FAO/GIEWS - Food Outlook No.2 - May 2002 p.7

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Higher world trade in 2001/02

World cereal trade in 2001/02 is estimated at 237 million tonnes, up 4 million tonnes, or some 1.8 percent, from the previous season. The expansion could be largely attributed to soaring wheat purchases by the EC. Overall, aggregate cereal imports by the developing countries are estimated at only slightly above the previous season’s levels as larger cereal imports by countries in Asia, especially China, Indonesia and Turkey, would be largely offset by declines in several countries in Africa and South America.

World trade in wheat and wheat flour (in wheat equivalent) in 2001/02 (July/June) is estimated at 106 million tonnes, up 5 million tonnes from the previous season. However, imports by the developing countries are put at 81 million tonnes, up 3 million tonnes from 2000/01, because of significantly larger imports by a number of countries in Asia. The overall expansion in wheat trade this season would be mostly on account of larger imports by the EC, where wheat purchases are seen to rise well above the usual volume of some 3 million tonnes to a peak of at least 8 million tonnes, making the Community the largest single wheat importer in 2001/02. This unexpected rise in imports by the EC, which is also a major wheat exporter, results from the removal of the special import duty premium earlier in the season, which, in effect, boosted imports of cheaper wheat from eastern Europe into the EC market, mostly for feed. The levies were reintroduced recently, resulting in a substantial slow-down in imports.

Regarding exports, the EC’s new status as a leading wheat importer (though still a net exporter) has not been the only important development of the current season. The prevalence of exceptionally large wheat surpluses in many countries this season is another. The 2001/02 season has been marked by a surge in wheat export availabilities in a number of Central and Eastern European Countries (CEECs) as well as Kazakhstan, the Russian Federation, Ukraine, India and Pakistan. Some of these newcomers were among the largest importers in recent years. Confronted with large supplies and limited storage facilities, most have resorted to exports as the remedy for a speedy liquidation of their domestic surpluses. The 2001/02 season has also been marked by the return of the Syrian Arabic Republic as an international supplier of durum after two years of absence, following a strong recovery in its domestic production. By contrast, among the traditional major exporting countries, only Australia is seen to increase its market share this season, while economic problems in Argentina have already taken toll on the pace of exports despite the sharp devaluation of the Peso. Meanwhile, wheat sales from North America are estimated to remain below the previous season’s volume, depressed by growing competition from other exporters.

Asia is the leading wheat market and in 2001/02 imports into Asia are estimated at 49 million tonnes, up 6 million tonnes from the previous season. Among the largest importers in Asia, the Islamic Republic of Iran, faced with a third year of drought-reduced crops, is expected to resort to higher imports. Wheat imports by the Republic of Korea are also estimated to rise, due to strong demand for feed quality wheat. Imports into China (Mainland) are seen to rise significantly, following a decline in 2001 production and the strong demand for higher quality wheat.

Overview of World Cereal Imports

Wheat Coarse grains Rice (milled) Total
2001/02 2002/03
2001/02 2002/03
2002 2003 2001/02 2002/03
  ( . . . . . . . . . . . . . . . . . . . . . . . . . . million tonnes . . . . . . . . . . . . . . . . . . . . . . . )
Asia 49.4 50.1 57.7 58.0 13.4 120.5
Africa 24.2 26.2 13.3 15.6 6.5 43.9
Central America 6.4 6.8 14.2 14.4 1.7 22.3
South America 11.6 11.8 6.2 6.7 1.0 18.7
North America 2.6 2.6 5.8 3.9 0.7 9.0
Europe 11.3 6.9 9.0 8.3 1.7 21.9
Oceania 0.5 0.5 0.1 0.1 0.4 1.0
WORLD 106.0 105.0 106.2 107.0 25.2 24.21/ 237.4 236.2
Developing Countries 80.7 84.5 69.4 72.7 21.3 20.5 171.5 177.7
Developed Countries 25.3 20.4 36.8 34.3 3.8 3.7 65.9 58.4

Source: FAO. 1/ Highly tentative.

