Food Outlook

No. 10, 1995 - Rome, October 1995

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HIGHLIGHTS

The cereal supply/demand outlook for 1995/96 has tightened further. A new substantial reduction in the forecast for 1995 world cereal production has increased the need to draw on stocks to meet consumption requirements. With prices higher, the cost of cereal imports will be much greater in 1995/96, having possible serious implications for low-income food-deficit countries.

Next year's cereal harvest will be crucial for world food security. With the safety net provided by carryover stocks now largely eroded, global output in 1996 must increase by some 5 percent or 95 million tons to meet requirements in 1996/97. A larger increase would be needed if stocks are to be replenished. The early prospects for winter sowing in the northern hemisphere are favourable so far. However, plantings will need to increase and much will depend on the weather up to the next harvest.

FAO's latest forecast of 1995 global cereal output now stands at 1 891 million tons, 3 percent less than last year, and well below trend for the third consecutive year. Wheat output at 536 million tons, is still 1.9 percent up from 1994 but that of coarse grains, at 807 million tons, is 8 percent less. Global paddy production is forecast to rise by about 1 percent to 547 million tons.

Food security problems persist in many countries. In southern Africa, following drought-reduced harvests, an estimated 10 million people are in need of emergency food assistance. In the Horn of Africa, despite a generally favourable early outlook for 1995 cereal production, vulnerable populations throughout the sub-region continue to require emergency assistance. In the CIS, the food aid needs of several countries remain high, and the food supply situation in Bosnia-Herzegovina remains critical.

World cereal trade in 1995/96 to remain virtually unchanged at 200 million tons. Compared to 1994/95, wheat shipments are predicted to expand slightly but this would be offset by smaller expected imports of coarse grains and rice.

Export prices of most cereals have strengthened further, mainly reflecting the tighter supply outlook for 1995/96, and in particular lower wheat and coarse grain availabilities in the major exporting countries.

Fertilizers prices have also risen sharply in recent months reflecting an increase in global demand.

World cassava production is forecast to increase marginally in 1995, mostly in Africa and Latin America, but trade in dry cassava products will continue its downward trend. Prices of cassava products remain firm in line with this year's higher grain prices.

 


BASIC FACTS OF THE WORLD CEREAL SITUATION
------------------------------------------------------------------------
                        * 1991/ *  1992/ *  1993/ *  1994/ *  1995/   *
                        *  92   *   93   *   94   *   95   *   96     *
                        *       *        *        *  estim.*  forec. *
-------------------------------------------------------------------------
                       ( . . . . . . . . million tons. . . . . . . . . ) 

WORLD PRODUCTION 1/
 Rice (paddy)               520      530      529       542     547
 Wheat                      547      566      564       526     536
 Coarse grains              814      870      803       881     807

 All cereals              1 881    1 966    1 896     1 949   1 891

 Developing countries     1 044    1 073    1 092     1 092   1 109
 Developed countries        837      893      804       857     782

------------------------------------------------------------------------
                        * 1991/ *  1992/ *  1993/ *  1994/ *  1995/   *
                        *  92   *   93   *   94   *   95   *   96     *
                        *       *        *        *  estim.*  forec. *
-------------------------------------------------------------------------
IWORLD IMPORTS 2/
 Rice (milled)              14       15       16       18        17
 Wheat                      108     103      93       92        95
 Coarse grains              94       93       82       90        88

 All cereals               215      211      192      200       200

 Developing countries      130      128      127      144       145
 Developed countries        85       83       65       56        55

FOOD AID IN CEREALS 3/    13.1     15.2     12.6      8.4       7.6

------------------------------------------------------------------------
                        * 1991/ *  1992/ *  1993/ *  1994/ *  1995/   *
                        *  92   *   93   *   94   *   95   *   96     *
                        *       *        *        *  estim.*  forec. *
------------------------------------------------------------------------
WORLD UTILISATION
  Rice (milled)             347      355     359      365       371
  Wheat                     555      556     571      553       546
  Coarse grains             820      840     831      871       841

  All cereals             1 722    1 751   1 761    1 789     1 758

  Developing countries      956      987    1009    1 036     1 058
  Developed countries       766      764     752      753       699

                          ( . . . . . . . . kg/year . . . . . . . .)

  Per caput food use
  Developing countries      169      169     170      170       171
  Developed countries       129      129     129      128       127

--------------------------------------------------------------------
                        * 1991/ *  1992/ *  1993/ *  1994/ *  1995/   *
                        *  92   *   93   *   94   *   95   *   96     *
                        *       *        *        *  estim.*  forec. *
------------------------------------------------------------------------
WORLD STOCKS 4/    ( . . . . . . . million tons . . . . . . . . ) 

  Rice (milled)             66       67      62        59       56
  Wheat                    136      144     134       107      100
  Coarse grains            134      168     139       145      109

  All cereals              336      379     334       312      265

  Developing countries     162      166     167       162      154
  Developed countries      174      213     167       150      111

                           ( . . . . . . .percentage . . . . . . )
  Stocks as % of world cereal
  consumptions               19       21      19        18       14-15

------------------------------------------------------------------------
                        * 1990/ *  1991/ *  1992/ *  1993/ *  1994/   *
                        *  91   *   92   *   93   *   94   *   95     *
                        *       *        *        *  estim.*  prévis. *
------------------------------------------------------------------------
EXPORT PRICES 3/     ( . . . . . . . U.S.$/ton . . . . . . . . )
 Rice (Thai, 100%,2nd grade 1/
                            302      278      250      289      317 5/
 Wheat (U.S. No.2 H.W.)     150      143      143      157      191 7/
 Maize (U.S. No.2 Yelllow)  110       97      113      104      128 7/

OCEAN FREIGHT RATES 3/
 From U.S. gulf to Egypt    18.1     12.1    15.1    19.1     19.1 7/

------------------------------------------------------------------------
                        * 1991/ *  1992/ *  1993/ *  1994/ *  1995/   *
                        *  92   *   93   *   94   *   95   *   96     *
                        *       *        *        *  estim.*  forec. *
------------------------------------------------------------------------
LOW-INCOME FOOD-   ( . . . . . . . million tons . . . . . . . . ) 
DEFICIT COUNTRIES 8/
 Roots & tubers 
production   1/            313      325       339      340     342
  Cereal production 1/     847      851       876      872     895
  Per caput production(kg) 251      248       250      245     250

  Cereal
   imports 2/               74       70        65       74      75
    of which
    food-aid 3/           11.0     11.1       8.2      7.4     6.0

Percentage of                    (  . . . . percentage . . . . . )
cereal import covered 
by food aid                 15       16       13        10       8
------------------------------------------------------------------------

SOURCE: FAO  Note: Totals and percentages computed from unrounded data

1/ Data refer to the calendar year of the first year shown. 2/ July/June except for rice for which the data refer to the calendar year of the second year shown. 3/ July/June. 4/ Stock data are based on aggregate of national carryover levels at the end of national crop years. 5/ Average of quotations for July 1994-March 1995. 6/ Change from corresponding period of previous year for which figures are not shown. 7/ Includes all food deficit countries with per caput income below the level used by the World Bank to determine eligibility for IDA assistance (i.e. U.S.$ 1 345 in 1993), which in accordance with the guidelines and criteria agreed to by the CFA should be given priority in the allocations of food aid.


CEREALS

CEREALS: SUPPLY/DEMAND ROUNDUP

The cereal supply/demand outlook for 1995/96 has tightened further. Recent information on 1995 crops has forced a new substantial reduction in the FAO's forecast for world 1995 cereal production now put at 1 891 million tons, 58 million tons or 3 percent below the previous year. At this level, global output will be below expected consumption requirements for the third consecutive year. As a result, during 1995/96 global cereal stocks are forecast to fall by some 47 million tons, to 265 million tons, 3 million tons less than forecast last month. The ratio of cereal stocks to trend utilization in 1996/97 would be well below what FAO considers the minimum necessary to safeguard world food security. Of particular concern is the low volume of wheat and coarse grains supplies held by the major exporters, which has already led to sharp increases in international prices for most types of cereals. Higher price are expected to lead to reduced utilization of grains, in particular for animal feed, and are already affecting the composition of cereal imports in 1995/96, especially in Asia, where some countries are substituting maize for low quality wheat in feed rations. There is no evidence yet that the high cereal prices have resulted in reduced cereal imports for food consumption by developing countries. However, there is growing concern that many of these countries will not be able to finance in 1995/96 the additional cost of cereal imports which FAO estimates at about U.S.$ 3 000 million, or some 25 percent more than in 1994/95, for all low-income food-deficit countries (LIFDC) in aggregate. High cereal import prices coupled with reduced food aid availabilities in 1995/96 could have serious consequences for the food security of LIFDCs, particularly those that depend on imports to meet a large part of their food requirements.

