FAO/GIEWS - Food Outlook No.3 - June 2000 p. 6

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World trade in 2000/01 could decline slightly

FAO's first forecast for cereal trade in 2000/01 is 221 million tonnes, which would be around 4 million tonnes below the previous year's volume, reflecting a likely contraction in world trade of wheat and coarse grains. This tentative first forecast is based on the latest production indications and assumes that the volume of world trade in rice would remain close to this year 2/ .

Global wheat trade in 2000/01 is forecast to decline by over 2 million tonnes to 101.5 million tonnes after this season's relatively sharp increase. Nevertheless, at this level world trade would still be above the average of the past 5 years. The anticipated decline in next year's trade volume would be mostly on account of reduced imports by the Russian Federation and Pakistan, reflecting larger production, while imports by most other countries are likely to remain close to the estimated 1999/2000 levels. In Asia, imports by the Islamic Republic of Iran are likely to remain high due to persistent drought for the second consecutive year while purchases by China are forecast to increase. Wheat imports by China (mainland) could rise sharply, from 900 000 tonnes in 1999/2000 to 2.5 million tonnes, the highest since 1996/97, because of a likely reduction in domestic output. By contrast, good production prospects in Pakistan could result in a sharp cut in imports, while larger crops in India, combined with the continuation of the ban on imports, could eliminate commercial imports altogether. Imports by most other countries in South East Asia are forecast to remain close to this season, given the likely prospects for sustained economic recovery and relatively weak international prices.

Overview of World Cereal Imports - Forecast for 2000/01

  Wheat   Coarse grains Rice (milled) Total
  1999/2000 2000/01 1999/2000 2000/01 2000 2001 1999/2000 2000/01
  ( . . . . . . . . . . . . . . . . . . . . . . . . . . million tonnes . . . . . . . . . . . . . . . . . . . . . . . )
Asia 48.7 46.7 55.4 55.2 11.6   115.6  
Africa 22.9 23.9 13.1 13.6 5.3   41.3  
Central America 5.7 5.7 11.7 11.7 1.5   19.0  
South America 11.4 12.0 7.3 6.7 1.1   19.8  
North America 2.5 2.7 3.5 3.6 0.6   6.7  
Europe 12.1 9.9 7.9 6.1 1.7   21.6  
Oceania 0.5 0.5 0.1 0.1 0.4   0.9  
WORLD 103.8 101.5 98.9 97.0 22.2 22.2 1/ 224.9 220.7
Developing Countries 79.0 78.3 64.9 64.6 18.3 18.3 162.2 161.1
Developed Countries 24.8 23.2 34.0 32.4 3.9 3.9 62.7 59.6

Wheat imports are also likely to rise in Africa. As in the current season, production shortfalls in a number of countries in North Africa could result in sizeable imports. The largest increases are expected in Algeria and Morocco where the current drought has hit hardest. In the sub-Saharan region, aggregate imports could remain high as in this season, but it is difficult to make any realistic forecast at this early stage against the background of on-going civil conflicts in many parts. Elsewhere, most countries in Central and South America could import as much as in the current season. In Europe, imports by the Russian Federation may fall sharply with production rising, assuming no further food aid deliveries.

Regarding exports, the forecast for 2000/01 points to a somewhat similar picture as in this season in terms of aggregate shipments from the five largest wheat-exporting countries. Overall, sales from the EC and the United States are expected to rise, while exports from Canada could remain unchanged and those from Australia and Argentina could decline. Among other countries, exportable wheat supplies in most countries in Asia are likely to be more limited, in particular in Kazakhistan and Turkey. In Europe, apart from the EC, sales from Hungary are also forecast to increase.

FAO's first forecast for international trade in coarse grains in 2000/01 points to a decline of around 2 million tonnes to 97 million tonnes. This decline, the first in three years, would be mainly accounted for by smaller shipments of maize and barley. The projected reduction in world trade largely reflects the anticipated rise in coarse grains output in a few importing countries, especially in the Russian Federation, along with several countries in South America. However, as in the case for wheat, several countries in Asia and Africa would need to resort to more imports in order to cover their domestic requirements, primarily the Islamic Republic of Iran, Turkey, Egypt, Morocco, Ethiopia and Tanzania.

