COARSE GRAINS

PRODUCTION

Table 4. Coarse grains production (million tonnes)

Better harvest results in the United States raise global 2005 coarse grain crop

FAO’s forecast for world coarse grain output has been raised by almost 13 percent to 970.6 million tonnes, after slipping back in September, but remains below last year’s record level. A significant upward revision for the United States, following better than expected results in the latter stages of the maize harvest, accounted for most of the increase.

In Far East Asia, the 2005 aggregate coarse grains production is forecast marginally up from last year’s bumper level. In China, harvesting of the main crops is complete. The country’s aggregate coarse grains crop is now estimated at 139 million tonnes, 1.4 million tonnes down from the good level of 2004, following a return to average yield after the bumper levels in the previous year. Harvesting is well advanced in India, where the aggregate output in 2005 is forecast at 34 million tonnes, 2 million tonnes more than last year, reflecting an increase in the area planted.

In Near East Asia, as for wheat, a bumper coarse grain crop was harvested in 2005 reflecting favourable weather conditions and more area dedicated to barley, the main crop. Significant increases were registered in Syria, Iraq and Afghanistan. The 2006 crop has already been planted in many parts under generally favourable conditions. In Turkey, drier weather in early November after a wet period favoured planting, as did the arrival of the first rains of the season in northwestern parts of the Islamic Republic of Iran, which had previously been too dry.

In the Asian CIS countries, the 2005 aggregate coarse grains production is estimated at 4.7 million tonnes, about 400 000 tonnes up on the previous year.

In North Africa, harvesting of the 2005 winter coarse grain crops was virtually complete as of mid-November. Aggregate output is forecast at about 9.9 million tonnes, some 22 percent below the 2004 crop due to reduced plantings in most countries as a result of dry weather. In Egypt, the largest producer, the maize crop is officially forecast to decrease to 6.2 million tonnes, reflecting a 6 percent drop in area planted. Planting of the winter coarse grain crop (mostly barley) for the 2006 harvest is underway and the outlook is generally satisfactory. Some seasonal rains since mid-October have improved the soil moisture level for planting and establishment after previously very dry conditions.

In western Africa, harvesting of cereals is now well advanced. The aggregate output of coarse grains in the nine Sahelian countries in 2005 is estimated at a record 13.38 million tonnes, some 35 percent above last year’s harvest. Above-average outputs are anticipated in all countries with the exception of Cape Verde. Production is also expected to increase in most of the coastal countries along the Gulf of Guinea. In Nigeria, the largest producer, coarse grains production is officially estimated to have increased by over 42 percent compared to last year’s drought-affected crop.

In central Africa, harvesting of the 2005 coarse grains is underway. In Cameroon, prospects are favourable, reflecting abundant and widespread rains, in spite of reports of localized dry spells in the northern Sahelian zone. By contrast, persistent insecurity continues to affect food production in the Central African Republic.

In eastern Africa, harvesting of the 2005 main season coarse grains has been completed in southern parts of the subregion but has just started in the north. The subregion's aggregate 2005 output is forecast at about 22.8 million tonnes, about 6 percent higher than last year and above the average of the past five years. In Kenya, the “long-rains” maize crop is estimated at about 2.5 million tonnes, 20 percent above average. Similarly in Tanzania, the 2005 coarse grains output is estimated well above average at 4.3 million tonnes, while in Uganda, an about average output is forecast. By contrast, in Somalia, the 2005 main season “gu” crop, harvested until September, was estimated at just 115 000 tonnes, about 37 percent less than the post-war average. The decline is due to the poor rainfall in the main crop producing areas of southern Somalia. In Eritrea and Ethiopia, the outlook for the coarse grain harvest is favourable reflecting the good rains of the past months and the output is expected to recover from last year’s reduced level in Eritrea and to remain above average in Ethiopia. In the Sudan, latest forecast point to a better crop than last year’s reduced level.

