Food Outlook - March/April 96

CASSAVA

• Slight increase in 1995 production and consumption
• Cassava trade down again in 1995
• Prices sharply up in 1995
• Production and trade outlook for 1996 mixed

Slight increase in 1995 production and consumption

The estimate of world cassava output in 1995 has been raised by 2 million tons since the last report and is currently put at 161 million tons of fresh roots, with upward adjustments in Africa and Latin America. Production in Africa is currently estimated to have reached 82 million tons, or two percent above the previous year, primarily as a result of favourable weather conditions, which boosted plantings and yields. Larger crops were harvested in Angola, Burundi, Cameroon, Côte d'Ivoire, Ghana, Mozambique, Nigeria and Zaire. In Ghana and Mozambique, output was 18 and 27 percent respectively above the drought-reduced levels of 1994. In Nigeria, cassava output at 31 million tons, reached a record for the second consecutive year, following the progressive replacement of existing improved varieties with new higher-yielding polyploid varieties, which are more resistant to pests and diseases. By contrast, very poor crops were harvested in Tanzania, mainly reflecting recurrent problems of mealy-bug and mosaic disease outbreaks that affected productivity, but also in Benin and Uganda. Likewise, in Liberia and Rwanda, the impact of civil strife on agricultural activities, but also adverse weather conditions and shortages of farm inputs, were responsible for the decline. Little change in the harvested volume occurred in other countries of the region.

WORLD CASSAVA PRODUCTION 1/

In Latin America and the Caribbean, cassava production in 1995 expanded in a number of countries, particularly in Brazil, Bolivia and Colombia. In Brazil, output increased by over 7 percent to reach 26 million tons as a result of higher producer prices and favourable growing conditions. In Bolivia the expansion resulted from larger plantings. In Colombia, the rise in output benefited from the 1995-98 Plan, which provided support inter alia to the cassava agro-industry on the Atlantic Coast and to the promotion of new technology applications. In the Dominican Republic output also increased slightly.

By contrast in Asia, total output in 1995 is estimated to have fallen by seven percent, reflecting smaller crops in Indonesia and Thailand. In Indonesia, the 1995 output fell to 15.4 million tons, two percent below the 1994 harvest as yields were depressed by drought. Similarly in Thailand, production declined by 18 percent, to 15.7 million tons due to reduced plantings, the effect of drought, harvesting of immature roots and shortage of farm labour.

Utilization of cassava follows closely domestic production in most countries as not many of them are exporters. Cassava provides a relatively cheap source of dietary energy and thus continues to play a key role in food supply of many countries in the tropics.

In Africa, larger crops led to some increase in consumption of cassava as food, especially in Ghana, Nigeria, Mozambique and Zaire. The devaluation of the CFA-franc has increased the use of cassava in producing countries such as Benin, Cameroon, the Central African Republic, Congo and Côte d'Ivoire, because of higher prices for imports of wheat and rice on domestic markets. As a result, demand for cassava in those countries rose well above available supplies, pushing up prices. In other countries, where output rose in 1995, cassava contributed significantly to sustaining food availability. In Nigeria, for instance, per caput consumption continued its upward trend, as the new varieties proved to be more suitable for a number of food preparations and superior to the traditional ones. Moreover, as from March 1995, consumption of cassava was further supported by the Government's imposition of a 100 percent customs duty on rice imports.

Usage of cassava as food and feed in 1995 rose in most countries of Latin America and the Caribbean, particularly Brazil. In most Asian countries, including China, India and Indonesia, domestic supplies were further supplemented by imports of tapioca starch and flour to meet the growing demand for snack foods and industrial uses.

In the developed countries, cassava utilization as animal feed fell, particularly in the EC but also elsewhere, as the result of tight domestic supplies in exporting countries.

Cassava trade down again in 1995

World cassava trade in 1995 is estimated to have fallen for the second consecutive year to 5.8 million tons (14.5 million tons in fresh root equivalent), or 17 percent below the previous year's volume. This mainly reflects reduced shipments to the EC, largely as chips and pellets for feed, which represent the bulk of the international trade. Trade in starch and flour for food and industrial uses, accounted for an estimated 17 percent of world trade, two percent more than in the previous year.

Imports into the EC in 1995 fell by 2 million tons, or 37 percent, to 3.4 million tons due to the tight supply/demand situation in the major exporting countries, and increased freight rates. This was the smallest annual purchase since 1990 and 3.4 million tons less than the quantity allowed under the Community's various cooperation agreements with cassava suppliers. Under the Uruguay Round Agreement, the earlier voluntary restraint arrangements provided for in the Cooperation Agreement between the EC and Thailand on imports of cassava and products were replaced by an annual tariff quota.