Export availabilties of coarse grains are expected to be sufficient to meet the forecast import demand although sales from some of the traditional exporters could be down from the previous year. Shipments from the major exporters are expected to rise or remain at least at the same level as in 1999/2000 except for Argentina. Maize exports from China are likely to decline as production is expected to be smaller and exceptionally strong sales during the current season have already resulted in smaller carryover stocks.

Except for rice, world trade in most other major cereals shows stronger growth in 1999/2000 in spite of smaller food aid shipments

At 225 million tonnes, the current estimate for global cereal imports in 1999/2000 points to a notable gain of around 9 million tonnes, or 4 percent, over the previous year's reduced level. Much of this increase can be credited to robust trade in wheat and higher imports of maize and barley, whereas, trade in rice could dwindle somewhat from the high volumes registered in the previous two years. Based on the latest World Food Programme estimates, this year's total cereal shipments as food aid could reach 7.5 million tonnes, which would be some 3 million tonnes down from 1998/99. However, this sharp decrease mostly reflects the drop in food aid shipments to the Russian Federation. For the developing countries as a group, cereal imports are expected to rise to an all time high of around 162 million tonnes, up 2.6 percent from the previous year. Most of the increase would be in wheat and coarse grains.

Overall, the cereal import bill of the developing countries in 1999/2000 is expected to be close to US$21 billion, which is about US$600 million, or 3 percent, below the previous year's value in spite of a likely reduction in food aid deliveries from the previous year. Weak international cereal prices during the course of the 1999/2000 trade season largely compensated for the rise in import volume. For the Low Income Food Deficit Countries (LIFDCs), the overall cereal import bill is seen to fall by at least 7 percent, to below US$9 billion, with imports at 70.5 million tonnes, down 1.5 million tonnes from last year's estimated volume. The decline in imports is due to reduced purchases by a few countries where production increased.

The latest estimate for world wheat and wheat flour (in wheat equivalent) imports in 1999/2000 (July/June) is about 104 million tonnes, 1.3 million tonnes higher than was reported in April and nearly 6 million tonnes higher than in the previous year. This month's upward revision mainly reflects higher import forecasts for the Islamic Republic of Iran, Kenya, Sudan and the Russian Federation, which would more than offset slight downward revisions to import estimates for Bangladesh, the Republic of Korea, Yemen, Mexico and Brazil. This year's relatively large expansion in world trade could be attributed to a combination of factors, which include the following:

Aggregate wheat imports by the developing countries are now put at 79 million tonnes, up more than 2 million tonnes from the previous year. In value terms, this would be equivalent to US$9.7 billion. However, for the LIFDCs, wheat imports are likely to show a decline of around 600 000 tonnes to 39.7 million tonnes. This level of purchases would cost nearly US$4.6 billion, down US$300 million from 1998/99.

On the regional basis, Asia and Europe would account for most of the expansion in world wheat trade in 1999/2000. Wheat imports into Asia are currently put at almost 49 million tonnes, up 3.5 million tonnes from the previous year's reduced volume. However, the bulk of the increase reflects a sharp rise in imports by the Islamic Republic of Iran, which more than offset the reduced imports in several other countries, including Bangladesh and Pakistan. At the same time, due to another good crop in China, imports into the Mainland could remain under 1 million tonnes, which is trivial compared to annual imports of some 10 to 15 million tonnes in earlier years.

In Europe, total imports in 1999/2000 are seen to rise sharply, by over 60 percent, to 12 million tonnes. However, most of this expansion is attributed to higher imports by the Russian Federation, a third of which is accounted for by food aid shipped in the previous season but delivered in 1999/2000. In addition, Belarus, Romania and Slovakia are among the other countries in Europe where a notable increase in imports is likely, mostly in view of reduced domestic production.

In Africa, total imports in 1999/2000 could reach 23 million tonnes, down 1 million tonnes from the previous year despite continuing large purchases by several countries in North Africa, especially Algeria and Morocco due to drought-reduced harvests. By contrast, in Egypt, the world's largest wheat importer in most years, the irrigated wheat crop for 1999 was the highest on record, resulting in some decrease in its imports. At around 17 million tonnes, wheat imports by most countries in Latin America and the Caribbean are expected to remain close to the previous year's levels. However, imports by Brazil could decline by 1 million tonnes, given a rise in production and large carryover stocks. By contrast, Mexico is forecast to import slightly more than in 1998/99 due to a decline in domestic output.

