TRADE

• REVIEW OF THE 1995/96 SEASON
• TRADE PROSPECTS FOR 1996/97

REVIEW OF THE 1995/96 SEASON

FAO's latest estimate of world cereal imports in 1995/96 remains at 201 million tons, almost 2 million tons lower than in 1994/95. This decline is mainly on account of an expected decrease of trade in rice after record imports in 1995. By contrast, imports of wheat and coarse grains in 1995/96 are estimated to remain close to the previous year’s volume. The sharp increase in grain prices this season is estimated to have had little impact on the overall volume of trade. However, differentials between prices for different grains, especially maize and wheat, resulted in some shift in trade from more expensive grains to cheaper ones. Export subsidies, an integral part of the grain market since the mid-1980s, were virtually absent this season, due to the decline in export availabilities and the surge in international prices.

World imports of wheat and wheat flour (in grain equivalent) in 1995/96 (July/June) are put at 94 million tons, which is nearly the same as in 1994/95. Among the developed countries, aggregate wheat purchases are estimated at 20 million tons, slightly lower than in 1994/95. Imports into Europe are put at above the previous year’s levels as the increase in wheat purchases by the EC and the Slovak Republic was more than offset by the decline in imports of Poland and Romania, while aggregate wheat shipments to the CIS could remain at the previous year’s level of around 5 million tons.

Total imports by the developing countries may reach 74 million tons, or almost 80 percent of world wheat trade. This volume would be slightly larger than in the previous year, mainly on account of somewhat higher imports into Africa and Asia. In Africa, imports by drought-stricken Morocco are estimated to have tripled compared to 1994/95 to reach 3 million tons. On the other hand, imports by nearly all other major wheat deficit countries in Africa are likely to have fallen below the previous year’s levels mainly due to larger 1995 crops, particularly in Algeria, Egypt, and Ethiopia. In Asia, purchases by China, the world’s largest wheat importer, are estimated to rise by 2 million tons to 13 million tons by the end of the season. By contrast, aggregate wheat imports into Latin America and the Caribbean are estimated at nearly 15 million tons, which is 900 000 tons lower than in 1994/95, mainly due to smaller imports by Brazil.

Export supplies of wheat in 1995/96 were strongly conditioned by lower production in major exporting countries, and shortfalls could only be met by a sharp reduction in stocks. However, in the United States, despite the decline in 1995 output and strong domestic demand, exports continued at an exceptionally fast pace throughout the first half of the season (July-December). In order to reassert its position as a reliable supplier, stocks were drawn down to near working levels and export commitments have been met, albeit at much higher prices. By contrast, despite a larger harvest in Canada, shipments fell below last year’s level, reflecting strong domestic demand and lower carryovers from the previous season. In the EC, domestic supply concerns led to a tightening of export sales by imposing export taxes. This development combined with lower production in Argentina, which harvested its crop in November, prompted a further surge in export prices throughout the remaining half of the season. However, the recovery of Australia’s wheat output and export availabilities in several smaller exporters, such as Hungary, India, Romania, Bulgaria, Turkey and Poland, mitigated to some extent the sharp upward movements in international prices.

The estimate for world imports of coarse grains in 1995/96 (July/June) has been raised by 1 million tons this month to nearly 89 million tons. While in aggregate coarse grain imports are close to the previous year’s volume, purchases of barley are estimated to decline for the fifth consecutive year to reach only 13 million tons, over 1 million tons below last year and the lowest volume in over a decade. Imports of sorghum are estimated at just over 6 million tons, also down from the previous year, by over 500 000 tons. However, these declines have been largely offset by increases in the imports of maize which are estimated at 67 million tons, 2 million tons larger than in 1994/95.

OVERVIEW OF WORLD CEREAL IMPORTS

Aggregate imports by the developed countries are currently estimated at around 33 million tons, some 500 000 tons less than in 1994/95, mostly due to smaller maize purchases by Japan. However, aggregate imports of coarse grains by the developed countries have been falling continuously since 1989/90, mainly as a result of declining purchases by the CIS which for 1995/96 are estimated to be the same as in the previous year at 500 000 tons, compared with over 15 million tons imported annually during the 1980s.

By contrast, total coarse grain imports by the developing countries are estimated to increase for the fifth consecutive year to over 55 million tons, some 1 million tons above the previous year’s volume. Rising demand in the Far East is mainly responsible for this development. The 1995/96 total imports by the developing countries in Asia is estimated at 34 million tons which would be 2 million tons or 7 percent above the previous year’s imports. This is mostly on account of larger purchases by China, currently estimated at over 11.5 million tons. Shipments to the Republic of Korea are also estimated to peak in 1995/96 at 9.5 million tons, 700 000 tons more than in 1994/95. This would be mainly at the expense of smaller feed wheat purchases due to higher prices compared to maize.