By contrast, in Africa, total imports are estimated at around 24 million tonnes, down 1 million tonnes from the previous season, despite larger imports by several drought-affected countries in the north. The decline is mostly attributed to smaller purchases by South Africa and Ethiopia, mainly because of above-average harvests in 2001. Across Latin America and the Caribbean, imports by most countries are estimated at previous season’s levels, while in a few cases, they could decline, largely due to higher domestic supplies, such as in Brazil, Mexico and Chile.

Global trade in coarse grains in 2001/02 (July/June) is estimated at 106 million tonnes, similar in volume to total world trade in wheat. At this level, international trade in coarse grains would be almost 3 million tonnes smaller than in the previous season, which was a record. Most of this contraction should reflect a fall in the developing countries’ aggregate imports to around 69 million tonnes. The decline in world trade would be mostly on account of reduced maize and sorghum imports, by 2.2 million tonnes and 500 000 tonnes, to 76 million tonnes and 8 million tonnes, respectively. Trade in barley is seen to remain at the previous season’s level of around 18 million tonnes, while imports of other major coarse grains, including oats, rye and millet, are all forecast to decline slightly.

Despite contracting global trade, coarse grain exports in 2001/02 (July/June) from the United States, the world's largest exporter, are seen to increase by about 2 million tonnes from the previous season. Australia is also expected to have another successful export campaign this season, given its large barley supplies and strong international demand for malting barley. However, as with wheat, a number of unexpected developments have also emerged in the coarse grain market this season: Canada, a major coarse grain exporter, is expected to import a record maize volume of about 3 million tonnes, to compensate for the decline in its overall 2001 coarse grain production; the EC has turned into a big barley importer this season while its global market share as a leading barley exporter dropped sharply; maize exports from Argentina have suffered not only from lower domestic output but also the adverse impacts of uncertainties regarding the country’s trade policy. Following smaller maize production, South Africa, the most prominent coarse grain exporter in Africa, has greatly reduced its maize exports as well. On the other hand, for most of the current season, China has continued to surprise the market by making large maize sales. Brazil has turned into a major maize exporter, supported by large domestic supplies and a strong international demand for non-GMO Brazilian maize. A bumper maize harvest in Hungary and an upsurge in barley output in the Russian Federation and Ukraine have also contributed to higher exports from those countries.

Total coarse grain imports by countries in Africa in 2001/02 are forecast at about 13 million tonnes, down by more than 1 million tonnes from the previous season. However, most of this decline would be on account of smaller purchases by a limited number of countries, in particular Egypt and Kenya. In Egypt, a bumper maize crop and large carryover stocks from the previous season have reduced import requirements for this season. Similarly, in Kenya, a strong rebound in maize production to the highest level since 1995 had significantly lessened the need for external supplies. However, imports by most other countries in the sub-Saharan region are likely to remain similar or even exceed the previous season's levels. Sharpest increases are expected in southern Africa, where production shortfalls in a number of countries have increased the need for imports, especially in Zambia and Zimbabwe.

In Asia, coarse grain imports in 2001/02 are likely to approach 58 million tonnes, down somewhat from the previous year as slightly higher imports by China, the Philippines and Turkey would be more than offset by declines in the Republic of Korea, the Democratic Peoples Republic of Korea, Iraq and the Syrian Arab Republic. In Japan, a weak currency and further contraction in feed use have dampened the import demand for maize.

In Europe, where aggregate coarse grain imports in 2001/02 are estimated at 9 million tonnes, slightly above the previous season, increased purchases by the EC and the Russian Federation account for most of the year-to-year rise. While barley exports from the Russian Federation tripled this season, maize imports have been on the rise because of smaller domestic production in 2001. In Latin America and the Caribbean, Mexico is seen to reduce its coarse grain imports on the basis of sharp increases in maize and sorghum harvests in 2001. In Brazil, a record maize crop has boosted domestic supplies and turned the country into a major exporter instead.

