slightly above the average of the past five years. This first forecast is very tentative, however, as the bulk of the world’s crops have yet to be planted in the main producing northern hemisphere countries.
Table 5. Coarse grains production (million tonnes)
The estimate of world coarse grains output in 2004 has been revised up to 1 026 million tonnes, 10 percent higher than the good level of the previous year. This outcome mainly reflects bumper crops in the United States, the EU and China.
In Far East Asia, the 2005 crops are about to be planted in China and India, the largest producing countries. However, very early indications point to another increase in maize plantings in China (Mainland) as the government continues to implement agricultural support policies to increase grain production and farmers’ income. It is also too early to make a forecast of India’s output in 2005 because so much depends on the performance of monsoon rains, which are still to come. However, should weather conditions be favourable, the area planted is likely to increase because strong feed demand and high maize prices are expected to be an incentive to farmers to sow and increase the use of hybrid seeds. In the Philippines, the secondary season maize crop is currently in the ground and a good output is expected. The country achieved a record maize output in 2004 attributed to the increased use of better quality seeds.
In the Asian CIS countries, the area planted to winter coarse grains (mainly barley) has increased from 2004 to just over 3.3 million hectares and crops are reported to be in good condition. Maize and barley are the two main coarse grains in the subregion. Last year, the subregion harvested a below average crop of 4.2 million tonnes of coarse grains and early indications point to a larger harvest this year.
In North Africa, growing conditions for the 2005 winter barley crop, to be harvested from April, have been satisfactory in most countries so far. A threat to crops from Desert Locust infestation was avoided by control operations. Planting of maize is expected to start in April in Egypt, the largest maize producer in the subregion.
In Western Africa, land is under preparation for planting of the 2005 coarse grain crops in the coastal areas along the Gulf of Guinea. The 2004 coarse grains season was characterized by serious Desert Locust infestations in the Sahel, which caused severe localized damage to crops and pastures, notably in the northern areas. In Mauritania, the most affected country, 2004 cereal production is estimated to be down by 44 percent compared to the previous year. Aggregate output in the nine CILSS countries was estimated at nearly 12 million tonnes, 15 percent below the previous year’s record crop but still average. By contrast, growing conditions have been generally favourable in the coastal countries along the Gulf of Guinea, where harvesting of the 2004/05 second maize crop has been completed. Coarse grains production is estimated to be above average in all countries, except in Côte d’Ivoire, Liberia and Sierra-Leone, where past or present civil strife hampered or continues to hamper agricultural activities.
In Central Africa, planting of the 2005 coarse grains is about to start. Harvesting of the 2004 second maize crop was completed and the subregion’s aggregate coarse grains output is estimated to be above normal. In Central African Republic, cereal production is expected to recover somewhat, as a result of increased plantings following an improved security situation and agricultural inputs distribution.
In Eastern African, the 2004 aggregate coarse grains output is estimated at some 21 million tonnes, about 5 percent below the previous year but still above the average of the past five years. In Ethiopia, although the secondary “belg” crop has still to be gathered, the main season output was good and aggregate production is forecast to increase by 13 percent over the previous year to an above-average 8.9 million tonnes. In Tanzania, the aggregate 2004 coarse grains output is estimated at about 4 million tonnes, well above the previous year’s level and about 17 percent above average. Prospects for the 2005 main maize crop season on the ground in the uni-modal rainfall areas have improved with favourable rainfall. In Sudan, the 2004 main coarse grains crop declined by nearly 45 percent from the well above average level in 2003 due to erratic rains and civil unrest. In Kenya, the aggregate 2004/05 maize crop is estimated at about 2.1 million tonnes, 21 percent below the previous year as a result of unfavourable weather. In Eritrea, the 2004 coarse grains output, estimated at 80 000 tonnes is about 22 percent below average, mainly due to drought and displacement. In Somalia, latest estimates put the aggregate coarse grains output at 265 000 tonnes, 2 percent below the previous year. In Uganda, provisional estimates indicate a 2004 coarse grains output of about 1.8 million tonnes, slightly above 2003 but 4 percent below the average.