Overall the forecast rise in world wheat imports in 1999/2000 is to be met mostly by larger exports from all major exporters with the exception of the United States (Table A.3). Larger sales from Argentina, Australia and Canada would reflect their ample exportable supplies. Exports from Canada could register the sharpest rise, 27 percent, a significant recovery from the previous year's reduced volume. Exports from the EC are also seen higher, in part due to the weaker Euro during the second half of the season. By contrast, wheat exports from the United States could fall by 1 million tonnes from the previous year to 28 million tonnes, given the decline in domestic production and large exportable supplies in other exporting countries. Among other wheat exporters, large production is expected to boost exports from Kazakhstan, mostly to countries outside the CIS. By contrast, faced with smaller crops, exports from Turkey are seen to fall sharply, while in Syria a severe drought greatly reduced that country's export potential as well. Total exports from several European countries outside the EC could be halved to around 5 million tonnes, mostly reflecting smaller supplies in Hungary, Ukraine and the Russian Federation.

Similar to wheat, world trade in coarse grains is expected to stage a sizeable expansion in 1999/2000 (July/June). This month's estimate for global trade in coarse grains has been raised further, to 99 million tonnes, up over 2 million tonnes from the previous report, mostly reflecting upward adjustments to imports into the Republic of Korea, Algeria, Kenya and Mexico. At the current forecast level, world trade in coarse grains is up 6 million tonnes from 1998/99. For maize, the most traded of the coarse grains, this year's imports are currently put at 70 million tonnes, up 5 percent from the previous year. For barley, the second-most traded coarse grain, imports are estimated to rise by 11 percent to 18 million tonnes. Imports of sorghum could also rise, by 5 percent to over 7 million tonnes.

Overall, total coarse grain imports by the developing countries are estimated to reach 65 million tonnes, an increase of some 5 million tonnes, or 8 percent, over the previous year. At this level, the developing countries would spend roughly US$7.3 billion on imports, or US$400 million more than the previous year. For the LIFDCs as a group, the cost of this year's coarse grain imports could reach US$2.2 billion, some US$250 million more than in the previous season, reflecting a higher import volume of some 2.2 million tonnes over the previous year.

At almost 99 million tonnes, the current forecast for global imports of coarse grains in 1999/2000 is some 6 million above earlier expectations at the start of the season. This could be attributed to several developments:

In Asia, this year's imports are now put at over 55 million tonnes, up 2.5 million tonnes from 1998/99. The most significant increase is in the Islamic Republic of Iran, which resorted to larger imports of barley and maize because of domestic production shortfalls. Imports by the Republic of Korea are also expected to show a sharp rise, mainly because of strong domestic feed demand. Despite the slowing pace of maize purchases in recent months as a result of the outbreak of the foot-and-mouth disease, the overall coarse grain imports by that country could still show an increase of nearly 20 percent to 8.7 million tonnes. In Africa, imports into the northern region are estimated to remain close to the previous year's relatively high volume because of persistent poor harvests in several countries. In addition, imports into the sub-Saharan region are forecast to increase by about 1.3 million tonnes to nearly 5 million tonnes. The largest increases are in Kenya and the Republic of South Africa, mostly reflecting higher import demand for maize because of smaller domestic crops. Imports by most other countries in the sub-region could also increase, albeit only slightly despite the continuing food shortages.

Total imports into Latin America and the Caribbean also show a relatively strong increase. Among the countries in Central America, much larger imports are anticipated in Cuba, Haiti, Guatemala and Honduras. Purchases by Mexico, the region's largest importer, are estimated to reach 8.7 million tonnes, which would be close to the previous year's level. In South America, the expected 600 000 tonnes increase in imports by Brazil would more than offset slightly smaller purchases by most other countries in the sub-region. The strong growth in poultry industry in Brazil is the main driving force behind the rise in import demand for maize. Total coarse grain imports into Europe could rise by 23 percent over the previous year to almost 8 million tonnes, despite a small reduction in maize imports by the EC. An increase in maize imports by the Russian Federation would account for the bulk of the European increase, while imports of barley by Belarus and Romania are also estimated to increase, mainly due to lower domestic production.