In these circumstances, of immediate concern are the food security prospects of several countries where food supply difficulties already exist and access to adequate food in the coming months will depend greatly on cereal imports. In southern Africa, following drought reduced harvests, an estimated 10 million people are in need of emergency food assistance. However, deliveries of food aid remain slow and further pledges are needed coupled with measures to expedite their delivery and internal distribution. In the Horn of Africa, 1995 cereal production in Somalia is forecast to be sharply down from last year. Although the early outlook for the 1995 main season crops in the rest of the Horn is generally favourable so far, the final output will crucially depend on precipitation in the coming weeks. A series of FAO/WFP Crop and Food Supply Assessment Missions and GIEWS staff visits are planned to the sub-region to review the outcome of 1995 harvests and estimate the cereal import and food aid requirements for 1996, but it is already clear that vulnerable populations throughout the sub-region will continue to require emergency assistance well into 1996. Growing conditions are favourable in most Sahelian countries of western Africa and, in the coastal countries, overall crop prospects are rated satisfactory. However, reduced harvests are again anticipated in Liberia and Sierra Leone, due to persistent civil strife, and the food supply situation remains critical for large sections of the population in both countries. In Asia, the food supply situation remains tight in Cambodia, the Democratic People's Republic of Korea, Laos and Mongolia. In the Near East, shortages of farm inputs have hit food production in Afghanistan and Iraq; both countries have large vulnerable populations. In the Caribbean area, Antigua, Barbuda, Dominica and St. Kitts and Nevis have been severely affected by hurricane and floods, with consequent damage to food and cash crops. Appeals for international assistance has been made by their governments. In the CIS, the food aid needs of Armenia, Azerbaijan, Georgia, the Kyrgystan Republic and Tajikistan remain high. In Europe, the food supply situation in Bosnia-Herzegovina remains critical.

FAO's forecast of world cereal production in 1995 now stands at 1 891 million tons, 11 million tons less than last month's forecast. This mostly reflects further downward revisions in the estimates for wheat and coarse grains production in the United States and the CIS, and in the forecasts for wheat production in Argentina and China. At the forecast level, 1995 cereal output would be 58 million tons or 3 percent below estimated production last year, and well below trend for the third consecutive year. Virtually all of the decline is in coarse grain production in the developed countries, in particular in the United States and the CIS while output in the developing countries is forecast to increase. The cereal production forecast could still be subject to substantial revisions as the outcome of some of the major 1995 crops, in particular that for rice in Asia but also coarse grains in North America and wheat in the southern hemisphere, could still be affected by adverse weather in the coming weeks.

FAO's latest forecast for global wheat production in 1995 is down 6 million tons from a month ago at 536 million tons, but still 10 million tons or 1.9 percent more than in 1994. In the northern hemisphere, where harvesting of the 1995 crop is virtually complete, latest information on the outcome of the wheat harvest in China points to a slightly smaller crop than earlier expected. In the United States, the forecast for the 1995 aggregate wheat production has been reduced because of poor weather conditions for the end of spring wheat harvesting in the northern plains. In the CIS, findings of an FAO Crop Assessment Mission in August point to lower cereal output than earlier anticipated. In the southern hemisphere, in Argentina, one of the world's major wheat exporters, the forecast for 1995 wheat output has been reduced significantly because of continuing dry conditions during the sowing season which is expected to result in smaller plantings. However, prospects remain favourable for the developing crop in Australia. Planting of the 1996 winter wheat crop is now underway throughout the northern hemisphere. Progress is behind normal in the United States because of dry conditions, but rains have generally improved soil conditions throughout Europe and the wheat area is expected to increase following the reduction the area set-aside requirement in the EC for the 1996 crop.

Global coarse grains production in 1995 is now put at 807 million tons, 8 million tons less than last month's forecast and 8 percent down from 1994. The latest revision is mostly due to a further reduction in the estimates for production in the United States and the CIS, and also for the crops in Mexico and Sudan which more than offset marginal upward revisions for Asia and Europe. In the United States, the outlook for the 1995 maize crop deteriorated due to predominantly hot and dry weather during early September. In Central America, a below-normal coarse grain crop is in prospect in Mexico due to a combination of reduced plantings and dry weather in parts. In the CIS, the latest information points to smaller coarse grains crops than earlier projected. In the southern hemisphere, sowing of the 1996 coarse grain crops has already begun in northern parts of South America, while in the south, land preparation is well underway. In Australia, as for wheat, conditions remain favourable for the developing winter coarse grains crop.

By the end of September, the bulk of the main 1995 paddy crops in the northern hemisphere were at an advanced stage of development and in some countries the harvest had already begun. FAO's forecast for world output of paddy in 1995 has been raised slightly to 547 million tons, about 1 percent more than in the previous year. The increase since the last report mainly reflects revision of the forecast for India following continuing improvement in the overall distribution of rains in the country. By contrast, in several of the other major producing countries in Asia, weather conditions in September were relatively poor for the paddy crop

FAO's latest forecast puts trade in cereals in 1995/96 at 200 million tons, only marginally up from the previous month, and virtually unchanged from the revised estimate of the volume traded in 1994/95. Compared to last year, a slight expansion in shipments of wheat is envisaged but this would be offset by smaller imports of coarse grains and rice. The forecast for world imports of wheat and wheat flour (in wheat equivalent) remains at 95 million tons, 2 million tons up from 1994. Most of the increase is expected to be accounted for by larger shipments to some developing countries, in particular China, and drought-stricken Morocco. However, following this month's downward revision to the 1995 wheat production forecasts, largely for two major exporters, Argentina and the United States, the exportable supplies from which 1995/96 imports will have to be met are now expected to be tighter than earlier anticipated.

World coarse grains imports in 1995/96 are now forecast to reach 88 million tons, 1 million tons more than expected last month, but still 2 million tons below the previous year's volume. Virtually all of the decline is expected in maize imports in the developed countries, in particular Japan, where the demand for feed grains has fallen significantly due to a decline in livestock production and rising meat imports. For coarse grain exports, it is already clear that exportable supplies will be sharply lower in 1995/96 than in the previous year. The situation for maize is particularly delicate because availabilities of United States maize are expected to drop sharply following a much reduced crop, supplies in Argentina are lower, while South Africa and China are expected to have virtually no export availabilities this year.

FAO's forecast for world rice trade in 1995 has been raised substantially to 17.9 million tons, a record volume and 1.7 million tons up from 1994. The upward revision reflects the larger imports expected to be needed by China and Indonesia as domestic supplies in these two countries remain tight despite the large procurements made earlier in the year. The sharp increase in import demand this year is expected to be met mainly by larger exports from the United States, India, Thailand, Myanmar and Viet Nam.

International wheat prices have strengthened further since the beginning of September after weakening slightly in August. Prices, which remain highly volatile because of the tight supply/demand outlook for 1995/96, rise substantially following the USDA's September forecast which indicated reduced wheat output in the United States and reports of deteriorating prospects for some other major producers, in particular Argentina. In addition, prices were supported during the month by the extension of the EC's suspension of subsidized wheat exports from mid-September to mid-October. By late September, the price of the U.S. No 2 hard winter wheat (f.o.b. Gulf) had risen to U.S. $ 199 per ton, U.S. $ 12 per ton higher than in August and U.S. $ 39 per ton or 24 percent above that of a year ago. Chicago futures prices for wheat have also strengthened and in late September, December futures for the U.S. No. 2 soft red winter wheat rose to a new contract high of U.S. $ 180.44 largely due to continuing strong demand for United States' wheat, particularly from Egypt and China. Export prices for maize have also risen sharply since the beginning of September, recovering nearly all of their losses in August. By late September, the price of United States No. 2 yellow maize (delivered Gulf ports) had risen to U.S. $ 133 per ton, close to July levels, some U.S. $ 6 per ton higher than in August and U.S. $ 37 per ton or 38 percent above the price a year ago. Maize export prices responded strongly to the USDA's September crop forecast which pointed to a much smaller maize crop than previously anticipated. Chicago maize futures have also risen, and by the third week of September, fears of freezing temperatures in key maize growing parts of the United States, resulted in the December price reaching a new contract high of U.S. $ 122.44 per ton, some U.S. $ 10 per ton above the average prices quoted in August. International rice prices rose sharply in September with the FAO Export Price Index for Rice (1982-84 = 100) averaging 137, 3 points up from the previous month. Prices for Thai rice rose as supplies from the second crop are diminishing and prospects for the main crop are uncertain due to unfavourable weather. In the United States export prices for rice also strengthened, partly in line with the tighter supply situation in some other major exporting countries and because of likely reduced yields from its own crop.

As a consequence of this year's high international cereal prices, utilization of grains during 1995/96 is expected to be dampened somewhat, in particular feed use. Commercial feed compounders are particularly sensitive to price changes and are likely to reduce the grain component of feed rations if prices are high relative to other feeds. In addition, faced with higher grain prices, livestock producers could eventually cut inventories, which would further reduce demand. Estimates of feed use of grains have already been revised downward for 1995/96 in a number of countries, especially in Europe and North America. Largely as a result of higher prices, therefore, the global feed use of cereals in 1995/96 is currently forecast to fall to 597 million tons, 7 percent, or 44 million tons less than last year. Most of the decline is expected to occur in the developed countries and will mainly involve coarse grains. Feed use of wheat is also likely to fall, in particular in the CIS, EC and the United States and in some grain importing countries of Asia where wheat is expected to be replaced by relatively cheaper coarse grains in feed rations.