In Southern Africa, the outlook for the subregion’s aggregate 2005 coarse grains crop, to be harvested from April-May, is favourable, and output is forecast at 18.4 million tonnes, the largest crop since 2000 and above the average of the past five years. This mainly reflects a good harvest in South Africa, the subregion’s largest producer, where the first official forecast for maize, the main staple crop, is put at 10.5 million tonnes, 11 percent above the five-year average. Elsewhere, prospects are mixed with below normal harvests expected in Botswana, Lesotho, Namibia, Swaziland and Zimbabwe, but normal to above normal in the rest of the subregion.
In Central America and the Caribbean, harvesting of the 2004 secondary season coarse grains crops has been completed. The aggregate output in 2004 is estimated at a record 33.4 million tonnes, mainly due to a good maize crop in Mexico. By contrast, in Cuba, Guatemala, Honduras and Nicaragua reduced outputs are estimated as a result of periods of prolonged dry weather.
In South America, harvesting of the 2005 coarse grains crop is underway in the important producing countries in the south of the subregion. FAO’s latest forecast points to an output of some 78 million tonnes, well above last year’s level and close to the record of 2003. In Argentina, the official forecast for the main maize crop has been revised upward to 18.5 million tonnes, reflecting improved weather conditions after earlier dry spells in some parts. At this level, maize production would be very close to the record output of 1998. In Brazil, harvesting of the main season maize crop is underway in southern key producing states of Rio Grande do Sul, Parana and Minas Gerais and the output is expected to decline by about 7 percent compared to the same season crop last year. Meanwhile, planting of second season (safrinha) maize crop has started in centre-west state of Mato Grosso and planting intentions point to a below-average area of 2.7 million hectares. In aggregate, the 2005 maize output is provisionally forecast at about 39 million tonnes, well below last year’s good crop. In the Andean countries, limited soil moisture in coastal areas of Ecuador and Peru is delaying planting activities of the 2005 main season maize crop. Farmers’ concern about a second consecutive drought season has also negatively affected planting prospects.
In North America, planting of the bulk of the 2005 maize crop in the United States will begin from April. The USDA’s 31 March Prospective Plantings report indicates a 1 percent increase in the maize area. However, a forecast return to trend yields after bumper levels last year would still mean a significant drop in output from the record level in 2004. In Canada, production of coarse grains (mostly still to be sown later this year) is also expected to decrease somewhat in 2005, as the combined result of reduced barley plantings and a return to average yields after bumper levels last year for all coarse grains in general.
In Europe, following last year’s bumper crop, early indications for 2005 point to an overall reduction in area, which, compounded with a return to normal yields after exceptionally high levels in 2004, could pull production back to about the average of the past five years. In the EU, the overall coarse grains area is expected to decline in response to policy changes which re-instated the 10 percent set-aside requirement and caused a shift of some land from coarse grains to wheat production. In the Balkans, reduced areas are also expected after last year’s surpluses. In the European CIS countries, the aggregate coarse grains area is tentatively forecast to reach 29 million hectares, about 3 percent down on 2004.
In Australia, prospects for the 2005 summer coarse grains crop (mostly sorghum) are very favourable, reflecting good rains in the main producing areas. The combined sorghum and maize area is estimated to have risen by about 24 percent to almost 800 000 hectares.
The forecast for world trade in coarse grains in 2004/05 (July/June) has not changed since the previous report, remaining at 102.5 million tonnes. This amount is less than in the previous season, although the EU enlargement, and hence the exclusion of intra-trade among the new EU member countries, accounts for most of this apparent decline4/. Total imports by the developing countries are forecast to increase by 2.3 million tonnes to 70 million tonnes. Among individual coarse grains, total world maize imports are forecast at around 77 million tonnes, of which imports by the developing countries are put at 53 million tonnes, up 1 million tonnes from the previous season. Trade in barley is forecast to approach 16 million tonnes, with the developing countries importing about 12.5 million tonnes, also 1 million tonnes more than in the previous season. For other coarse grains, imports by the developing countries are expected to remain largely unchanged from the previous season.