In southern Africa, the 2005 coarse grain crop harvested earlier this year was estimated at 19 million tonnes well above the average level of the past five years, primarily due to a record maize crop in South Africa, which more than offset reduced harvest in most other countries. Planting of the main season crops to be harvested in 2006 has started but progress is hampered in some parts due to delayed rains. Early prospects for the 2006 coarse grains are also uncertain due to reports on planting intentions in South Africa indicating (by late October) a sharp reduction in the area to be planted in response to low soil moisture and low maize prices. However, the increase of prices in November, particularly for white maize which is now higher than a year earlier, is likely to modify farmers’ intentions. Uncertainty also surrounds Zimbabwe, where problems with input supplies as well as hyperinflation could severely constrain production.

 

In Central America and the Caribbean, in Mexico, harvesting of the 2005 main summer maize crop (mostly rainfed) is underway. Official forecasts indicate an output of some 16 million tonnes, similar to the very good output obtained last year during the same season. Planting of the 2006 winter maize crop has recently started in the north-western states of Sonora and Baja California Sur. Elsewhere in the region, harvesting of 2005 second season coarse grain crops is about to start. Heavy rains due to the intense hurricane season have adversely affected the crops in localized areas. However, the main season coarse grain crops, harvested earlier in the year, were satisfactory in most countries of the subregion. In aggregate, the 2005 outputs are forecast to increase in Nicaragua, Honduras and El Salvador but to decline in Guatemala, where the impact of excessive rains in recent months has been more severe.

In South America, the 2005 aggregate coarse grains production is estimated to be down by 4 percent, essentially due to the sharp decrease in Brazil’s production as a consequence of the prolonged dry spells that affected southern producing areas. Planting of the 2006 maize crop is well advanced in the main southern producing countries. Early prospects are mixed. In Argentina, planting operations has been hampered by reduced soil moisture and reports on planting intentions point to an area of maize of 3 million hectares, about 9 percent lower than the previous years. Plantings of sorghum are also expected to be lower. In Brazil, the area planted and yields are forecast to substantially recover from last year’s level, increasing 6 and 12 percent respectively, and tentatively forecast to lift annual production to over 40 million tonnes. In Chile, official sources estimate a reduction of about 10 percent in maize area, as a consequence of the low prices in 2005 that induced a diversion of land toward more profitable crops, such as barley or vegetables.

In North America, conditions remained mostly favourable for the maturation and harvest of the latest sown maize crops in the United States and the output estimate has been revised up slightly since the last report to 280 million tonnes, well above the average of the past five years but still about 20 million tonnes down from last year’s record. In Canada, the 2005 coarse grain output is now officially estimated at 24.8 million tonnes, slightly less than earlier expected and down from last year’s good level although still above the average of the past five years. Some reduction was already expected because of reduced plantings but yields also turned out poorer than expected. Moreover, adverse weather during the harvest period has resulted in poorer quality crops this year.

In Europe, the bulk of the 2005 coarse grains have been harvested and the main winter coarse grain crops of barley and rye in northern and eastern parts of the region have mostly been planted under favourable conditions. In the EU the 2005 aggregate coarse grains output estimate remains virtually unchanged since September at 130 million tonnes, almost 15 percent below last year’s record and below the average of the past five years. Output of all the major grains fell as a result of reduced plantings and lower yields. In the Balkan countries, the 2005 coarse grains output is estimated sharply down from the previous year’s bumper level. Excessive summer rainfall had an adverse impact on the barley and other small grain crops and although the extra moisture was not as detrimental for the summer maize, the maize area and yields are nonetheless reported to have been well down on the previous year. In the European CIS countries, with just the last of the summer maize crop still to be harvested in some parts, the 2005 aggregate coarse grains output is also confirmed down this year. The 2006 winter grains are already dormant in the north of the Russian Federation and entering dormancy in the south and in Ukraine.

In Australia, the 2005 winter grain harvest is underway. Production prospects continued to improve over the last two months with ample rainfall in most of the major producing area. Output of barley, the main winter coarse grain, is now forecast at 8.4 million tonnes, about 2 million tonnes up from last year and above average, which had earlier seemed very unlikely given the exceptionally dry start to the season.