World cereal carryover stocks at the close of the crop years ending in 1996 are now forecast at 265 million tons, 3 million tons less than expected last month, and 47 million tons down from their opening level. This month's revision is largely due to a smaller forecast for wheat and maize stocks in the United States following indications of lower production in 1995 than earlier anticipated. Global wheat stocks are now forecast to fall to about 100 million tons, 8 million tons down from their opening level and the smallest volume in 15 years, while those of coarse grains are currently estimated to fall by 36 million tons to 109 million tons, the lowest level since the mid-1980's. Also, world rice stocks are expected to fall by the end of the 1996 marketing seasons, to 56.5 million tons, 2.6 million tons below their opening level. For wheat and coarse grains, virtually all of the decline in stocks is envisaged to occur in the developed countries, in particular in Canada, the CIS, the EC, and the United States, while for rice, lower stocks are projected in the United States, and in some of the major producers in Asia.

Limited global cereal supplies and rising cereal prices confirm a tight and potentially very volatile global supply/demand situation in 1995/96. Over the last three years global cereal stocks have been eroded considerably, and at the current forecast level, cereal stocks at the end of the 1995/96 crop years would be 14-15 percent of trend utilization in 1996/97, well below the 17-18 percent range that the FAO Secretariat considers the minimum necessary to safeguard world food security. Thus, improving the outlook for world food security will depend crucially on achieving a substantially higher level of cereal production in 1996 than this year. Even assuming that there are no unfavourable developments for the remainder of 1995/96, to meet expected utilization in 1996/97 and prevent a further erosion of world cereal stocks, a minimum increase in 1996 world cereal output of some 5 percent or 95 million tons would be required. To replenish stocks to minimum safe levels would require an additional 3-4 percent increase in production. The early outlook for 1996 crops is satisfactory so far. In the United States, as for this year, farmers are not required to set-aside any wheat land for 1996. Winter wheat planting is now underway but progress has been slower than normal due to dry weather. In the EC, prospects for increased cereal production in 1996 are also favourable. Winter grain plantings are already underway under generally satisfactory conditions, and the rate of set-aside for 1996 has been cut. However, efforts will also have to be made to increase production in many other countries, where economically sound. As unfavourable weather in the coming weeks could still significantly affect the outcome of the remaining 1995 harvest, and prospects for 1996 crops will depend crucially on the weather this autumn and next year, the situation calls for close monitoring in the months ahead and, if necessary, timely preventive action.


CURRENT PRODUCTION AND CROP PROSPECTS

POSITION BY REGION

ASIA

The region's output of wheat in 1995 is now forecast at 224.6 million tons, some 1.6 million tons lower than last month, but 5 percent higher than normal. The downward revision is due to lower production in China, where output is currently estimated at 102 million tons compared to an earlier forecast of 104 million tons. The decrease was partially offset by increased forecasts in other Asian countries. In India, Pakistan, Bangladesh and Nepal, output is estimated to have reached record levels of 63 million tons, 17 million tons, 1.4 million tons and about 1 million tons respectively. In the Islamic Republic of Iran, output is estimated to be similar to last year's record harvest of 11.5 million tons. In Mongolia, a significantly below average harvest is anticipated, reflecting serious shortages of fertilisers, herbicides and other inputs.

FAO's current forecast for coarse grain production in the region has been revised upward by some 1.8 million tons, over the previous month, and currently stands at a record 198.4 million tons. This volume represents an increase of some 8 million tons over 1994. The upward revision is attributed to significant increases in production in China and Indonesia. The forecast for China, has been revised up by 1.2 million tons and currently stands at a record 120.7 million tons, whilst in Indonesia output is forecast at 7.26 million tons, some 756 000 tons move than forecast in the previous month. In India, an output of 33.8 million tons is expected, some 9 percent higher than last year, whilst in Pakistan production is forecast to decline by 6 percent over 1994, due to reduced plantings.

Reflecting short supplies of agricultural inputs, cereal production was again lower than normal in Afghanistan. In Iraq, despite good weather conditions and efforts of the Government and international organizations, severe constraints relating to agricultural machinery, seeds and other agricultural inputs resulted in a decrease in output. Cereal production in 1995 is estimated at 2.5 million tons, about 10 percent lower than in 1994 and 16 percent below the average of the previous five years. In Turkey, although some 3 percent higher than last year's below-average harvest, production of wheat, estimated at 18 million tons, remained below normal. As a result of larger area planted and favourable weather, a record crop was harvested in Syria. In Saudi Arabia, reflecting Government measures to reduce domestic output, production is estimated to be less than both last year and the average.

FAO's forecast for the region's output of paddy in 1995 is 497 million tons, about 4 million tons more than in 1994. In India, the Monsoon rains have continued to improve. It is now estimated that at least 90 percent of the Kharif rice crop has benefited from good rains, about the same percentage as during the same period in the previous year and compared to 70 percent in 1993. Output of paddy in India is now forecast at 123 million tons, marginally up from the previous year's record production. In China, weather conditions over recent weeks have been generally favourable. No major delays occurred in the harvesting of the current (intermediate) rice crop. Although in June/July widespread floods had affected large parts of the southern and central provinces, Chinese officials have raised their estimate of the early rice harvest to 42.18 million tons slightly above last month's forecast and 3.2 percent larger than last year's. A breakdown of the estimates showed that the early rice harvest in Hunan, Jianxi and Anhui has fallen significantly, but the decline was offset by larger output in Guangdong and Zhejiang. Despite the upward revision, the early rice crop in 1995 is still well below the average level of recent years. Total output of paddy in China (Mainland) is forecast at 178 million tons, marginally up from the 175.9 million tons produced in 1994 but about 11 million tons short of the record output produced in 1990. In Myanmar, the outlook for the main paddy crop in the ground is generally favourable. Total production of paddy is forecast to rise reflecting an increase in the total planted area in 1995, by some 12 percent compared to 1994, due to an expansion in both the main and second paddy crops, and the introduction of a third planting in some areas.

Elsewhere in Asia, weather conditions in September were unstable with generally little improvement from the poor weather conditions in July and August. In Bangladesh, early estimates put the Aus crop at only 1.6 million tons of rice (milled equivalent), compared to the official target of 2.6 million tons. The Aman crop in the ground has been affected by heavy rains and, although the official target is to raise output from this crop to about 20 million tons in milled equivalent, about 21 percent more than last year, it is unlikely that this level of production will be achieved. In Indonesia, the harvesting of the main crop is over, while that of the second paddy crop is virtually complete with the exception of some areas in Sumatra, which normally account for less than 6 percent of its total production. Output of paddy in 1995 is estimated at 47.7 million tons, about one million tons more than in 1994 but less than the harvests of 1992 and 1993 and well below the target output set for this year. In Japan, the area under rice has been reduced by 7 percent and with cooler weather in August through September, a small reduction in yields is expected. Official forecast indicate that output of paddy in 1995 would be around 12.6 million tons, about 15 percent lower than the bumper harvest in 1994. In the Republic of Korea, continued wet conditions through September, following the heavy floods of the previous months, have adversely affected the harvesting of rice. As a result, output of paddy this year is likely to fall from the 6.9 million tons produced in 1994. In the Democratic People's Republic of Korea, heavy rains have damaged extensive areas of rice. A preliminary assessment of the flood damage indicates that about 1.08 million tons of paddy may have been lost and a very tight food supply situation is reported. In Pakistan, harvesting of the rice crop is about to start. The target output of paddy for 1995 is 6 million tons, virtually unchanged from last year's output.

In the Philippines, typhoons, volcanic eruption and the consequential mud flows damaged significant areas of rice early in the growing season. As a result, output from its main paddy crop is forecast at 6.7 million tons, well below the target but still above the 6.2 million tons harvested in 1994. In Sri Lanka, the Yala (second) rice crop has just been harvested. Early estimates indicate that about 941 000 tons have been gathered, slightly below 1994's harvest. In Thailand, heavy floods in September in the northern, north eastern and central provinces have damaged the main rice crop this year. Output from this crop is officially forecast at 17.2 million tons, 5 percent down from the previous year. This forecast is, however, very tentative as it is too early to fully assess the impact of the floods on total output as some of the area can be replanted with short-cycle, higher-yielding, varieties. Moreover, shortfalls from the main crop are likely to be offset by increased production from the second paddy crop. Taking these factors into account, the forecast for Thailand's total output for 1995 has been lowered only slightly to 20 million tons. In Viet Nam, planting of the 10-month crop continues, the first in the 1995/96 season. By early September, some 2.2 million hectares of the crop had been planted which would be 2.2 percent up compared with the same period last year. However, it is uncertain at this stage if the target for this crop, set at 7.6 million tons or nearly 3 percent higher than the poor crop harvested in the previous year, will be achieved as typhoons and tropical storms in the north have damaged the crop.