More abundant supplies of feed wheat, higher 2004 production and slower growth in feed demand have, together, driven down import demand for coarse grains in several countries in Asia, including: Indonesia, Israel, Japan and the Republic of Korea. However, Saudi Arabia is expected to raise its purchases of barley, while higher maize imports are expected by the Islamic Republic of Iran and China.
In Africa, maize imports in Kenya are forecast to double this season to 1.2 million tonnes, as a result of a below-average maize production and a tighter domestic supply and demand balance. Imports by most other countries in Africa are likely to remain steady at the previous year’s levels. Also in most of Latin America and the Caribbean, coarse grain imports are likely to remain at the previous season’s levels or increase only slightly. By contrast, in Europe, total imports are forecast to decline sharply. The forecast is based on a sharp decline in the EU as a result of this season’s strong recovery in production as well as large supplies of low quality wheat destined for animal feed. However, imports by the Russian Federation are forecast to increase, driven by larger purchases of rye because of a very low domestic production.
The overall exportable supplies of coarse grains have rebounded this season because of larger world production in 2004. In the EU, rising surpluses are likely to drive up exports of barley and rye in particular. Exports of maize from Argentina are also expected to rise. In spite of this year’s record maize crop in the United States, the world’s largest maize exporter, and although the country’s shipments may increase slightly on July/June basis, they are expected to decline on the basis of its August/September marketing season; in part due to subdued world demand and competition with other exporters.
By contrast, sharp falls in sales are forecast for China and Brazil. Between them, the two countries exported 17.5 million tonnes of coarse grains in 2003/04, but with tighter domestic supply and demand balances, their combined exports are forecast to reach only 9 million tonnes this season, representing a drop of nearly 50 percent. Among other countries, larger barley and rye sales are anticipated from Ukraine, where supplies are large and nearby demand strong, but sales of maize from the Republic of South Africa are likely to decline despite falling prices partly reflecting a strong South Africa Rand.
Total utilization of coarse grains world wide is forecast to reach 983 million tonnes in 2004/05, up 37 million tonnes, or almost 4 percent, from the previous season. Food use is forecast at 176 million tonnes, up slightly from the previous season, permitting the average global per caput level to remain unchanged at about 28 kg. Feed usage accounts for the bulk of total utilization and is forecast to reach 627 million tonnes, 27 million tonnes more than in the previous season. Most of this growth in feed use is likely to take place in the United States, the EU and Ukraine, following a strong recovery in their domestic supplies. Another major growth area is industrial use, most notably the continuing rapid expansion of ethanol production in the United States, the largest grain-based ethanol producer, which derives 98 percent of its ethanol production from maize and the remainder from sorghum. Over the past few years, total grain usage for production of fuel ethanol in the country has risen at such an unprecedented rate that by 2004/05, the domestic ethanol industry has emerged as the third largest market for maize, after domestic feed and exports. In 2004, the country’s production of ethanol soared to almost 3.5 billion gallons, requiring a record 40 million tonnes of maize (and over 1 million tonnes of sorghum). This represented almost 17 percent of domestic maize usage and would account for about 9 percent of global maize utilization.
World coarse grains stocks for crop years ending in 2005 are now forecast to reach 189 million tonnes, 41 million tonnes, or 29 percent, above the much reduced opening levels and also 9 million tonnes more than was reported in December. The increase since the previous report reflects the sharp rise in the estimates for 2004 production. Above-average or bumper crops in several major producing countries/regions are behind the expected increase in world inventories this season. The largest build-ups are forecast for the United States and several countries in Europe and China. At the current forecast levels, aggregate coarse grains stocks held by the five major exporters are expected to almost double from the previous season to 84 million, representing 45 percent of the world total.
Another notable development is the expected increase in stocks in China for the first time in 4 years. Following a rebound in 2004 production in China, stocks in that country are also expected to rise, approaching 51 million tonnes, some 4 million tonnes more than their opening level.
Maize prices gained somewhat since the previous report but still remain lower than in the previous season. Large crops and ample exportable supplies continued to weigh on international maize prices this season. In March, the price of United States maize (US No.2 Yellow) averaged US$100 per tonne, up US$6 per tonne since November but US$29 per tonne, or almost 22 percent, below the corresponding month last year. Also in the United States futures market, Chicago maize futures continue to move on lower levels than last year in spite of receiving occasional supports from soybeans and a weak US dollar. By late March, July 2005 futures were quoted at US$87 per tonne, some US$35 below the corresponding values last year.
