FAO/GIEWS - Food Outlook No.4 - September 1999 p. 4

TRADE 1/

Increased demand prospects will give rise to higher world cereal trade in 1999/00

Higher world demand for nearly all types of major cereals is expected to boost cereal trade in 1999/2000 to 218 million tonnes, up 5 million tonnes, or over 2 percent, from the revised 1998/99 estimate. This month's trade forecasts for the 1998/99 and the current marketing season (1999/2000) have been raised significantly. Latest import estimates for 1998/99 point to nearly 6 million tonnes increase over the previous report, at least one million tonnes of which would represent additional wheat and rye food aid deliveries to the Russian Federation. The forecast for the current marketing season has also been revised upward by 5.7 million tonnes. This increase takes into account increased demand prospects. A large portion of the anticipated growth in imports would be in the developed countries where, mainly because of an expected increase in imports by the Russian Federation, total imports are forecast to expand by 5 percent to 60.5 million tonnes. Aggregate cereal imports by the developing countries are also expected to rise, but the increase would be just over 1 percent to around 158 million tonnes. Imports by the Low-Income Food-Deficit Countries (LIFDC) are forecast at 71 million tonnes, which, as in the previous year, would represent nearly 33 percent of the world total.

 

OVERVIEW OF WORLD CEREAL IMPORTS - FORECAST FOR 1999/2000

International trade in wheat and wheat flour (in grain equivalent) in 1999/2000 (July/June) is currently forecast to reach 101 million tonnes, 3 million tonnes higher than in the previous year and 1.5 million tonnes more than was reported previously. Larger imports by several countries in Asia would be responsible for most of this season's anticipated growth in world imports. Total imports into Asia are currently put at nearly 48 million tonnes, up 2 million tonnes on the previous year. The largest increase is expected in the Islamic Republic of Iran, where prolonged and severe drought has greatly reduced this year's production and, as a result, imports are forecast to reach at least 5.8 million tonnes, up 2.6 million tonnes or 80 percent, on last year and 800 000 tonnes more than was forecast earlier. Even at this level, however, imports would still be below the record 7 million tonnes imported in 1996/97. Following this month's upward revisions to production estimates in China, the forecast for its wheat imports has been lowered by over 2 million tonnes to 2.8 million tonnes, which would still represent an increase of about 1.2 million tonnes over the previous year. In Pakistan, the latest wheat production estimate is below the Government target and, as a result, imports are forecast to increase by about 800 000 tonnes over last season. With the country facing hard currency problems, however, the Government has recently decided to ban the private sector imports, which in the previous year were responsible for one-third of the total imports. Consequently, the bulk of this year's imports is expected to be secured through bilateral credit arrangements with major exporters. In the Philippines, with faster economic growth and higher demand from the milling sector, this year's imports are expected to rise by 200 000 tonnes and to reach 2.3 million tonnes.

By contrast, several other Asian countries are expected to reduce their imports this season. A record crop in India would result in at least a 600 000 tonnes cut in imports. In the Republic of Korea, where large quantities of low quality wheat are often imported for animal feeding, this year's imports are forecast to decline by 700 000 tonnes, given the relatively lower priced maize in international markets. Imports by Indonesia are also expected to decline, by about 500 000 tonnes, in part due to balance-of-payments constraints, while large stocks of wheat flour, owned by BULOG, the state commodity regulator, are also expected to be released in the course of the season.

At 22.5 million tonnes, total imports into Africa are expected to increase slightly compared to the previous season. In Egypt, following a small reduction in imports last year, this year's purchases are expected to increase, by about 200 000 tonnes, in order to prevent per caput consumption from declining. In Morocco, the expected production shortfall caused by drought could result in at least 700 000 tonnes increase in imports. In the Republic of South Africa, imports are forecast to rise by at least 400 000 tonnes as this year's production is expected to fall further below last year's reduced volume, mostly because of lower plantings and unfavourable weather conditions. By contrast, a likely bumper crop expected in Algeria could result in a decrease in its imports by about one half million tonnes.

Total imports into Europe are forecast to approach 10 million tonnes, up 1 million tonnes from the previous year. Most of the anticipated increase would be on account of larger imports by the Russian Federation. Total wheat imports by the Russian Federation in 1998/99 reached 2 million tonnes, of which foreign donations from the United States and the EC accounted for roughly 1.3 million tonnes, out of a 2.7 million tonnes total pledged, thus, leaving the remaining 1.4 million tonnes to be delivered during the current marketing season. Given the prospects for yet another poor crop and heavily depleted stocks, this year's wheat imports by the Russian Federation are tentatively put at 3 million tonnes. However, the eventual imports may prove to be even higher if additional credit and/or food aid can be secured from major exporters. Elsewhere, imports into the Latin American and Caribbean region is forecast to exceed 17 million tonnes. While imports by Mexico are forecast to remain the same as in the previous year, imports by the region's largest importer, Brazil, could decline by about half a million tonnes from the previous year to 6.5 million tonnes, mostly because of high import cost following last year's devaluation of the Real and also higher Argentine prices, the principal wheat exporter to Brazil, as well as a slight decline in domestic consumption.