AFRICA

NORTHERN AFRICA: Production of wheat in the sub-region in 1995 is estimated at 8.8 million tons, a decrease of 22 percent from the previous year's above-average harvest of 11.3 million tons. This decline was due to markedly below-average crops in Morocco and Tunisia which were only partially offset by increases in Egypt and Algeria. Production of wheat in Morocco, 1.1 million tons, was only 20 percent of the previous year's record crop of 5.5 million tons, due to the effect of prolonged drought. In Egypt, output was 1.3 million tons higher than the below-normal crop of 4.4 million tons harvested in 1994, while production in Algeria almost doubled to an above-average of 1.4 million tons. In Tunisia, the output from the wheat crop is estimated at 0.47 million tons, even smaller than the poor 1994 harvest and only 37 percent of normal. The output from the coarse grains crop in the sub-region, also affected by unfavourable weather, is estimated at 8.5 million tons, some 2.3 million tons less than in the previous year and sharply below average.

In Egypt, high rice prices have encouraged a marked expansion in the area planted to rice this year. It is estimated that about 631 000 hectares are now under rice compared to 579 000 hectares last year and 424 000 hectares a decade ago. Overall, weather conditions have been normal so far and, should they continue to prevail, output of paddy in 1995 could reach about 5 million tons.

WESTERN AFRICA: Overall growing conditions for the 1995 coarse grains have been satisfactory so far and harvest prospects are generally favourable. In the Sahelian countries, after abundant and widespread precipitation during August, the amount of precipitation decreased somewhat in the first half of September, notably in the centre of Sahel but remained widespread, except in some areas of western Burkina Faso. Rains also decreased in northern and central Senegal and in The Gambia, where dry spells appeared, but remained abundant in southern Senegal and Guinea-Bissau. In Mauritania, precipitation decreased in the east but remained widespread in the west. In Cape Verde, all islands received abundant rain in early September. Stages of development of the crops vary throughout the sub-region but coarse grains are reaching maturation in several areas.

Significant infestations of Desert Locust during August have been reported in south-western Mauritania, where breeding was in progress. In September, new generation gregarious adults started to appear, concentrate and move into north-western Mauritania and the adjacent areas of northern Senegal. Elsewhere in the Sahel, low numbers of locusts are present, notable in the Adrar des Iforas of Mali, Tamesna of Niger and eastern Chad.

In the countries along the Gulf of Guinea, the crop situation is mostly favourable. In the south of the coastal countries, rains were abundant and widespread in July and August. They decreased somewhat in late August and September but remained well distributed, allowing good crop development and favouring the harvest of the first maize crop. Harvest prospects are good in most countries. Planting of the second maize crop is almost completed. In the north of these countries, precipitation remained adequate for the development of coarse grains. Millet and sorghum are generally reaching the heading stage while maize is maturing. Good outputs are anticipated except in Liberia and Sierra-Leone where civil strife and the high number of displaced persons have disrupted farming operations.

Good rains have benefited the rice crop in the sub-region. In Guinea, Guinea Bissau, Mali, Nigeria and Senegal, the rice crop is developing well and output in these countries is likely to rise above the previous year's volume. By contrast, early estimates of the paddy crop in Sierra Leone indicate a 30 percent fall from the previous year to 284 000 tons. In Liberia, output of paddy is not expected to recover from the 25 000 tons produced in 1994, which would be half the output of 1993 and just one-tenth the average production before domestic hostility disrupted economic activity in the country in the early 1990s.

CENTRAL AFRICA: Benefiting from widespread and regular rain, coarse grains are developing satisfactorily. The first maize crop has been harvested in southern Cameroon. In Zaïre, seasonably dry conditions prevail in the south and, crops are growing satisfactorily in the north.

EASTERN AFRICA: The outlook for this year's wheat crop is favourable. In Kenya, the recently harvested wheat crop is estimated to be higher than last year and above average, mainly reflecting larger plantings. In Ethiopia, the developing wheat crop is reported in generally good condition following abundant rains in the past month.

Overall prospects for the 1995 coarse grains crop are favourable although the final outturn will depend on precipitation in October which will be critical for crop growth and yield prospects in many countries. Preliminary forecasts point to an aggregate output around last year's good level. In southern countries of the sub-region harvesting is virtually completed. In Uganda and Tanzania, cereal production is estimated to be up from 1994 and above normal, mainly as a result of good weather. By contrast, in Somalia, coarse grains output is provisionally estimated to be down from last year's below-average level due to smaller plantings of sorghum, dry spells earlier in the season, floods in some areas and pests damage. In Kenya, maize output is anticipated to be average to above-average but, smaller than the bumper crop of last year as a result of reduced plantings and irregular rains. In Eritrea, prospects for this year's coarse grains harvest have deteriorated as a result of desert-locust infestations in September. An assessment of the crop damage is underway. In Ethiopia, despite recent localized floods, crops are reported in good condition and the harvest outlook is positive. In Sudan, following normal rains in the past month and successful control of pests, growing conditions for this year's coarse grains remain favourable; however, production is likely to decline from the exceptional level of 1995 as a result of lower plantings. In Rwanda and Burundi, where the 1995 second season coarse grain crops were harvested earlier this year, outputs increased from last year but remained below average due to reduced plantings. Planting of the 1996 first coarse grains crop seasons has started in these countries but, as a result of the massive displacements of population, the area sown is expected to remain below normal.

Harvesting of the 1995 paddy crop is complete in the sub-region. Tanzania, the major producer, is estimated to have harvested 0.7 million tons of paddy, significantly more than in the previous year due to improved yields.

SOUTHERN AFRICA: The sub-region's 1995 coarse grain output, harvested earlier in the year, is estimated at 10.4 million tons, down some 47 percent from the last year. The decrease was mainly due to the drought which led to significant reduction in yields in all countries of the sub-region except Malawi and Mozambique, where production increased as a result of larger plantings and good yields in the main producing areas. In Angola, revised estimates indicate a marginal increase in coarse grain production from last year's poor crop, although output was still below average. Production was constrained by large numbers of mines and/or limited availability of seeds, fertilizers and tools. Revised estimates in Botswana also indicate that output was somewhat higher than earlier expected, particularly for late planted crops like sorghum, which benefited from late season rains. However, total output is still slightly below last year's level. In Lesotho, Namibia, South Africa, Swaziland, Zambia and Zimbabwe, sharp reductions were experienced compared to 1994.

Latest indications for the winter wheat crops in the region point to a small increase in output. The outlook in South Africa, the main wheat producer in the sub-region, is satisfactory and an output of 2.3 million tons is expected. By contrast, in Lesotho, Malawi, Namibia and Zimbabwe, the outlook is unfavourable and only half of last year production is expected because of acute shortages of water and sharply depleted irrigation reserves. In Zambia, a slight recovery from the previous year's poor harvest is anticipated.

The sub-region's paddy output is estimated up slightly from last year's reduced harvest. In Madagascar, the 1995 paddy crop season over: output is estimated at 2.5 million tons, about 4 percent higher than in the previous year. Planting of the next season's paddy crop is about to start.

CENTRAL AMERICA AND THE CARIBBEAN

Moderate to abundant rains since late August have brought relief to the main wheat growing areas of the north-west of Mexico, which had been affected by the late arrival of the rainy season. Besides restoring much needed moisture to soil and pastures, the rains also helped increase water reservoir levels for planting of the 1995/96 wheat crop which is due to start from October.

Harvesting of the 1995 main season coarse grains crops continues under normal conditions in most Central American countries. Above-average outputs are anticipated in El Salvador, Honduras and Nicaragua, while production should be about normal in Guatemala. In Mexico, prospects are poor for the 1995 maize and sorghum crops to be harvested from October. Latest official forecasts point to a low maize output of about 15.5 million tons, almost 15 percent down from the 1994 crop mainly due to significantly reduced plantings because of high production costs relative to expected returns. In addition, serious damage to maize plantings (and other non-cereal foodcrops) is reported in the north-western states of Sinaloa and Sonora, as a consequence of torrential hurricane rains in mid-September. Sorghum output is expected to fall considerably from last year's below-normal level. The decline reflects substantially reduced plantings and poor yield prospects also due to the long dry spell, particularly in the state of Tamaulipas, in the north-east, which accounts for 40 percent of the national production. Bean production is equally forecast to fall sharply. In the Caribbean area, a below-average maize output is expected in Cuba, while production of minor food crops such as potatoes, sweet potatoes, cabbage and plantains is satisfactory. In Haiti and the Dominican Republic, normal and above-normal maize outputs are anticipated respectively. In the Lesser Antilles, Antigua, Barbuda, Dominica, and St.Kitts & Nevis have been severely affected by hurricane floods with consequent serious damage to food and cash crops, commercial and industrial fishery sites, housing and infrastructure.