Since the last report, FAO’s production forecast for the aggregate 2004 paddy crop has been cut by 5 million tonnes to 605 million tonnes (404 million tonnes in milled rice equivalent), as the effects of weather problems late last year were better quantified, particularly in Cambodia, China (Mainland) and Laos. However, despite the recent reduction, world paddy production in 2004 would still be 3.8 percent larger than in 2003 and the second highest on record. Among the main producers, China will end the season with a 12 percent rise in output despite the recent drought-incurred losses to the late rice crop. By contrast, in India the crop is forecast to decline slightly from 2003 due to localized droughts and floods.
Table 6. Rice production (million tonnes)
The 2005 season is well advanced in the southern hemisphere and along the equatorial belt, where a number of countries have already started gathering their 2005 paddy crops. FAO’s preliminary forecast for 2005 output stands at 614 million tonnes, 1.5 percent more than the revised estimate for 2004. In the northern hemisphere, where the bulk of world rice is produced, the 2005 season is yet to commence, so the current outlook for global production is highly tentative.
In Asia, despite paddy losses to the tidal wave in Sumatra last December (see Special feature on Tsunami), the Government production target in Indonesia in 2005 has been set only marginally below the record performance of last year. Production in Sri Lanka, another country hit by the Tsunami, is anticipated to recover in 2005, due to favourable weather. The main Maha crop, being harvested, is put at 1.9 million tonnes, 16 percent higher than the same crop in 2004, which was drought-affected. The outlook is also positive in Malaysia.
In southern and eastern Africa, output in Madagascar is expected to grow to 3.4 million tonnes, reflecting an increase in plantings in response to a surge in domestic prices and abundant rains in the past two months. In Malawi and Mozambique, dry spells in southern parts during February have worsened prospects for a recovery in paddy production from the drought-affected levels of 2004. In Tanzania, late and erratic rains in the northern highlands major producing areas have adversely affected rice plantings and yields.
In South America, official surveys in Argentina point to a 4 percent increase in the area planted, which together with better yields, would boost production by 8 percent. In Brazil, official forecasts indicate a paddy output similar to last year’s bumper crop, with increased plantings compensating a return to normal yields. Limited water availability for irrigation in Uruguay is reported to have resulted in a 10 percent decline in planting, which may depress production to 1.1 million tonnes. In Ecuador and Peru, current dry weather is delaying planting operations of the 2005 paddy crop. In Guyana, the sector, which is highly dependent on exports to the EU market, is likely to be negatively affected by expectations of falling export prices under the new EU rice policy regime implemented in September 2004.
In Australia official forecasts point to a 20 percent contraction in paddy output in 2005, as insufficient rainfall in growing areas constrained rice cultivation again this year.
In the major producing countries in Asia, where the 2005 paddy crop is still to be planted, a recovery in production in 2005 is anticipated in those countries affected by major weather anomalies in 2004, in particular Bangladesh, Cambodia, India, Nepal, and Thailand, often spurred by the need to rebuild domestic rice reserves. In the Islamic Republic of Iran, Pakistan and the Philippines, production is expected to continue the increasing trend of the past years. In Viet Nam, the Government, which has pledged to keep the area under rice about constant, is aiming at only a marginal increase of output to 36 million tonnes. Similarly, a modest 1.4 percent increase in output to 182.5 million tonnes is anticipated in China, as rising input costs may limit price incentive effects. By contrast, official forecasts already indicated a reduction of production in 2005 in Japan, in line with current government policies. Similarly, the widening of market access to imports is expected to depress the sector in the Republic of Korea.
Among African countries located north of the equator, production is set to recover in Chad and Mali. Further increases are anticipated in Egypt, Nigeria and Senegal, while little change is foreseen elsewhere as a surge in the costs of basic inputs, especially fertilizers, may erode the positive impact of attractive domestic prices.