FAO’s forecast for world rice trade for 2002 currently stands at 25.2 million tonnes, 1.5 million tonnes above the revised estimate for 2001 and the second highest level since the record performance in 1998, mainly reflecting expectations of higher imports by Indonesia.

Much of the trade pattern during the current year will be influenced by the outcome of production during the past 2001 season but also by changes in policies, especially those related to market access. In the Far East, the opening of import quotas by China and by the Chinese Province of Taiwan is the reason underlying the expected rise in their purchases. A major boost is expected to be provided also by Indonesia, the imports of which could rise to 3 million tonnes, twice as much as in 2001. Increasing domestic prices in the country and subdued production prospects for 2002 are putting pressure on private traders and on Bulog, the government food agency, to import more. In the rest of the region, most of the other traditional rice importers are expected to reduce their purchases, including Bangladesh and the Philippines, both of which gathered excellent crops in 2001. Imports by the former are now officially forecast at 200 000 tonnes, compared with 370 000 tonnes last year, while for the Philippines they are anticipated to fall to 600 000 tonnes, down from 850 000 tonnes in 2001. Among countries in the Near East, the Islamic Republic of Iran is expected to import 1.2 million tonnes, or 20 percent more than last year, to meet consumption requirements and replenish stocks. The forecast for Iraq remains at 1.2 million tonnes, unchanged from 2001, while that for Saudi Arabia was raised slightly to 840 000 tonnes, as the upward trend dominating since 1997 is expected to continue.

Imports by African countries, a major force in sustaining international trade last year, are expected to be lower, especially in the major markets, i.e. Côte d’Ivoire, Ghana, Nigeria and Senegal. Moreover, since the beginning of the year, the Government of Nigeria has raised import tariffs several times, bringing their level to 150 percent by mid-April. The new tariff might seriously impair the volume of global trade in parboiled rice. By contrast, in Madagascar, the worsening of the 2002 season outlook has triggered an upward adjustment in imports to the country compared with last year.

Unlike in Africa, exports to Central America and the Caribbean are anticipated to expand by 6 percent to 1.7 million tonnes to compensate for the production shortfall of last year. Mexico and Cuba will remain the major markets, taking close to 500 000 tonnes each. Purchases by countries in South America, on the other hand, are likely to fall, but not as much as originally expected. According to the latest official forecast, Brazil will cut its shipments by only a minor extent, from 700 000 tonnes in 2001 to 677 000 tonnes this year. In Peru, official import estimates point to a 20 percent decline to 50 000 tonnes, following expectations of a larger crop this season. Similarly, imports by Colombia, which are subject to public licenses, could fall from the relatively high level in 2001. Many countries in the region, including Colombia, operate a price band system that results in variable import levies, which tend to rise when world prices are low and vice-versa. In this connection, a recent WTO ruling against Chile’s use of such a mechanism on wheat imports, in a case filed by Argentina in October 2000, may create a precedent relevant to a large number of countries operating similar schemes. Among the developed countries, forecasts of imports into the United States and the EC in 2002 have been raised, respectively, to 400 000 tonnes and 700 000 tonnes, little changed from the previous year. The outlook for the Russian Federation’s purchases in 2002 suggests a 50 000 tonnes increase to 370 000 tonnes.

As regards exports, an outstanding feature of the international rice market this year is India return as an important supplier. Rice inventories in the country have reached unprecedently high levels, keeping pressure on the Government to sell rice abroad at prices well below those prevailing on the domestic market. FAO’s forecast for India’s exports in 2002 has been raised to 3.5 million tonnes, 2 million tonnes more than last year, although the Government target for the fiscal year is much higher. Even though India is currently displacing some traditional exporters from key markets in Asia and Africa, the expected expansion of the global market should give scope for larger sales also from China, Egypt, Myanmar, the United States and Viet Nam. Thailand, on the other hand, might be able to keep its deliveries at 7.5 million tonnes, matching the record achieved in 2001. By contrast, short supplies might result in a drop in exports compared with the past year in Australia (from 700 000 tonnes to 550 000 tonnes), Pakistan (from 2.4 million tonnes to 1.5 million tonnes) and Uruguay (from 640 000 tonnes to 450 000 tonnes).