Harvesting of the 1995 main paddy crop has begun. The outlook for crops in the region is mixed with production in the Dominican Republic and El Salvador expected to increase because of the beneficial rains throughout most of the growing season. By contrast, in Costa Rica, output is forecast to fall mainly because of reduced plantings. In Mexico, the outlook for paddy output this year is uncertain as hot and dry weather has prevailed through most of the growing season reducing the availability of moisture for the normal development of the crop. In 1989, Mexico produced 637 000 tons of paddy but since then, output has contracted sharply fluctuating in most years around 350 000 tons. In Cuba, paddy production has fallen even more sharply, with output in 1995 forecast at about 100 000 tons, one-fifth of the average production in the late 1980s.

SOUTH AMERICA

Planting of the 1995/96 wheat crop has been completed in all countries of the southern areas in Argentina, the main producer, plantings and yields are forecast to decrease significantly from last year as a result of insufficient rainfall. Some of the country's main producing areas, in the south of Buenos Aires and La Pampa provinces, have been affected by dry weather throughout the sowing season; other large growing areas, such as Cordoba, Entre Rios and north of Santa Fe have also suffered from dry weather. Production is tentatively forecast at between 8.0 to 8.5 million tons, but the final outcome will depend on the adequacy of rains during the remainder of the season. In Brazil, harvesting has started and wheat output is provisionally forecast to fall to about 1.7 million tons, compared to the already below-average crop of 2.1 million tons in 1994. In Chile, where harvesting is due to start later in the year, early indications point to a below-normal output of about 1.4 million tons, reflecting reduced plantings. In Uruguay, harvesting is due to start from late October, and production is expected to decline from last year but would still remain marginally above average. In the Andean countries, in Bolivia, below-normal rains continue to affect the development of the 1995 second season wheat crop, but aggregate output in 1995 is nevertheless expected to increase from the previous year, when the crops were also affected by a dry spell. In Peru, the bulk of the 1995 wheat crop has been collected and output is estimated to be close to last year's above-average level. In Colombia, harvesting of the 1995 first season crop is underway and a normal wheat output, near the 1994 level, is anticipated, while in Ecuador an average output has been gathered.

Land is being prepared in the southern areas of the sub-region for planting of the 1996 coarse grain crops mostly from October, although sowing has already started in some parts of Brazil and Argentina. In the Andean countries, in Bolivia, harvesting of the 1995 sorghum crop is about to be completed and above-average output is anticipated. In Ecuador, harvesting of the second season maize crop is due to start from October and preliminary forecasts indicate an above-average aggregate 1995 maize output. In Colombia, harvesting of the main season crop, mostly maize and sorghum, is almost complete and production is provisionally estimated to be below last year's slightly reduced level. In Venezuela, where harvesting of the 1995 maize crop is underway, output is forecast to decrease from last year's below-normal level. The area planted is close to that of 1994 but low yields are anticipated as a consequence of the high cost of agricultural inputs, compounded by credit restrictions to the agricultural sector.

The sub-region's output of paddy in 1995, the bulk of which has been harvested, is estimated at 19.5 million tons, 1.3 million tons more than in 1994, and a record. A substantial proportion of the increase is attributable to the recovery in output in Brazil. For 1995, the paddy crop in that country is estimated at 11.1 million tons, 5 percent more than in 1994. Exporting countries in the region have also made major gains in their production. In particular, paddy output in Argentina has increased by 62 percent to 984 000 tons, which would be nearly 3 times the volume produced a decade ago and surpass Uruguay's production, which is estimated at 710 000 tons.

NORTH AMERICA

In the United States, the September USDA crop report estimates the 1995 aggregate (winter and spring) wheat output at a below-average 59.5 million tons, about 1 million tons less than forecast in August and 6 percent less than the harvest in 1994. The latest downward revision followed continuing poor conditions throughout August for the spring wheat harvesting in the northern plains. However, in early September the pace of spring wheat harvest picked up somewhat and by 17 September it was reported to be about 90 percent complete which is slightly behind last year's pace but ahead of normal. Planting of winter wheat for harvest in the summer of 1996 has started but the pace is behind normal because of dry conditions, particularly in Texas and Kansas. Farmers are holding off planting as soils are too dry for satisfactory germination. By 17 September, just 7 percent of the expected season total winter wheat area had been sown across the 19 major producing states, compared to 13 percent at that time last year and 11 percent on average. The wheat set-aside area for the 1996 crop has been set at zero percent, unchanged from 1995.

In Canada harvesting of the 1995 cereal crops advanced well in early September favoured by warm temperatures. Hard frosts struck many parts towards the end of the month but the plants which remain in the ground are now close to maturity and unlikely to suffer significant damage. In late September, cereal harvesting was reported to be nearly complete in the province of Manitoba, and about 60 percent done in Alberta and Saskatchewan, the other two major producing provinces. The yield and quality of this year's crops are reported to be average to good. The latest official forecast (24 August) put the 1995 aggregate wheat output at 24 million tons, 3.5 percent above last year's outturn, mostly reflecting an expansion in plantings, by 4 percent, to 11.4 million hectares.

The outlook for the United States 1995 coarse grain crop, mainly maize, deteriorated during August and early September due to predominantly hot and dry weather in major growing areas in the Corn Belt, which has reduced yield potential. Furthermore, in late September, severe frosts struck many parts of the Corn Belt. Some of the least mature maize crops may have been damaged. Fortunately however, by 17 September, the development of the maize crop had caught up somewhat following the late start to the season and the bulk of the crop in the major producing states was reported to be nearing maturity. Harvesting is already underway in some states. Latest forecasts now put aggregate coarse grain output in the United States at 224 million tons. Of this, maize is expected to account for about 199 million tons, which would be some 20 percent down from 1994's record crop.

In Canada, aggregate coarse grain production is expected to decrease somewhat in 1995, mainly reflecting a large reduction in the output of oats. Production of oats is forecast to drop by 23 percent, largely due to a reduction in plantings but also because a larger proportion of the crop was cut for forage earlier in the summer following hot dry conditions which dramatically reduced yield potential. By contrast, barley production is forecast to recover from last year's below-average outturn to an about- average 12.4 million tons. Hot dry weather during the critical filling stage reduced yield expectations from earlier high expectations in western Canada where over 90 percent of Canada's barley is grown. Maize production is forecast at about 7 million tons, marginally up from 1994 but still well above average.

Harvesting of the paddy crop in the United States is well advanced in most states except California, where harvesting normally starts around mid-September and peaks in October. The official forecast for paddy output in the United States has been lowered from 8.4 to 8.2 million tons, which would be about 0.7 million tons less than in 1994. The downward revision reflects extremely hot weather which has adversely affected yields in the southern states, principally in Texas, Louisiana and Mississippi. Long grain paddy rice output is now forecast at 5.8 million tons, 2 percent less than the forecast of the previous month. Medium/short grain paddy production, now put at 2.4 million tons, is also less than earlier anticipated.

EUROPE

Heavy rains in several parts of Europe in September generally improved the condition of previously dry soils for winter grain planting, but interrupted late harvesting operations and caused severe flooding in localized parts throughout the region. The region's aggregate cereal output in 1995 is now forecast at an about-average 269 million tons, 10 million tons up from 1994. Cereal output is estimated to have risen in most of the EC countries, except Spain and Portugal where drought reduced production again, while among the eastern countries significantly larger crops have been gathered in Poland and Romania. In the other eastern countries, 1995 cereal crops are estimated close to or somewhat below 1994 levels because of a combination of reduced plantings and/or lack of funds and/or inputs.

In the EC, several areas benefited from the September rainfall which covered the region, especially where soils were previously too dry for winter grain sowing, but in the north of the United Kingdom and in parts of Italy, severe flooding damaged 1995 crops which were still to be harvested. However, apart from maize, harvesting of the bulk of the Community's 1995 cereal crops was already completed by the end of August following generally favourable summer weather. Exceptionally hot dry conditions in northern parts, were beneficial for harvesting but probably led to some yield loss as crops lacked moisture during the filling stage and matured too rapidly. In southern parts, excessively dry conditions caused significant crop and yield losses in Spain, Portugal, Italy and Greece. Aggregate cereal output in the EC (including the three new members Austria, Finland and Sweden) is now forecast at 177 million tons, slightly below earlier projections but still about 1 percent up from last year's reduced outturn. Aggregate wheat output of the EC is now put at nearly 86 million tons. This is somewhat below earlier projections because dry summer conditions affected yields in some parts, but is still about 1.5 percent above the aggregate production of the 15 countries last year, reflecting expanded plantings in the major producers (France, Germany and the United Kingdom). Barley output is now estimated to have declined marginally in 1995 to some 43 million tons, compared to nearly 44 million tons in 1994. This is mostly due to the sharp reduction in output in Spain which more than offset larger crops in several other countries. Maize production in the Community is now forecast to reach nearly 30 million tons compared to 29 million tons in 1994. Winter grain planting is underway throughout the EC and early indications point to a larger wheat area because of attractive prices and a cut in the set-aside level to 10 percent for both rotational and non-rotational set-aside from 12 percent and 17 percent respectively for the 1995 season.