Turning to exports, larger sales are expected to originate from the major exporters as export supplies from several smaller exporting countries, such as Hungary, Romania, the Syrian Arab Republic and Turkey, are expected to be significantly reduced because of lower domestic production. Although the Government of India has authorised exports of some 2 million tonnes in anticipation of a record crop, the relatively high price of Indian wheat could, in effect, prevent any large sales taking place this season. Consequently, aggregate exports by the five major exporters on a July/June basis are forecast to reach at least 91 million tonnes, up almost 10 million tonnes on the previous year. At this level, the major exporters' global share of trade would approach 90 percent, as compared to 83 percent in the previous season.

In Asia, this year's imports of coarse grains are forecast at over 54 million tonnes, up 1.5 million tonnes on the previous year. The most significant increase is expected in the Republic of Korea, where larger maize imports are expected to compensate for a likely decline in wheat purchases. The forecast decline in production in the Islamic Republic of Iran and Syrian Arab Republic could also result in higher imports of barley and maize. In Africa, total imports are forecast to increase by about 600 000 tonnes from the previous year to 12 million tonnes. Larger maize imports by the Republic of South Africa and also several countries in eastern Africa, following this year's poor harvests, would offset a likely decline in barley imports by Algeria, due to good prospects for production there. In Europe, a likely increase in coarse grains imports by Poland, Romania, Slovenia and the Russian Federation are expected to more than offset the possible decline in purchases by mostly the EC, so that total imports into Europe would rise by about 700 000 tonnes over the previous year to 6.8 million tonnes. Among the Latin American and Caribbean countries, total coarse grain purchases by Mexico, the region's largest importer, are expected to remain close to last year's estimated volume of 8.6 million tonnes. However, this year's likely decrease in domestic production is expected to favour larger sorghum imports at the expense of reduced maize purchases. Among the other countries, higher maize production in Brazil is expected to result in a decline of around 600 000 tonnes in imports compared to the previous year.

Aggregate exports from the five major exporting countries are expected to be sufficient to meet the expected growth in demand this season. Higher shipments are forecast particularly from Argentina, Canada and the United States, while exports from the EC and Australia are likely to decline slightly. Among the smaller exporters, maize exports from the Republic of South Africa are forecast to be reduced significantly following a reduction in domestic supply. Similarly, barley exports from Turkey are expected to fall well below last year's volume. By contrast, good crop prospects in China are expected to boost maize exports from that country, especially in view of strong demand from its neighbouring countries.

The forecast for global rice trade in 1999 has been adjusted upwards from the last report by 900 000 tonnes to about 22.7 million tonnes, which, if realised, would be the second highest on record. The upward revision reflects large purchases and/or purchase commitments by some of the major importing countries. Indonesia's rice imports are currently forecast at 3.5 million tonnes, up 800 000 tonnes from the previous report, as both public and private companies have been actively making purchases from the international market in recent months. The expected increase in the 1999 paddy output would need to be supplemented with enough imports to meet the local demand and maintain a reasonable level of stocks. Imports by Nigeria were also adjusted upwards by 350 000 tonnes to 650 000 tonnes based on imports to date. During the first half of the year, the country imported a total of 276 000 tonnes from Thailand alone. Expected rice imports by the Islamic Republic of Iran were increased by 100 000 tonnes from the previous report to 800 000 tonnes as production prospects remain poor. Purchases by Sri Lanka, Oman, Cote d'Ivoire and Colombia were raised by 200 000 tonnes overall. By contrast, expected imports by Brazil were reduced by 200 000 tonnes to 800 000 tonnes, based on its good harvest. Similarly, anticipated imports by Bangladesh have been reduced by 200 000 tonnes from the previous report to 1.5 million tonnes, following reports of a 27 percent higher output in the Boro crop, compared to last year. Shipments to China (Mainland), mostly of high quality rice from Thailand, were halved to 200 000 tonnes based on imports to date showing only 87 000 tonnes shipped during the first seven months of the year. The 1999 expected import level for the Philippines, one of the large rice buyers last year, was left unchanged from the previous report at 1.2 million tonnes, or 55 percent of the level imported in 1998.

On the export side, the forecast for rice shipments out of China (Mainland) was raised by 400 000 tonnes from the previous report to about 1.8 million tonnes due to exports to date. Statistics from the Customs office show that the country has already shipped 1.3 million tonnes from January to July. In Viet Nam, anticipated rice exports were adjusted upwards by 400 000 tonnes to a record 4 million tonnes due to increased shipments in recent months to Indonesia and other countries in the Middle East and West Africa. Indications are that exports during the first eight months of the year totalled close to 3.3 million tonnes, which would be slightly ahead of last year. Exports from Myanmar, Australia and Argentina were increased by a combined 200 000 tonnes. However, the forecast for Pakistan's rice exports was reduced by 100 000 tonnes to 2.1 million tonnes. Expectations regarding shipments from Thailand, the world's leading rice exporter, were unchanged from the previously reported volume of 5.5 million tonnes, which would be almost one million tonnes below last year's record as many of its customers are expected to import less compared to the previous year due to higher production. During the first six months of the year the country shipped out about 2.9 million tonnes of rice compared to 3.3 million tonnes over the same period in 1998. The forecast for rice exports by India remains unchanged at 2.5 million tonnes despite a Government decision to exempt all export-oriented rice mills from levy obligations. Previously, the millers had to contribute a certain percentage of non-Basmati milled rice to the Public Distribution System and the feeling is that the new decision could help make their rice more competitive on the international market.

For the year 2000, global rice trade is provisionally forecast to remain of the order of 22 million to 23 million tonnes, about the same as this year's anticipated level. Indonesia is again projected to be the largest world rice importer, while Thailand is expected to retain its leading role among exporters.