TRADE

Trade volume change little compared to the previous season

The prospects for world trade in coarse grains in 2005/06 have changed little since the previous report in September. At 105 million tonnes, world trade in coarse grains in 2005/06 would be slightly more than the revised estimate for 2004/05 and about 500 000 tonnes higher than anticipated earlier. For the developing countries, as a group, total coarse grains imports are forecast at 73 million tonnes, up 1.2 million tonnes from 2004/05, whereas, aggregate imports by the developed countries are put at 32 million tonnes, virtually unchanged from the previous season. Among the individual coarse grains, trade in maize is forecast at 78 million tonnes, up 1 million tonnes from 2004/05. World trade of rye is seen to decline but for other major coarse grains, trade is expected to remain mostly unchanged from the previous season.

In Asia, imports are forecast to decline to 57.6 million tonnes, down 1 million tonnes from 2004/05. The drop in imports is mostly driven by reduced purchases of barley by Syria because of higher domestic production and by smaller maize purchases by Indonesia, because of the rise in its domestic production as well as a modest reduction in feed demand as a result of the avian flu and high fuel prices. Most other countries in the region are forecast to import as much coarse grains as in 2004/05 with demand for feed grains remaining exceptionally strong in Saudi Arabia and in the Islamic Republic of Iran but more subdued in Japan.

In Africa, aggregate imports are forecast to increase by almost 1 million tonnes from the previous season to 16.5 million tonnes in 2005/06. Coarse grains purchases by several countries in North Africa are expected to increase mostly in response to lower production of barley. Higher imports are also expected in sub-Saharan Africa, to meet severe shortages in several countries. In Zambia and Zimbabwe, maize imports are forecast to increase by nearly 200 000 tonnes and 260 000 tonnes respectively. In Zambia, the Government earlier extended the deadline for duty free imports to March 2006 in order to facilitate imports but by late November because of severe food shortages, it declared a national food disaster and appealed for immediate donor assistance. Maize imports by drought-stricken Malawi are forecast to increase more than four times to almost 800 000 tonnes. In mid-October, the Government of Malawi asked for external assistance by declaring this year as a national disaster with a major food crisis affecting millions in the country. It is reported that by early November, donors and the Government had mobilized 214 000 tonnes of maize and 18 000 tonnes of pulses. In a related development, the World Food Program launched an aid appeal for US$88 million for Malawi, of which, by mid-November, only US$28 million was reported to have been covered.

In Central America, strong domestic demand for both yellow and white maize is reported in Mexico. In a recent policy development, Mexico announced in October the issue of import permits for up to 300 000 tonnes of white maize imports for the second half of 2005 (under the 2004-2007 NAFTA maize TRQ scheme). Among countries in South America, higher maize imports are forecast for Brazil as a result of a drought-reduced production, low stocks and strong demand from pork and poultry industries (for exports) and rapid growth in domestic meat consumption.

In Europe, imports by most countries are forecast to remain at the previous season’s level. In the EU, however, maize imports are forecast to rise as a result of a sharp drop in its production. The increase is likely to be much smaller than what the cut in production would have implied. This is because of large supplies of cheap wheat and a possible contraction in poultry production due to consumer reaction to avian flu which could reduce demand for coarse grains.

On the export side, maize exports from the United States are forecast to increase sharply because of large exportable supplies and less competition in world markets due to smaller availabilities from Brazil and China. Maize exports from China are forecast to drop to 4.5 million tonnes, down 20 percent from the previous season due to much tighter domestic supplies. However, with the worries over avian flu gaining ground in recent weeks (especially after the first reported human case in mid-November), domestic feed demand from the poultry sector could decline and this might result in larger exportable supplies than currently foreseen. A bumper maize crop and strong regional demand are boosting exports from South Africa to the highest level since the mid-1990s. Larger sales of barley are expected from Australia, Canada, and the EU this season, compensating for reduced anticipated exports from Bulgaria and Ukraine. However, rye shipments from the EU are expected to decline significantly given the slow pace of sales so far.