In eastern parts the 1995 cereal harvest has also been virtually completed, with the exception of maize, and latest reports indicate that production increased significantly in Poland and Romania, but remained close to or somewhat below last year's levels in the other eastern countries. In Poland, latest official estimates in late September put aggregate 1995 cereal output at some 25 million tons, 16 percent up from the drought-reduced crop in 1994 and the biggest output since 1991, reflecting increased plantings and generally favourable weather conditions. Similarly, in Romania, wheat output increased sharply to about 7.7 million tons from 6 million tons last year due to expanded area and good conditions. By late September the maize harvest was reported to be about 20 percent complete and indications still pointed to a bumper crop of 12 million tons. If this materializes the country's aggregate cereal output in 1995 would rise to about 21.5 million tons from 17 million tons last year. Production of cereals in 1995 is also estimated to have risen, although only moderately, in the Czech Republic. Aggregate cereal output is estimated at about 7.5 million tons compared to 7 million tons in the previous year. In the Slovak Republic, cereal output remained close to last year's 3.8 million tons, while in Albania, Hungary, and Bulgaria, production was seen to drop somewhat because of a combination of reduced plantings, lack of funds and/or inputs and localized drought conditions. In the Baltic States, the aggregate output of cereals and pulses in 1995 is estimated at 3.7 million tons, close to last year's below-average level. In Estonia, output fell by 16 percent, but indications are that in Latvia and Lithuania output increased marginally.

In central parts of Bosnia-Herzegovina (BiH Federation), wheat production is estimated to have increased significantly. This reflects an increase in the area planted due to improved availability of seed and fertilizers as well as mostly favourable weather conditions. However, maize production is estimated to be down from last year due to diversion of land to food crops. In northern and eastern parts of Bosnia-Herzegovina, cereal production is estimated to have declined as a result of increasing shortages of agricultural inputs. In Croatia, cereal production is tentatively estimated to be 6 percent higher than in 1994. In the Yugoslavia Federal Republic (Serbia and Montenegro) the cereal output is estimated above last year's volume with the maize crop higher than anticipated reflecting good yields. In the Federal Yugoslav Republic of Macedonia, cereal production is estimated less than last year mainly due to a reduced wheat crop affected by dry weather. In Slovenia, a normal level of wheat and maize production is estimated.

Harvesting of the 1995 paddy crop in the region has begun. A moderate rise in output is expected, especially in Italy, the main producer in the region, reflecting an increase in area by 1.4 percent. Most of the increase was due to plantings of Indica varieties while the area under Japonica rice fell. By contrast, the outlook of the rice crop in Spain is uncertain because of inadequate water supply. Despite the intention to plant 60 000 hectares of rice, the actual planted area was only 49 000 hectares.

COMMONWEALTH OF INDEPENDENT STATES1/

In the CIS, the findings of an FAO Harvest Assessment Mission in August point to a sharp reduction in the 1995 output of cereals and pulses to 126 million tons, (cleaned weight). This is 15 percent below last year's production and only two thirds of production in 1992, mainly on account of a 4 million hectare reduction in the area sown compared to last year, dry conditions in parts of the Russian Federation and Kazakhstan and inadequate availability of credit and other inputs, particularly herbicides and fertilizers. Current indications are that output has fallen sharply in only three states: in the Russian Federation (to 64 million tons), Kazakhstan (to 10-11 million tons) and the Kyrgyz Republic. Grain production is forecast to remain close to last year's levels in Belarus, Tajikistan and the Ukraine to increase in Armenia, Georgia, Moldova, Turkmenistan and Uzbekistan. Aggregate production of wheat is tentatively forecast to fall by nearly 2 million tons to 58 million tons provided weather conditions remain favourable until the completion of the harvest in Kazakhstan and in Siberia. Coarse grains output is expected to fall by about 19 million tons to around 62 million tons, reflecting sharply reduced plantings of feedgrains and dry conditions in the spring. Production of pulses is likely to fall to about 4 million tons, and that of paddy could decline by 4 percent to 1.4 million tons.

____________________

1/The Commonwealth of Independent States (CIS) includes 12 member states (Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, the Kyrgyz Republic, Moldova, the Russian Federation, Tajikistan, Turkmenistan, the Ukraine and Uzbekistan).

OCEANIA

The outlook for the 1995 winter wheat and coarse grain crops remains generally favourable. After good planting rains in most parts of Australia, abundant rains continued in Western Australia and south eastern Australia boosting crop yield prospects in these parts. However in Queensland and parts of New South Wales, where crops were already suffering from patchy rains and hot temperatures, sudden frosts in mid-September have caused moderate to severe damage, and yields have likely been adversely affected. Neverthless, the bulk of the crops have continued to develop normally during the month firming earlier output forecasts. Based on end-August crop conditions, wheat output is expected to reach some 16 million tons compared to just 9 million tons in 1994. Barley output is forecast at over 5 million tons from about 3 million tons in the previous year. These increases reflect a substantial expansion in winter grain plantings by about 20 percent and higher yields expected after last year's drought-reduced crops. For the summer crops to be harvested in 1996, assuming normal weather, a 27 percent rise in plantings, to 1.4 million hectares, is forecast. Output of the main summer crop, sorghum, is forecast to rise to 1.33 million tons from 1.02 million tons in the previous season.

The 1995 paddy crop season in Australia, the major producer in the region, is over. Preparation is now underway for the planting of the 1996 paddy crop, most of which takes place in October. The production target set for 1996 is 1.2 million tons, 7 percent up from the previous year's harvest.


TRADE

World trade in cereals in 1995/96 is currently forecast to reach 200 million tons, some 500 000 tons more than was anticipated in September and the same as in 1994/95. Compared to the previous year, the only likely expansion is expected in wheat while the global trade in coarse grains and rice are forecast to fall below 1994/95 levels. This year's tight supply situation which has already resulted in a significant increase in export prices of nearly all types of cereals is likely to prevent any significant rise in imports despite larger needs in several countries due to reduced production. These countries are likely to face an even more stringent domestic supply situation this year as their ability to finance import requirements would be greatly undermined by higher prices in international markets, smaller and diminishing export subsidies as well as lower food aid supplies.

The overall outlook for international trade in wheat has not changed from the September assessment. The forecast for 1995/96 (July/June) imports remains at 95 million tons, over 2 million tons more than in the previous year. This month's major changes include downward revisions in projected imports for China, Morocco and the Republic of Korea and upward adjustments for Algeria and Egypt.

Aggregate wheat imports by the developing countries are still forecast at around 75 million tons, 3 percent or 2.5 million tons above the estimate for 1994/95. In Asia, wheat imports are envisaged to remain close to last year's volume as most countries in the region, with the exception of China and the Republic of Korea, are likely to import as much as in 1994/95. Imports into China are now forecast to reach 12 million tons, 1 million tons above the estimated imports in 1994/95 but some 500 000 tons less than anticipated in September. Despite strong import demand due to high domestic prices, the rise in this year's international wheat prices is likely to curb imports to some extent. High world market prices for wheat are expected to reduce purchases by the Republic of Korea in 1995/96 to 2.8 million tons, sharply below the previous year's level of some 4.3 million tons, as wheat is likely to be partially replaced by coarse grains in animal feeding.

Aggregate wheat imports into the developing countries in Africa in 1995/96 are forecast to reach 20 million tons, up slightly from the previous report and 2 million tons larger than in 1994/95. Nearly all of the increase compared to last year would be on account of substantially larger imports by drought-stricken Morocco. Although the forecast for wheat shipments to this country is slightly reduced from last month, imports are likely to reach 2.8 million ton, 1.6 million tons more than in 1994/95. Imports into Algeria and Egypt have been revised upward for both 1994/95 as well as 1995/96. Compared to the adjusted estimates for 1994/95, total imports into Algeria and Egypt in 1995/96 are expected to decline slightly following bumper harvests in both countries. For the sub-Saharan region as a whole, this year's wheat imports are forecast to remain at around the same volume as in 1994/95. This is because the early prospects for the 1995 wheat crop in the eastern sub-region are favourable while the situation in southern Africa remains somewhat uncertain.

Shipments to Latin America and the Caribbean are forecast to reach 15.5 million tons, close to last year's estimated imports, despite a decline in output in several countries, especially Brazil, the region's largest wheat importer. Firm international wheat prices, a 10 percent import tariff on wheat from non-Mercosur origins and a draw-down of stocks are expected to reduce Brazil's wheat imports this year. Similarly, in Mexico, imports are forecast to remain close to last year's volume despite lower production, primarily due to the strong international prices and the devaluation of the Mexican peso earlier in the year which continues to restrict imports, primarily by the domestic milling industry.

Total wheat imports into the developed countries are forecast to remain close to the 1994/95 level, or around 20 million tons. In the CIS, despite a sharp reduction in this year's wheat output, total imports are anticipated to rise by only 600 000 tons from last year to around 5.7 million tons. The increase would mainly reflect a possible rise in imports from third countries into the Russian Federation, Uzbekistan and Tajikistan while imports into nearly all other CIS countries are expected to be smaller than in the previous year. Higher international prices combined with the near absence of export subsidies and reduced credits are likely to substantially restrain foreign wheat purchases by this group of countries. In Europe, imports by most countries, but especially Romania, are expected to fall below last year's volumes as a result of bumper crops harvested in 1995.