Elsewhere, in Costa Rica, Cuba, Nicaragua and Panama, production in 2005 should recover from last year’s drought/pest- reduced levels, while official forecasts in Mexico point to a marginal decline. Based on official forecast, production is also set to drop in the United States, reflecting expectations of lower producer prices and of less favourable growing conditions
FAO has slightly increased its forecast for rice trade in 2005 to 25.8 million tonnes, which would mean a 3 percent fall from the amount traded in 2004.
Much of the contraction in rice trade this year should arise from a sharp reduction in Thailand’s exports, from the exceptionally high 10.1 million tonnes shipped in 2004. Given the reduced 2004 production and the resulting tightening of prices, the country is anticipated to export 8.5 million tonnes, still its second highest performance on record. Shipments from Viet Nam are forecast to increase slightly to 4.1 million tonnes this year, despite an on-going drought which is affecting the second crop. The good 2004 season should allow Pakistan to raise its sales abroad, despite a recent hike of import tariffs in its traditional eastern African markets. Exports from China (Mainland), which were severely constrained by reduced availabilities en 2004, may rebound this year. However, the 1.4 million tonnes forecast is below average export volumes, given the relatively modest production outcome in 2004. Exports from the United States are also set to rise in 2005, sustained by an expected fall in domestic prices, improved access to Central America and the Caribbean and weak competition from Australia. Despite the disappointing 2004 harvest, sales from India are anticipated to be about 2.5 million tonnes, only marginally lower than last year, as the expected strength of world prices must enable the country to remain competitive, especially on the parboiled market. Among the other traditional exporters, Egypt is anticipated to keep exports high, at 750 000 tonnes. In South America, Argentina may step up shipments, although this might imply its gaining new markets outside the region. By contrast, exports may decline in Guyana and Uruguay. Australia’s rice sales will continue to be constrained by very limited domestic availability, following 3 years of below-normal precipitation in rice growing areas.
Import demand is expected to remain strong in several of the major rice importing countries in the course of the year, in some cases in spite of the prevalence of import restrictions. Deliveries to Indonesia, in particular, are anticipated to rise to 1.2 million tonnes. Even though the Government has extended its ban on rice imports until June, the state trading enterprise Bulog was reported to be considering buying rice on the world market to avert scarcities arising from current dry conditions affecting the secondary crop. Similar concerns are anticipated to boost imports to Bangladesh, where strong increases in prices have been reported. In the Philippines, the National Food Corporation has contracted large purchases in recent months. Overall, the country is forecast to buy 1.1 million tonnes in 2005, up from 1 million tonnes last year. According to the official sources, imports to the Republic of Korea are expected to rise to 226 000 tonnes. Early this year, the Government concluded an agreement with nine WTO country members to retain rice under the WTO “Special treatment provision” for another 10 years. In exchange, it pledged to widen progressively the minimum import quota to the equivalent of 7.9 percent of domestic consumption, or 408 700 tonnes, by 2014 and to immediately let 10 percent of imports be marketed at retail shops. By contrast, imports to China (Mainland) are set to fall to some 500 000 tonnes, down from a reported 761 700 tonnes in 2004. They are also likely to be somewhat lower in the Islamic Republic of Iran.
Current prospects for imports to African countries also point to an overall contraction, induced mainly by rising world prices and freight rates compounded, in several instances, by the devaluation of domestic currencies. Under the current outlook, declining rice deliveries are expected to be made to Benin, Cameroon, Madagascar, Nigeria and South Africa. With the implementation of the East Africa Customs Union protocol on 1 January 2005, Kenya, Tanzania and Uganda raised tariffs on rice imports to 75 percent, a move which is anticipated to depress their shipments this year.
Most countries in Central America and the Caribbean are anticipated to maintain a relatively high level of imports, in particular Cuba, Haiti, and Nicaragua, which were affected by weather problems in 2004. By contrast, based on higher inventories and current expectations of an above-average crop, Brazil is set to import less this year, with the country also announcing it would engage in exports.