Trade to decline slightly in 2002/03

As the current season draws to a close, attention is being focused on the likely prospects for the 2002/03 season, starting in July 2002. Based on the preliminary 2002 production prospects and the current expectations regarding overall cereal utilization in 2002/03 season, FAO's first forecast for world cereal trade in 2002/03 is tentatively put at 236 million tonnes, down slightly from estimated imports in 2001/02. Most of this anticipated decline would be on account of subdued wheat and rice trade while, for coarse grains, the overall trade prospect is expected to improve somewhat.

Global wheat trade in 2002/03 could decline to 105 million tonnes, down 1 million tonnes from the current season, despite higher import forecasts for most regions. The main reason for the likely decline in world trade is a sharp anticipated drop in imports by the EC after an unexpected surge this season. In view of a rebound in production and higher import levies, wheat imports by the EC are likely to revert to levels prevailing before 2001/02; thus, a drop of at least 4.5 million tonnes is likely. Although smaller imports are expected in Europe, imports by nearly all other regions are set to rise. The largest expansion is expected in Africa, where Morocco and Egypt are seen to enter the world market for more wheat as a result of anticipated smaller domestic supplies. In Asia, imports by China could increase given the likely decline in domestic production. Larger food aid shipments to Afghanistan could also give a lift to total imports by that country. However, imports by the Islamic Republic of Iran are envisaged to decline next season, given the forecast improvement in domestic production. Higher imports are anticipated for Latin America and the Caribbean, mostly driven by stronger import demand from Mexico and Chile.

At this early stage, it is uncertain how much next season’s wheat trade would again be influenced by some of the unforeseen events which took the current campaign by surprise; i.e. the changing situation in the EC and growing supplies among non-traditional exporting countries, such as India and Pakistan. India’s exports reached as many as 20 countries in 2001/02 and it is likely that India will continue to export and expand its market for another season, given the continuing domestic pressure to find foreign buyers for its surplus. Exports from Pakistan could drop sharply as stocks have already fallen considerably as a result of large exports during the current marketing season. However, next season may mark the return of Turkey as a significant supplier following the forecast recovery in its production. Among the CIS countries, exports by Kazakhstan and the Russian Federation could rise again next season, but for other countries in the region, as well as in the CEECs, reduced opportunities to export to the EC could greatly diminish prospects for higher sales. Among the five traditional major exporters, more sales are expected from the EC, while it is also possible that shipments from Argentina could pick up, especially if economic conditions improve. Export prospects for Australia, Canada and the United States could deteriorate slightly.

With regard to coarse grains, forecasts are quite tentative at this early stage, given the little information available on plantings and the eventual harvest outcomes. Based on the current assumptions about the production and consumption for 2002/03, world trade in coarse grains is expected to rise slightly above this season’s level, to 107 million tonnes. Imports into Africa would expand most, especially in southern Africa, where the deteriorating supply situation faced by several countries could result in a substantial increase in imports. Imports into most other regions are expected to remain close to those of the current season, but in North America, purchases by Canada are expected to return to more normal levels in view of a forecast rebound in domestic production. On the export side, total availability is expected to be more than sufficient to meet the anticipated small increase in import demand. In addition to large supplies among major exporters, Brazil, China, Hungary, the Russian Federation and Ukraine are also expected to remain important trade competitors during the new season.

1/ World trade in wheat and coarse grains is based on estimated imports delivered through 30 June of the July/June trade year. Some late-season purchases may be included in the next season if deliveries occur after 30 June. In general, exports and imports are calculated based on estimated shipments and deliveries during the July/June trade season and thus they may not be equal for any given year due to time lags between shipments and deliveries.

2/ The next marketing season for rice will start in January 2001.

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