Regarding this year's total wheat export supplies, current forecasts point to an even further tightening than was anticipated in the previous report. Among the major exporters this would be mainly on account of further decreases in the forecasts of production in Argentina and the United States. This year's exports from Argentina are now expected to be only 5 million tons (July/June), some 1.5 million tons less than anticipated last month and nearly one-third down from the estimated shipments in 1994/95. Because of tight supplies also in Canada and the EC and considering that supplies from Argentina and Australia will not be available for a few months, currently, the United States is virtually the only supplier on the global wheat market. While in the previous years there was strong competition between the EC and the United States for market shares, this year's reluctance to encourage exports because of domestic concerns has lead to a sharp fall in sales from the EC, so far. Shipments during the first three months of the current marketing year, are estimated to be some one-third below those of the same period in 1994. Altogether, larger exports in 1995/96 are only forecast for the United States and Australia while shipments from Argentina, Canada and the EC are likely to decrease. Also, shipments from Turkey have been trimmed by some 500 000 tons while Saudi Arabia would no longer remain in the export market due to tight domestic supplies. However, aggregate exports from other origins are anticipated to rise slightly this year. India is expected to export more and larger export supplies would also be available in several countries in Europe outside the EC, mainly Bulgaria, Hungary, Poland and Romania.

World trade in coarse grains in 1995/96 (July/June) is forecast at 88 million tons, almost 2 million tons or 1.8 percent below the previous year's estimated imports but 1 million tons higher than was anticipated in the September report, primarily due to upward adjustments in estimated imports by China, the Republic of Korea and Mexico.

Among the major coarse grains (see table on world coarse grains imports), current forecasts point to a significant decline only in maize imports. As for wheat, this year's maize supply situation is tight and consequently prices have increased considerably compared to last year. As a result, several countries are expected to substitute some of their maize requirements with rye and barley, the imports of which, therefore, are anticipated to rise slightly, especially in Asia. A small increase is also anticipated in oats trade, mainly on account of somewhat larger imports by the United States. World trade in sorghum is forecast to remain at the same level as in the past two years with Japan and Mexico continuing to account for over 80 percent of world imports.

 

Aggregate coarse grain imports into the developing countries are currently forecast to reach 56 million tons, similar to last year's estimated volume and 1 million tons more than anticipated earlier. Total shipments into the developing countries in Asia are projected to remain at around 32 million tons. This year's forecast reduction of maize purchases by Saudi Arabia and Thailand is currently expected to be offset by larger imports of rye into the Republic of Korea and of maize into China. These latter two countries now count for nearly 37 percent of total coarse grain imports by all developing countries. Given this year's high wheat prices in international markets and the continuing strong demand for grains for animal feed in the Republic of Korea, imports of low protein wheat are expected to be largely substituted by maize but also by some rye which is cheaper than maize. Under a recently announced decision by the Government, the Republic of Korea will allow the imports of up to 10 million tons of maize at a special reduced duty of 3 percent ad valorem, mainly in response to rising demand from the domestic compound feed industry.

In Africa, aggregate imports by the developing countries are forecast to rise by 300 000 tons from last year's 10 million tons. A combination of smaller maize imports by Egypt due to larger output and somewhat lower barley imports by Algeria is forecast to nearly offset larger maize and barley imports by Morocco due to drought. Although the overall coarse grain output in the developing countries of sub-Saharan Africa is anticipated to exceed last year's volume, imports by Kenya are forecast to rise by 500 000 tons as the country's maize crop, being gathered now, is expected to be smaller than last year's bumper outturn. Higher imports are also estimated for several countries in southern Africa where domestic production was reduced by drought.

In Latin America and the Caribbean, total coarse grain imports in 1995/96 are forecast to decline by about 200 000 tons from last year to around 13 million tons. In Central America, to compensate for its reduced output, maize imports by Mexico could rise to 3.5 million tons, 200 000 tons more than last year, which would also exceed the quota for duty free maize imports from Canada and the United States stipulated in the North American Free Trade Agreement (NAFTA). In addition, in anticipation of a smaller sorghum crop, imports of this grain into Mexico are expected to reach 3 million tons, some 500 000 tons more than last year. By contrast, coarse grain imports into South America are forecast to fall sharply this year mainly due to normal to above-normal crops in several countries. The largest decline in foreign purchases is expected in Brazil where this year's above-average maize crop is likely to result in a 50 percent drop in its coarse grain imports.

FAO's forecast of coarse grain imports into the developed countries in 1995/96 is put at 32 million tons, 2 million tons or around 6 percent below the estimated volume in 1994/95. The most significant decline is currently projected for Japan, the world largest coarse grain importer. Maize imports into Japan are forecast to fall by 1 million tons because the demand from the domestic feed sector is projected to be down from last year due to a fall in meat production and larger imports of livestock products. However, import of barley by Japan are likely to increase somewhat with the United States taking the biggest share of this market due to smaller export availabilities from Canada, Japan's traditional barley supplier. Smaller coarse grain imports are also anticipated for Europe, especially Poland and the EC, primarily due to larger domestic output. Total shipments from third countries to the CIS are also put below last year's already reduced level. The continuing sluggish domestic markets for livestock products of its member countries and the lack of money and credit to finance imports are among the main reasons for reduced imports into the CIS. By contrast, as a result of drought, South Africa, normally a maize exporter, is forecast to import 1 million tons of maize this year. Total coarse grain imports into North America are also forecast to rise. The increase would be mainly on account of larger maize shipments into Canada because of low domestic supply and a likely expansion of oats imports by the United States due to stronger domestic demand in the food sector.

Aggregate supplies of the major coarse grain exporters in 1995/96, will be constrained by a sharp drop in this year's output in the United States. As a result, despite the anticipated slightly smaller world trade in 1995/96, a significant draw-down in exporters' carryover stocks is certain. The situation is particularly delicate in the case of maize because of this year's near absence of any significant exports from South Africa and China. Consequently their maize export deficit will have to be taken up by larger shipments from the two other important exporters, the United States and Argentina.

FAO's forecast for 1995 global rice trade has been raised to 17.9 million tons. This would be a new record and 1.7 million tons more than the volume traded last year. The increase in the import forecast is entirely on account of China and Indonesia.

Imports into China in 1995 are now expected to total 1.9 million tons, 0.2 million tons more than estimated last month and over thrice the volume imported in 1994. Although substantial quantities of rice have been purchased and delivered into the country, and despite a slight improvement in its early harvest, indications are that China would continue to buy in the international rice market in order to keep prices in the domestic market stable. Shipments to the country, however, have slowed down considerably in recent months. Thailand's monthly exports to China which had averaged around 200 000 tons in the first quarter of the year slowed down to just 30 000 tons and 41 000 tons in July and August respectively. China's imports from Viet Nam have followed a similar pattern. However, the final volume of rice imports into China this year will depend heavily on the performance of the crop in the ground. The import forecast for Indonesia has been raised to 1.8 million tons, the largest volume in the past decade. At this level of purchases, Indonesia, which had achieved self-sufficiency in rice in 1984, has reverted to previous trade status in the late 70s and early 80s, when it was the world's largest importer of rice. In contrast to the upward revision of the import forecast for China and Indonesia, the forecast for Japan's imports in 1995 has been reduced. It is likely that Japan would defer a significant proportion of its import commitment under the Uruguay Round Agriculture Agreement to buy 359 000 tons of rice to early 1996 before the start of its next fiscal year in April. Rice imports into most of Africa have also slowed down in recent months with major exporters reporting a reduction in sales to the region. The main exceptions are Kenya (which has increased its rice purchases in 1995 buying primarily from India), and South Africa, where imports continue to remain substantial.

Parallel to the upward revision of the forecast for imports, FAO's estimate of global rice exports in 1995 has also been raised. The forecast for the United States exports in 1995 has been increased by 0.2 million tons to 3.1 million tons. Monthly exports of rice by the United States have averaged around 267 000 tons in the first seven months, almost 40 percent up from the volumes in the same period in 1994. In particular, United States' export sales benefited from a re-entry into the rice market of the Islamic Republic of Iran. In addition, sales of paddy rice to Mexico rose substantially as a result of the preferential arrangements contained in the NAFTA.

In view of the tight supply situation of other major Asian exporters and of its own large public and private holdings of rice, India's export sales of rice soared to surpass the original 1995 target of 2 million tons of non-Basmati rice. However, it is still not clear how much of these will be shipped as port congestion and heavy rains continue to obstruct the loading of rice from its traditional main outlet in Kandhla (Gujarat). Although shipments of rice are now made out of other ports, principally Vizag, Kakinadha (Andhra Pradesh) and Jamnagar (Gujarat), actual shipments may fall short of total sales. Reflecting this, the FAO forecast for India's rice exports in 1995 is 1.5 million tons with the possibility that a further revision may have to be made.