Smaller purchases by the United States are also foreseen, while Australia might need to come onto the market to buy at least 100 000 tonnes to cover its domestic needs while at the same time maintaining a minimum level of exports. In the rest of the world, imports to the EU are set to rise to almost 1 million tonnes. The EU’s tariffs on imports of milled and husked rice were sharply reduced last September to €65 per tonne and €175 per tonne respectively, following a 50 percent cut in the official paddy procurement price. Ensuing negotiations with some trading partners led the EU to agree to further tariff cuts as of 1 March 2005. According to the agreement, tariff rates on imports of husked rice will be reviewed on the base of recorded imported volumes over a six month period.
Imports to the Russian Federation are expected to remain at about 470 000 tonnes this year, despite the recent announcement that the country will impose a tariff of €70 per tonne for nine months. This replaces the previous tariff of 10 percent, which until January was also subject to a minimum value of €30 per tonne.
World rice inventories at the close of the 2004/05 marketing seasons are estimated at 97 million tonnes, slightly lower than the previous estimate of 99 million tonnes. The revision mainly reflects the deterioration of production prospects in China, which resulted in a lower estimate of the country’s rice stocks at the end of the 2004 season. Compared with their opening levels, global inventories would be 6 million tonnes smaller, meaning that production in 2004 was insufficient to meet consumption and that reserves had to be drawn down to cover the gap. Most of the traditional exporters are expected to reduce their stockpiles over the 2004/05 season, including China, Egypt, India, Pakistan and Thailand, although Viet Nam might keep them close to their opening levels and the United States raise them to a record 1.3 million tonnes. Among importers, inventories are likely to end lower in Indonesia and Nigeria but to change little in the Philippines and the Islamic Republic of Iran and to increase in Brazil, Japan and the Republic of Korea.
International rice prices strengthened in 2004, with the FAO all Rice Price Index (1998-2000=100) averaging 104 for the whole year, the highest level since 1998 and 22 points more than in 2003. Among the various categories, quotations of the high quality Indica rice rose by 20-30 percent compared with 2003. The rise was even stronger in the case of the lower quality Indica rice, with prices of Thai A1 Super rising by US$56 per tonne, or 37 percent, between 2003 and 2004. Gains were more contained in the case of Japonica and Aromatic rice.
Prices have remained on a rising trend since November 2004, with the index stable at 106 between January and March, 5 points more than last November and 3 points more than last December. The strength reflected adverse weather conditions for the secondary paddy crop in several major producing countries, which raised fears over the possible tightening of market conditions in the coming months.
In the high quality Indica rice sector, the price of Thai 100%B rice rose from US$265 per tonne last November to US$294 per tonne in the first three weeks of March. The Thai A1 Super quotations also gained about US$15 over the period. In contrast with most other origins, price quotations for rice from the United States fell in the past four months, in the wake of a 2004 bumper harvest and rising domestic inventories. International rice prices are expected to keep rising in the coming months, as supplies in several of the major exporting countries appear rather tight.
Moving to levels not registered since the early 1990s, the FAO trade-weighted international meat price index reached an average of 102 points in 2004, up from 2003’s average of 90 points. Early year price pressure resulted from animal disease and food safety concerns which limited exportable supplies from some of the major Asian markets, affected by Avian Influenza (AI), and North America in the wake of both AI outbreaks and reports of Bovine Spongiform Encephalopathy (BSE). As markets gradually opened over the course of the year, international meat prices, particularly for poultry and beef, witnessed some price easing; however, the 2004 average poultry and beef prices were up 22 and 14 percent respectively from their levels of a year ago.
In 2004, global meat markets were characterized by considerable instability, as animal disease outbreaks led governments to adopt policies to protect their livestock sectors, including import bans, tighter sanitary border control measures, and stronger domestic regulations. While global production grew 2 percent, the wide extent of market closures led to an estimated 1 percent drop in global meat trade, the first decline since the mid-1980s. Animal disease outbreaks, combined with exchange rate movements, prompted a significant shifting in trading patterns which have favoured increasing meat trade from South America. Meanwhile, food safety concerns led to shifts in product composition of trade with countries with Avian Influenza, increasing their exports of cooked product to avoid trade bans on fresh/chilled meat.