 

UTILIZATION

Growth in coarse grains usage hampered by a contraction in feed use

Following this month’s sharp upward revision of world coarse grain production estimates (by 12 million tonnes), the forecast for global utilization of coarse grains in 2005/06 has also been raised, although not to the same extent (but by about 5 million tonnes). Total coarse grain utilization in 2005/06 is now put at 982 million tonnes, up only 0.5 percent from 2004/05, which compares with a 3 percent expansion in the previous season. This is mostly due to the anticipated sharp decline in feed use, marking also the first such reduction since 2002/03. Total feed utilization of coarse grains is currently forecast to decline to 619 million tonnes, down 2 percent from the previous season. The largest decreases are forecast for the United States, the EU and several CIS countries, partly due to lower production and partly because of large supplies of feed wheat. At the same time, increased uncertainties over the impact of animal diseases, in particular the recent spread of avian flu into Europe makes forecasting feed demand particularly difficult. Early signs are pointing to limited gains in poultry production as consumers reduce egg and chicken consumption. Any prolonged meat consumption changes could lead to lower poultry production and reductions in feed demand in the coming months.

 

In contrast, an exceptional growth of about 5 percent is currently forecast for food consumption of coarse grains in 2005/06. This anticipated strong expansion largely stems from a likely rebound of about 5 million tonnes, or 17 percent, in maize and millet food consumption in western Africa after sharp drops in 2004/05 prompted by the severe drought last year. Industrial use of coarse grains is also forecast to expand significantly this season, mostly driven by higher fuel prices which have given a boost to demand for alternative energy sources which, as a matter of relevance to grains, has increased demand for maize-based ethanol. While strong investment in establishing and expanding ethanol plants is becoming more evident in many countries around the world, the United States is currently leading the way as the largest producer of maize-based ethanol. The United States is expected to put as much as 40 million tonnes of maize into ethanol production in 2005/06 and this would amount to almost as much maize as what the 25 EU Member countries, as a whole, are expected to use for animal feed from maize.

STOCKS

Coarse grains stocks decline

For the first time since the start of the current marketing season, the FAO forecast for world coarse grains stocks has been raised, mostly to take account of higher production estimates for 2005 and lower feed use. World stocks of coarse grains for crop years ending in 2006 are currently put at 181 million tonnes, up 9 million tonnes from the previous report but as much as 12 million tonnes, or nearly 6 percent, less than their opening level. Based on the latest estimates, stocks held by major exporters by the end of the seasons in 2006 could fall to 88 million tonnes, down by nearly 4 million tonnes from their high opening levels. Two years of bumper maize crops in the United States are likely to result in record high ending season stocks in the United States. However, the projected increase of roughly 5 million tonnes in coarse grains stocks held in the United States would not be sufficient to offset completely the expected sharp decline in the EU, where, following this year’s fall in production of all major coarse grains (maize and barley in particular), ending stocks are forecast to be cut by at least 7 million tonnes compared to their opening levels.

 

Elsewhere, this year’s drop in production in drought-stricken countries in North Africa is expected to result in a sharp decline in stocks in the affected countries. Similarly, in Southern Africa, a draw-down in stocks in 2005/06 is anticipated in several countries that gathered a reduced 2005 harvest. However, most other African nations, including those which until recently were severely hit by food shortages in western Africa, are projected to replenish stocks as a result of improved production prospects. In Asia, stocks in China are expected to decline again although the decrease would be relatively small and carryovers remain large. However, avian flu outbreaks may dampen feed demand in China as well as other affected Asian countries and that could eventually lead to higher stocks than currently anticipated. In other regions, maize stocks in Brazil and maize and barley inventories in Bulgaria, Romania and Ukraine are forecast to decline significantly this season, mainly because of smaller domestic production.

PRICES

Strong sales lifted feed grain prices but further gains are limited

So far this season, international maize prices have benefited from reduced exportable supplies in China and Brazil coupled with strong demand in several southern African countries. Prices of white and yellow maize from South Africa have been also supported by weather concerns and a weaker Rand against the US dollar in past months. In recent weeks, faster sales following the resumption of exports from the hurricane-affected US Gulf ports provided some support to the US maize and sorghum prices.

Since September, the US export prices moved generally sideways in spite of harvest pressures and large supplies of feed wheat. In November, the US maize export price (US No.2 Yellow) averaged US$97 per tonne, up US$3 from last year. However, any further gains are becoming more unlikely as markets expect the arrival of the second-largest US crop on record at a time when the strengthening of the US dollar is already putting pressure on US sales. In the futures market, the Chicago March 2006 values have declined US$5 since September, to around US$81 per tonne. Worries over the spread of avian flu in China, and possibly also Europe, could be expected to put more downward pressure on coarse grain prices in the coming months.