In contrast to the developments in the United States and India in recent months, the momentum of rice exports from Thailand, Myanmar and Viet Nam has fallen mainly because of tightening export supplies. This situation is likely to persist, pending the arrival on the market of Asia's main rice crop, which will not be until late in the year. Although Thailand's exports in September recovered somewhat from the small volume shipped in August, floods and reduced stock could affect shipments in the coming months. In Viet Nam, domestic rice prices have stabilised and more rice is likely to become available for export, but not in the quantity seen early in the year when large sales created instability and shortages in its domestic market. In Myanmar, large exports, effected in the first five months of the year, have been followed by a substantial drop in trade in June and July with August showing a moderate recovery.

Taking into account the production outlook in 1995 and likely carry-over stocks into 1996, the international rice market in 1996 is expected to remain tight, while the volume of global trade could contract from the record level in 1995. However, this is a very preliminary and tentative forecast as most of the 1995 paddy crop is still to be harvested. Moreover, for key importing countries, such as Bangladesh, China and Indonesia in Asia, and Brazil in South America, where a substantial proportion of the rice crop is produced in the early part of the year, imports would depend upon the crop performance in early 1996. As regards exporting countries, the main uncertainty lies with India where supplies of rice are sufficient to meet a significantly larger volume of exports. However, for such exports to materialize, the present logistical problems will have to be solved.


CARRYOVER STOCKS

World cereal stocks at the close of individual country crop years ending in 1996 are now forecast at 265 million tons, some 47 million tons less than their opening level and 3 million tons less than forecast last month. This recent downward adjustment has been largely brought about by revisions of wheat and coarse grain stock estimates in the United States. The bulk of the draw down of world cereal stocks is forecast to be in coarse grains which are projected to fall by 25 percent, mostly in maize. However, carryovers of wheat and rice are also expected to decline for the third consecutive year by 7 percent and 4 percent respectively compared to last year. Overall, global cereal stocks at the end of the 1995/96 crop years are forecast to fall to between 14-15 percent of trend utilization in 1996/97, well below the 17-18 percent range that the FAO Secretariat considers the minimum necessary for world food security.

Global wheat stocks for crop years ending in 1996 are currently put at about 100 million tons, almost 8 million tons less than their opening level and the smallest volume in 15 years. All of the decline in 1995/96 is expected to occur in the developed countries, in particular the United States and the CIS. Continued downward revisions of the estimate of the United States wheat crop have reduced the official forecast of inventories to be carried into 1996/97 by this country to levels close to those of the mid-1970s. Other major wheat exporters, in particular Canada and the EC, are also facing historically low wheat carryovers. Ending stocks in the CIS are forecast to fall by over 3 million tons reflecting mainly the continuing crisis in the farm sectors of member countries. In particular, production shortfalls in the Russian Federation during the past three years are estimated to have pushed wheat stocks to extremely low levels in spite of sharp cutbacks in livestock feeding of wheat, the volume of which is estimated to have fallen by two-thirds during the last three years.

Aggregate ending wheat stocks of the developing countries are forecast to be down only slightly from last year in most regions, except Asia where two successive bumper crops could boost India's wheat carryovers to record levels unless larger than currently anticipated exports can be generated. Favourable crops are also likely to add to the wheat stocks of China, Pakistan and Syria in 1995/96. By contrast, severe droughts in Morocco and Tunisia are expected to reduce the aggregate wheat stocks by 20 percent in the North African sub-region which accounts for the bulk of inventories held by the developing countries of Africa. Weather-reduced production is also forecast to result in smaller wheat stocks in Latin America, particularly in Argentina, Brazil and Mexico.

World coarse grain carryovers are now forecast at 109 million tons, some 36 million tons below their opening level and the lowest since the mid-1980s. The reduction in stocks would be mainly located in the developed countries, especially in the CIS, the EC and the United States. At 24 million tons, coarse grain inventories at the end of the 1995/96 marketing years in the United States would be the smallest since the mid-1970s. Worsening production prospects for maize have prompted a further reduction in the official forecast of 1995/96 ending stocks. Among the other major coarse grain exporters, the EC is facing much smaller barley intervention stocks compared to last season due to relatively strong demand and below average crops in northern Europe. As with wheat, coarse grain stocks in the CIS are forecast to continue to fall also this year, especially of barley, rye and oats, in spite of a substantial reduction in livestock inventories during the past few years. In South Africa where output fell sharply this year, maize inventories are expected to be reduced. By contrast, larger crops could allow an increase in coarse grain stocks in a number of eastern European countries.

Aggregate coarse grain stocks held in the developing countries, forecast at some 47 million tons would decline in all regions by a total of over 7 million tons compared with last year. The bulk of the reduction in Asia is expected to occur in China where rising demand for grains as animal feed is outpacing increases in production and in spite of higher predicted imports of maize. In Africa, most of the fall in coarse grain stocks is forecast for Egypt, in an effort to reduce costly imports, and in Morocco and Zimbabwe to offset lower output. In Latin America, most of the decline is anticipated in Argentina, where exports are likely to increase to take advantage of high international prices, and in Mexico due to expected smaller maize and sorghum crops.

World rice stocks at the close of the marketing seasons in 1996 are expected to fall further, by 2.6 million tons, to 56.5 million tons. Stocks in Bangladesh, China and India are likely to be smaller as, despite the increased output of rice in 1995 in these countries, some draw-down in stocks would be needed to meet rising demand. In Indonesia, no significant recovery in stocks is expected, despite the large quantities of rice imported in 1995. In the United States, ending rice stocks in 1996 have been revised down significantly (- 18 percent) to 849 000 tons to take into account a poorer 1995 crop outlook and expectations that export trade before the end of the marketing year would intensify.


EXPORT PRICES

International wheat prices have strengthened again since the beginning of September following a slight decline during August. By late September, the price quotation for US No 2 hard winter (fob Gulf) rose to U.S.$ 199 per ton, some U.S.$ 12 per ton higher than in August and as much as U.S.$ 39 per ton or 24 percent above the corresponding period a year earlier.

A number of factors have influenced wheat prices in recent weeks. Because of this year's tight supply situation, price movements have been more volatile with the market generally over-reacting to weather conditions, crop developments and purchasing intentions. Wheat prices rallied substantially after the USDA's September crop report, which indicated a smaller output in the United States. Due to the EC's earlier decisions to temporarily suspend export restitutions for soft wheat until mid-October, the export market since the beginning of the 1995/96 trade year has been predominately confined to supplies from the United States. However, higher international prices combined with the overall absence of export subsidies from the United States and a stronger US dollar have made non-subsidized wheat exports from the EC possible. The market has also been reacting strongly to the deteriorating crop outlook in Argentina. Export price quotations for Argentine wheat (Trigo Pan), which at this time of the year are only indicative of their likely levels after the harvest in November, reached U.S.$ 209 per ton by the end of September, a gain of U.S.$ 72 per ton over the corresponding month in 1994.

Firmer prices since August have also been a dominating feature in the Chicago futures market. On 21 September, December futures for US No. 2 soft red winter wheat rose to a new contract high for this year of U.S.$ 180.44 per ton. Strong demand for United States' wheat, particularly from Egypt and China, supported by heavy buying of several funds, especially towards the end of the third week in September, boosted the Chicago wheat futures. This was triggered by a significant volume of fund money being shifted out of bonds and equities into the grain markets.

Similar to wheat, maize export prices, after a short-lived decline in August, have strenghtened again since the beginning of September. By late September, the export price of United States No. 2 yellow maize (delivered Gulf ports) had risen by U.S.$ 6 since August to U.S.$ 133 per ton, close to the July levels, and some U.S.$ 37 per ton or 38 percent above the average price at the same time in 1994. Maize export prices responded strongly to the USDA's September crop forecast which pointed to a much smaller maize crop than earlier anticipated. Altogether, this year's surge in wheat prices is also seen to have started to influence maize quotations mainly because importing countries with expanding feed sectors are resorting to larger imports of coarse grains to substitute for the relatively more expensive low-protein wheats used in feed rations.

Quotations for the maize contracts on the Chicago futures exchange also rose in September. By the end of the third week of September, escalating weather concerns, primarily related to reports of the temporary prevalence of low temperatures in key maize growing parts of the United States, resulted in the December price reaching a new contract high of U.S.$ 122.44 per ton, some U.S.$ 10 per ton higher than the December price quotation in August.

International rice prices rose in September after easing slightly in most of August. The FAO Export Price Index for Rice (1982-84=100) averaged 137 points, 3 points higher than in the previous month. In Thailand, export prices for rice recovered strongly because supplies from the previous season second crop are dwindling pending the arrival of the 1995 main harvest later in the year and because traders are concerned about the extent of flood damage to the main rice crop. Thai 100 B rose by U.S.$ 15 to U.S.$ 370 per ton, although prices for fully broken rice, Thai A1 Super, were little changed at U.S.$ 295  per ton. Similarly, United States export prices for rice strengthened, partly in line with the tighter supply situation in other major exporting countries and because of likely reduced yields from its crop. U.S. long grain rice No.2 4 percent was quoted at U.S.$ 407 per ton, U.S.$ 33 up from a month ago.


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