Regarding exports of coarse grains, one the main features of the 1999/2000 season is a twofold increase in shipments from China, which are now put at almost 7 million tonnes. At this level, China would become the fourth largest coarse grain exporter. Large maize supplies in China and the resumption of stronger import demand by some of the nearby Asian countries provided an export advantage to China despite lower maize prices from the United States. In spite of the expansion in world trade, total coarse grain shipments (on July/June basis) from the United States and Argentina, respectively the world's first and second largest exporters, could show only a slight increase over the previous year. The growth in world import demand for barley could be met by larger exports from Canada and the EC, especially in view of reduced export supplies in Australia and Turkey due to smaller domestic production. Elsewhere, maize exports from the Republic of South Africa are also estimated to be down from the previous year because of sharply lower production. Sales from Hungary and Romania could rise given the more abundant supplies resulting from the rise in their domestic production.

The outlook for international rice trade for the rest of 2000 points to a weakening of global import demand for the second consecutive year, after an all-time high in 1998. Many of the major importing countries have harvested bumper crops, reducing their need for imports. As a result, FAO's forecast of world rice trade in 2000 has been revised downward by about 800 000 tonnes from the previous report to 22.2 million tonnes, down by 2.9 million tonnes from 1999. The contraction in the volume of rice trade combined with a weakening in international prices should result in a much lower value of world trade during the year 2000. In particular, imports by the developing countries are forecast to fall by 3 million tonnes to 18.3 million tonnes, a decline of US$660 million in value terms. As for the Low Income Food Deficit Countries (LIFDC), their import bill is estimated at US$2.1 billion, down by US$700 million from last year. Similar to 1999, the brunt of the decline in this year's global rice trade will be concentrated in Asia where the large importers will likely take less either due to increased domestic production or policy regimes that are aimed at limiting imports.

The bulk of the downward revision in the 2000 world rice trade forecast since the last report stems from a 50 percent cut in Bangladesh's expected imports to 500 000 tonnes. Bangladesh harvested an exceptionally good paddy crop during the 1999/2000 season and has continued to cut imports. The forecast of purchases by the Philippines has been reduced by 200 000 tonnes to 600 000 tonnes, based on improved paddy output in 1999/2000 season and good production prospects for the current season. The forecast for Indonesia, the world's leading rice importer, has also been cut, by 200 000 tonnes, to 2.3 million tonnes, compared to an estimated 3.8 million tonnes in 1999. By contrast, imports into Iraq are now expected to reach 900 000 tonnes, 200 000 tonnes up from the earlier forecast, in response to the upward revision of the United Nations oil-for-food programme. Import forecasts for the Islamic Republic of Iran and Brazil, the other major importers, remain unchanged. In India, an import tariff rate of 80 percent on broken rice was introduced in April 2000 in reaction to a large inflow of broken rice from Pakistan. Import tariffs were also imposed on other agricultural commodities.

Faced with a much less buoyant import demand, compared with the last couple of years, the major exporting countries have taken steps this year to secure new customers. The contraction in the demand has affected some countries more than others depending on their relative competitiveness. Thus, the forecast of expected shipments by India has been cut by 300 000 tonnes from the previous report to 1.4 million tonnes, which would mean a 1.3 million tonnes drop from the 1999 estimate volume. Prices in the country have remained uncompetitive compared with rice from other origins, reflecting relatively high production costs. In addition, Bangladesh, a major destination for India's rice exports, is expected to import much less than in the previous two years owing to a bumper harvest. Within the context of a weaker global import demand, projected sales by Viet Nam were lowered by 300 000 tonnes from previous expectations, to 4 million tonnes. The country reached an agreement to increase its rice exports to Cuba thereby making Viet Nam the main rice supplier to that country. Government officials are also actively looking for new markets in Africa and the Middle East.

Given the bearish outlook for rice imports, the United States also lowered its export forecast by 150 000 tonnes to about 2.9 million tonnes. In an effort to try and find destinations for their record supplies, farmers in the US are backing a Bill that would lift the ban on the export of rice and other food commodities to Cuba. The export forecasts for Pakistan, Argentina and Uruguay have also been revised downward by a combined 100 000 tonnes. By contrast, the forecast for China's export shipments has been increased by 100 000 tonnes from the last report to 2.7 million tonnes. The Government's policy to reduce rice stocks, particularly of lower quality, has made it a very competitive source for countries looking for such grades. The country's exports during the first four months of 2000 were estimated at about 1.1 million tonnes or over 60 percent ahead of the pace for the same period in 1999. Expectations regarding export shipments from Thailand were unchanged from the previously reported volume. The pace for the country's exports during the first four months of the year was slightly ahead of the comparable period in 1999. A Thai trade delegation was in Africa in May to explore, among other things, opportunities for increased rice exports to the continent.

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