In 2005, some recovery in consumption is expected, as markets open and exportable meat supplies increase, leading to a potential easing of some meat prices. However, the meat market outlook for 2005 will still be heavily influenced by the status of food safety concerns in the wake of Asian human fatalities due to AI and BSE, the animal disease status of many countries, shifting exchange rates, and production and trade policy developments. In particular, the trade outlook will depend on the satisfactory resolution of some current trade impasses which include: quota administration in the Russian Federation; the US BSE minimal risk regulations, which will influence US-Canada cross border cattle trade; the US trade action involving the imposition of anti-dumping duties against Canadian hogs; and the regulatory framework for resuming beef trade between the United States and Japan. In addition, poultry trade will be influenced by the imminent preliminary WTO ruling on EU duties for salted chicken imports which were raised from 15.4 percent to 75 percent in 2003.
Table 7. World meat statistics1
1 More detailed meat statistics are available on the Internet as part of the FAO World Wide Web (www.fao.org) at the following URL address: http:/www.fao.org/es/ESC/en/20953/21014/index.html
2 Includes meat (fresh, chilled, frozen prepared and canned) in carcass weight equivalent; excludes live animals, offals and EU (15) intra-trade.
Note: Total computed from unrounded data.
Supported by strong meat prices and weak feed prices, which are more than 20 percent lower than levels in early 2004, global meat production is estimated to rise by 2.8 percent in 2005 to 264.7 million tonnes. While meat supplies are projected to grow in both developed and developing countries, nearly 80 percent of the 7 200 tonne increase in production in 2005 is expected to be realized in developing countries, mainly concentrated in Asia, which accounts for more than 40 percent of global meat production. The developing countries’ share of global meat output is expected to increase, reaching 58 percent, up from 43 in the early 1990s.
Bovine meat is expected to witness the strongest output gains in 2005, up 3.1 percent to 63.5 million tonnes. This increase after stagnant growth in 2004, is expected despite record low cattle inventories for developed countries. While cattle numbers remain constrained in North America and Australia, strong prices are expected to prompt a slight recovery in their beef slaughter and output, while output in the EU is expected to decline due to CAP reform that has lowered payments to producers. This, however, could be partially compensated by the EU’s proposed phasing out of the Over Thirty Month Scheme (OTMS)5/ in the United Kingdom which could expand overall production by more than 185 000 tonnes.
Poultry production is also expected to increase significantly in 2005, but Avian Influenza still persists in Asia. Global poultry production in 2005 is expected up by 2.8 percent. Poultry meat consumption in Asia, which registered an unprecedented drop in 2004 to 27.2 million tons, is expected to recover in 2005, pushing up regional per capita intake to 2003’s pre-Avian Influenza level of 7.4 kg per caput. However, persistent outbreaks of N5N1 Avian Influenza, which spreads more rapidly in cooler weather, continues to be problematic in several of the 8 Asian countries that have officially reported outbreaks to the World Organization for Animal Health (OIE) since late 2003. Over 140 million birds in the region, (or an estimated 20-25 percent of inventories in Viet Nam and Thailand), have died or been culled since early 2004, resulting in a decline of 3 percent in Asian production Meanwhile, human health issues continue to cause global concern as the virus has killed at least 47 people since first erupting in Asia at the end of 2003.
Pigmeat output is forecast to increase to 2.6 percent to 103.4 million tonnes. The global market will be supported by a robust Asian economic outlook prompting 3-4 percent output increases in China, Japan, the Philippines and Viet Nam. In developed countries, the output is expected to remain stable with an increase in North America offset by lower European production. Meanwhile, global sheep meat production is likely to increase also by 3.3 percent, supported by strong gains in developing countries that account for nearly three-quarters of global supplies.
After two years of limited growth, per caput meat consumption may reach 41.7 kg per caput in 2005 supported by relatively strong economic growth and recovering consumer confidence, particularly in developing countries. However, there is considerable uncertainty related to Asian meat consumption prospects due to Japan’s confirmation of its first case of the human variant of mad cow disease (variant Creutzfeldt-Jakob disease - the human manifestation of Bovine Spongiform Encephalopathy).