WORLD TRADE IN CASSAVA 1/

By comparison, more attractive incentives granted to Thai exporters, which are also the main suppliers to non-EC markets, led to a partial recovery of imports outside of the EC. Total 1995 purchases by non-EC countries are estimated at 2.4 million tons, or 50 percent above 1994. A major increase in imports especially in the form of starch and flour, is reported to have taken place in China, Indonesia and the Republic of Korea, but also in other countries such as Malaysia and the Philippines. By contrast, New Zealand, the United States and Australia bought smaller quantities.

As in the past, Thailand and Indonesia continued to be the main suppliers to the world market, accounting for about 74 percent and 17 percent of global exports, respectively. Total exports from Thailand fell for the third consecutive year from 8.0 million tons in 1993 to 4.3 million tons in 1995. This was 26 percent less than in 1994 and the lowest volume in five years. By contrast, foreign sales by Indonesia were estimated to have recovered and reached one million tons, about 40 percent up from 1994. However, as a result of strong domestic demand, Indonesia could not fulfil its quota of 866.000 tons per annum permitted to the EC [/ Under the " bonus quota mechanism" Indonesian exporters were eligible to ship, in 1995, up to 2.6 tons to the EC for each ton exported to non-EC countries.]

Prices sharply up in 1995

Cassava combined with protein-rich oilmeals is a substitute for grains in animal feeding² [/ To substitute for grains in animal feed rations cassava pellets need to be supplemented with protein meals (e.g. a mixture made of 80 percent cassava pellets and 20 percent soybean meal).] . As a result, cassava prices in importing countries are closely linked to domestic grain and oilmeal prices. In July 1993, with the implementation of the first stage of the reform of the EC's Common Agriculture Policy ( CAP), aimed inter alia at bringing down grain prices in the Community, import prices for cassava pellets fell sharply (see Table). Subsequently, however, as barley prices began to rise, the price of cassava pellets also recovered, averaging U.S.$ 177 in 1995 compared to U.S.$ 144 in the previous year. Despite the increase in price and short supplies, cassava continued to be an attractive feed ingredient in the Community. Factors responsible for this development included the steadily rising domestic grain prices in the Community to quotations well above intervention levels combined with lower soybean meal import prices during the first half of 1995, compared with the same period in the previous year. As a result, the 1995 annual average price for pellets reached U.S.$ 177 per ton f.o.b. Rotterdam. This was almost U.S.$ 33 per ton, or nearly 25 percent higher than a year earlier. Despite the increase in soybean meal prices in the second half of 1995, prices of cassava/soybean mixtures in the EC remained substantially lower than quotations for barley in Spain during the same period, but exceeded barley prices in Germany and the Netherlands since July 1995.

PRICES OF CASSAVA, SOYBEAN MEAL AND BARLEY IN THE EC

Production and trade outlook for 1996 mixed

Early indications for global cassava production in 1996 point to a recovery in Asia. Preliminary estimates of the cultivated area in this region suggest an expansion as traditional plant material in the main exporting countries is gradually replaced by new, higher-yielding varieties. These varieties have a high starch content suitable for processing to meet the rising demand for tapioca products domestically and abroad. For Thailand, production in 1996 is forecast at 17.6 million tons, following the expansion in plantings of 4 percent envisaged under the Eighth National Economic and Social Plan. Expectations of high export returns from value-added sales of starch, flour and other products, may even prompt a larger shift to higher-yielding varieties than currently expected. In Africa, output could increase, particularly in some countries where producers are expected to react to higher cassava and cereal import prices and to a recovery in plantings following drought. Moreover, the ongoing diffusion of recently introduced high-yielding and pest-resistant varieties may contribute to bring production in several countries back to at least 1993 levels. An increase might also occur in Latin America and the Caribbean in line with trend production growth rates.

The size of world cassava trade in 1996 will depend primarily on the price developments for grains and soybeans in the EC, but also on the effects of the enlargement of the Community and the availability of supplies and prices in major exporting countries. Given the continuing demand for feedstuffs and the high levels of grain and oilmeal prices, a further reduction in the level of cassava utilization in compound feeds in the EC (the lowest level in five years was reached in 1995) and an increase in the usage of cereals to the detriment of cassava, seems unlikely, at least in the short-run. As a result, imports of cassava pellets by the EC in 1996 are anticipated to be slightly higher than in 1995, also because Thailand had left unutilized about 1.75 million tons of the EC quota in 1995. Accordingly, shipments of cassava from Thailand are anticipated to be higher in 1996, supported by a recovery in plantings and hence, larger availabilities, unless weather proves unfavourable. No major change in shipments to the EC is expected from other exporting countries following the fixing of 1996 quotas at previous year's level. By contrast, strong demand in Asia for cassava derived products, such as starch and flour, could continue to stimulate global exports of those commodities to these countries.