FAO/GIEWS - Food Outlook No.2 - April 2001 p. 3

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Supply/Demand Roundup

Early prospects point to an increase of almost 2 percent in global cereal production in 2001 from the previous year's below average output. Based on the condition of crops in the ground and planting intentions for those still to be sown, and assuming normal weather for the remainder of the 2001 cropping seasons, world cereal output this year is forecast at 1 889 million tonnes (including rice in milled equivalent), 35 million tonnes up from 2000 and close to the average of the past five years. However, as growth in cereal usage is anticipated to continue in the coming 2001/02 season, output at this level would be insufficient to meet global utilization for the second year in succession, leading to a further reduction in world cereal stocks. Against this background, the possibility of higher prices could not be ruled out, especially during the second half of the 2001/02 season.

World wheat production in 2001 is forecast at 585 million tonnes, which would be virtually unchanged from last year's below average crop, and still below the long-term trend. Output of wheat in Europe is expected to increase on the strength of larger crops in the central, eastern and CIS countries. In particular, output in the Balkans and Ukraine is expected to recover somewhat after severe drought last year. However, there are concerns that continuing dry conditions in some parts of the Balkans could begin to weigh on this year's improved prospects. Output in Africa is also expected to increase a little this year from last year's reduced crop, reflecting improved rainfall so far this season among the major producers in North Africa. In the southern hemisphere where the major wheat crops will only be sown later this year, wheat output is expected to increase slightly in South America if the forecast strong recovery in Brazil's production materializes. Early indications point to a significantly larger wheat crop also in Australia. However, offsetting these expected increases, a sharp drop in output is forecast for Asia. In China, policy measures have resulted in a further reduction in wheat area and, thus, no increase in output is likely from last year's drought-reduced crop, while in India and Pakistan, dry conditions are hindering the development of the winter wheat crop and lower outputs are forecast.

At this early stage, global coarse grains output in 2001 is forecast at 905 million tonnes, 4 percent up from 2000, and above the average of the past five years. Larger coarse grains crops are expected in Asia, mostly in China, and in several of the central, eastern and CIS countries in Europe where drought affected crops in the previous year. Output will be up also in South America, where a bumper crop is about to be harvested in Brazil. By contrast, output is set to decline in Africa, reflecting poor prospects this year in southern Africa, where the harvest is due to start from April. Production in Oceania is also forecast to decline due to a drop in Australia's summer crop production. Elsewhere, in North and Central America, coarse grain outputs are expected to remain close to the previous year's level.

However, since the major coarse grains crops in the northern hemisphere are yet to be planted, this early forecast is very tentative.

In the southern hemisphere and around the equatorial belt, harvesting of the 2001 season paddy crop is well advanced. In the northern hemisphere, where most of the world's rice crop is grown, planting of the main 2001 rainfed paddy crop will not begin until April-June, when the critical southwest monsoon firmly establishes itself. Assuming normal growing conditions and based on planting intentions in the major rice producing countries, the 2001 rice output is tentatively forecast at 597 million tonnes, similar to last year's output, but 14 million tonnes below the 1999 record level. The contraction in output since 1999 reflects low rice prices in the past season and limited prospects for a recovery, as well as government policies that prompted a cut in rice cultivation in some countries.

The forecast for world trade in cereals in 2000/01 (July/June) has been lowered since the last report in February, by 3 million tonnes, to 233 million tonnes mostly because of a lower estimate for imports by China. This would be 2 million tonnes below the previous season's record level. Imports of wheat and wheat flour (in grain equivalent) in 2000/01, are now put at 107 million tonnes, 1 million tonnes below the February forecast and 2 million tonnes below the previous season's level. Likewise, the latest forecast for coarse grains trade has also been lowered by 1 million tonnes since the last report, and now stands at 104 million tonnes, similar to the record volume of 1999/2000. A downward adjustment also to the global rice trade forecast now puts imports of rice in calendar year 2001 at just over 22 million tonnes, 900 000 tonnes down from February but still similar to the previous year's level.

Following a 2 percent increase in 1999/2000, growth in world cereal utilization is expected to be marginal in 2000/01. Total utilization for the current season is forecast at 1 907 million tonnes, just 0.3 percent up from the previous year, but nevertheless still above the average of the preceding three years. The volume of cereals used for food consumption is currently forecast to rise by 1.1 percent, to 971 million tonnes, primarily among the developing countries in Asia and the CIS. On a per caput basis, however, the average food consumption of cereals would remain unchanged at both the world level and for the developing countries as a group. In spite of the concerns about the contamination of animal feed with BSE infected meat and bone meal and, more recently, foot-and-mouth disease (FMD), global feed usage is not likely to be significantly affected in the short-run from these animal diseases. Global feed usage of cereals is forecast at 686 million tonnes in 2000/01, slightly up from 682 million tonnes in the previous year.

The latest forecast of global cereal stocks by the close of the current seasons ending in 2001 has been raised by 5 million tonnes to 645 million tonnes, but this remains at 48 million tonnes below their opening level. World wheat stocks are forecast to fall by 14 million tonnes to 243 million tonnes, while those of coarse grains are seen down by 26 million tonnes to 249 million tonnes. Global rice stocks are expected to fall by over 8 million tonnes to 153 million tonnes. However, despite the sharp drop in the level of world cereal stocks expected this season, exportable supplies have continued to exceed import demand, leading to persistent downward pressure on prices.

World Cereal Production, Supplies, Trade and Stocks

  1998/99 1999/2000
  (. . . . million tonnes . . . .)
Production 1/ 1 901 1 887 1 854
Wheat 598 591 585
Coarse grains 912 887 870
Rice (milled) 390 408 399
Supply 2/ 2 575 2 587 2 548
Utilization 1 872 1 901 1 907
Trade 3/ 216 235 233
Ending Stocks 4/ 700 693 645

In international cereal markets, only wheat prices remain above last year's level, and mainly because of stronger demand for high quality milling wheat. US hard wheat export prices have been stable in recent months at about US$134 per tonne, which is about US$20 per tonne above the price in the corresponding period last year. Export prices for US soft wheat have declined since January, and in March, the price was just US$5 per tonne above the reduced price a year earlier. International maize prices remain below the previous season's already low level. By March, US maize export prices averaged US$92 per tonne, a further US$3 per tonne drop since January, and US$3 per tonne below the price a year earlier, despite a likely increase in US export sales. The continued downward pressure is mostly due to large sales from China and the prospects of an exportable surplus in Brazil where a record crop is about to be harvested. With the arrival of new rice crops onto the market in some major exporting countries, and continued weak import demand, international rice prices declined further overall since December 2000. The FAO Export Price Index for Rice (1982-84 = 100) fell to 92 points in March, down from 94 points in December.

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