Prospects for a recovery in meat consumption, combined with increased market access as some countries gradually reopen borders to both North American beef and some Asian heat treated product, are expected to support global meat trade in 2005. Meat trade is forecast to grow by 4 percent to 20.1 million tonnes after a decline of 1 percent in 2004. In general, the pervasive market impact of animal diseases will continue to accelerate the shift in exporter market shares toward South American products. In particular, the continuing market suspension of beef products from North America (due to BSE) and of poultry products from AI-affected Asian countries will support market diversion. The global market share for South American meat exports in 2004, after expanding to 29 percent (37 percent for beef and 35 percent for poultry), is expected to rise an additional percentage point. Brazil, accounting for 24 percent of global meat exports in 2004, will likely maintain its position as the largest meat exporter, taking the lead in the beef sector and competing with the United States as the largest poultry exporter.
Despite tight supplies in developed countries and expectations of a continued Japanese ban on imported beef from the United States, exports in 2005 are projected up 5 percent to 6.3 million tonnes. Stronger demand is expected from the EU, Mexico, the Republic of Korea and the United States. The United States is the world’s largest and fastest growing beef importer, accounting for almost half of the more than 1.3 million tonnes increase in imports since the mid-1990s. While they account for a quarter of global imports in 2004 and 2005, they are traditionally also the second largest exporter, though their exports in 2005 will stay at near record lows in the absence of an agreement with Japan on the provision of cattle birth records for beef exported from the United States.
The continued absence of competition from the United States in key beef markets in 2005 will likely strengthen exports from Australia, South America and smaller exporters such as India and Nicaragua. Meanwhile, high beef prices in the EU, combined with a strong currency and restricted quotas into the Russian Federation, their major market, will not only preclude any recovery in their exports but expand their position as a net importer.
The share of developing countries’ exports is expected to reach 48 percent in 2005, nearly double that of 2000. However, the 8 percent projected increase in exports, is significantly below the average growth of nearly 25 percent witnessed over the past three years.
After falling by 4 percent in 2004, overall poultry trade is expected to increase by 5 percent in 2005, to 8.2 million tonnes, as the dominant exporting countries, such as the United States and Brazil, strengthen production and exports in response to robust domestic demand and relatively high international prices. In addition, non-traditional exporters, such as Chile, Malaysia and the Philippines will continue to ship poultry to high priced Asian markets, such as Japan, the Republic of Korea and Singapore, which are refusing fresh/chilled product from the their major suppliers, Thailand and China. Importer bans will likely constrain the region’s exports to less than 1 million tonnes, slightly above exports in 2004, but still nearly 50 percent below the 1.8 million tonnes shipped in 2002. Meanwhile, Asian imports, after dropping by an estimated 17 percent in 2004, are expected to recover to 3.3 million tonnes, which is less than the pre-AI outbreak level in 2003. Additional global import demand is also expected from the Central America and Caribbean region, where Mexico is positioned as the fourth largest poultry importer, and enhanced market access into Cuba.
As demand recovers for beef and poultry meat, the relatively strong trade gains witnessed by the pigmeat sector in 2004 are expected to erode. Global pigmeat trade is expected to remain virtually unchanged, rising by less than 1 percent in 2005 to reach 4.5 million tonnes. Indications that the Japanese safeguard for pigmeat will not be triggered will support the market; however, overall Asian import demand, after rising 13 percent in 2004, is expected to fall in response to stronger regional production prospects. While modest growth is expected for North American exports, shipments by others will likely be constrained by low quotas in the Russian Federation and rising prices.
Trade in sheep meat products is expected to reach 750 000 tonnes, up 4 percent, as robust demand in North America and Asia is matched by increased supplies in Oceania as a result of higher lamb numbers and increased carcass weights. Imports into the United States, however, may be limited by a weaker US dollar and a slight recovery in flock numbers.
2. Including wheat flour in grain equivalent.
3. EU imports show a decline from the previous season also because of the EU enlargement. The impacts of the EU enlargement on trade numbers were discussed in June 2004 issue of Food Outlook.
4. The impacts of the EU enlargement on trade numbers were discussed in June 2004 issue of Food Outlook.
5. The impacts of the EU enlargement on trade numbers were discussed in June 2004 issue of Food Outlook.