Food Outlook
Global Information and Early Warning System

---------------------------------- No. 5/6, 1996 Rome, May/June 1996


Latest information confirms expectation of a recovery in cereal output in 1996, but the global supply/demand situation will remain tight. If current forecasts materialize, cereal output would be sufficient to meet the expected consumption requirements in 1996/97. However, the outlook for global food security would remain precarious for at least another year as the expected increase would allow only a very modest replenishment of the reduced global stocks.

FAO’s latest forecast puts 1996 world cereal production at 1 828 million tons, (including milled rice) 6.5 percent up from 1995’s reduced level. Assuming favourable conditions until harvest, global output of wheat is forecast to increase by 4 percent to 571 million tons, that for coarse grains by over 10 percent to 883 million tons, while the rice (milled) crop is forecast at about 374 million tons, little changed from 1995.

The food outlook is unfavourable for many low-income food-deficit countries, particularly in sub-Saharan Africa and Asia, as food aid availabilities shrink and high cereal import costs persist. The situation is further aggravated in several countries by continuing civil strife disrupting domestic production and displacing populations.

FAO’s first forecast of world trade in cereals in 1996/97 is 193 million tons, down 8 million tons from the estimated imports in 1995/96. The reduction would mostly be accounted for by reduced wheat and coarse grains shipments into several major importing regions where domestic production is expected to increase.

Wheat and coarse grains prices rose to record levels in April but dropped back in May. Markets have been very volatile, largely influenced by weather, but active trade, poor prospects for the United States winter wheat crop and delayed spring wheat and maize planting kept prices firm. International rice prices fell in most of April and through the first half of May but rebounded in late May.

Global cereal stocks to recover only slightly in 1996/97 after the sharp decline in the previous season which has been associated with a record price rise. But at the forecast level, they would remain much below the minimum safe level for food security.

Global meat production and trade are expected to rise by 3 percent in 1996. However, uncertain prospects regarding feed prices, the bovine spongiform encephalopathy (BSE) crisis in the EC and a tightening of market access conditions by major importing countries are adding uncertainty to these forecasts.

World sugar production is expected to increase in 1995/96, leading to a market surplus and stock increase. However, since late April, tight supply of high quality refined sugar has partially offset the downward pressure on prices.

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