In Africa, total imports into the developing countries are estimated at nearly 9 million tons, some 500 000 tons less than in 1994/95. Most of this decline would be on account of reduced purchases by Algeria following a small recovery in its barley output. In Latin America and the Caribbean, only Brazil is estimated to import significantly less coarse grains in 1995/96 due to a bumper maize crop, while Mexico, the region’s largest coarse grain importer, is estimated to purchase nearly the same volume as in the previous year.

Regarding exports, the drastic fall in coarse grain production in the United States in 1995 combined with an unexpectedly strong feed demand in nearly all major exporting countries led to an exceptionally tight supply situation, particularly during the second half of the marketing year. The very fast pace of shipments during the second half of 1995, especially from the United States, indicates that many developing countries entered the market much earlier than usual, mainly in anticipation of price increases during the remainder of the season. Nevertheless, despite tight supplies and higher prices, active trading continued during the first six months of 1996 as additional supplies became available from Argentina and Australia as well as from several smaller exporters, such as Romania, Poland, and Turkey.

FAO's estimate for global rice trade in 1996 has been raised slightly to 18.0 million tons, still 2.7 million tons down from the record level traded in 1995. The decline is expected to be brought about by reduced import demand from Bangladesh, China and Indonesia following improved crop prospects in these three countries. However, the extent of the reduction is still uncertain and will depend upon crop prospects during the course of the year. In the case of Bangladesh, although Boro crop prospects appear to be improved from last year, more recent reports indicate that rainfall has been deficient in some areas. Preliminary import indications show that in the first half of the year some 0.5 million tons of rice have been contracted. As regards Indonesia, preliminary import data indicate that over 0.7 million tons of rice have been received in the first quarter, almost all of which were purchases carried over from the previous year. Although additional purchases of rice based on barter exchange have been made, the total quantities that would be purchased in 1996 are likely to fall well below the 3 157 000 tons imported in 1995. The greatest uncertainty in import demand, however, lies with Iraq, where imports of rice in 1996 could see a recovery because of the recent agreement on limited oil sales (see page 20 for details). The extent to which Iraq would cover its large food deficit with rice imports is still unknown. In the past, Iraq's annual purchases of rice ranged around 0.7 - 0.8 million tons, but with the recent increase in the prices of other cereals, more rice could be sought.

The slackening of international import demand in early 1996 has already had a significant impact on the exports of many countries. Thailand's rice exports have fallen sharply from the levels shipped in the corresponding period in the previous year. By 19 May, the country's shipments totaled 2.2 million tons compared to 2.6 million tons in the same period in 1995. Exports from India, the United States and Viet Nam have also been affected. India, which became the world's second largest rice exporter in 1995, is forecast to export about 2.5 million tons of rice in 1996 compared to 4.2 million tons in the previous year. Logistical problems remain a major constraint to the country's export activities. Although rice supplies in the country remain abundant, they are somewhat less than in the previous year, because of a slight reduction in output and a fall in rice stocks. Until end-March, government procurement of rice totaled 8.05 million tons compared to 11.55 million tons in the previous year. Both Punjab and Haryana, the surplus producing and rice exporting states in the north, had poorer crops in 1995.

TRADE PROSPECTS FOR 1996/97

At 193 million tons, FAO’s first forecast of world cereal trade in 1996/97 points to a contraction of around 8 million tons, or 4 percent, from the estimated volume of imports this season. Both the trade in wheat and coarse grains, particularly maize, are expected to decline while an unchanged global trade in rice in 1997 is tentatively forecast. The bulk of the decrease in imports would be a result of smaller purchases anticipated for the developed countries, although aggregate imports by the developing countries are also forecast to decline slightly. The fall in imports would mainly reflect the larger crops currently forecast for several regions, particularly the EC, CIS and North Africa.

Preliminary indications suggest that global trade in wheat in 1996/97 (July/June) would fall by around 3 million tons to 91 million tons from that estimated for the current 1995/96 season. On present indications, wheat imports are anticipated to fall for both developed and developing countries. Aggregate purchases by the developed countries in 1996/97 are forecast at around 17 million tons, 2.5 million tons less than the previous year, mainly in anticipation of improved harvests in many countries. Imports into the CIS are tentatively forecast to fall by about 50 percent to 2.4 million tons, while in Europe smaller imports by the EC would more than offset the likely increase of purchases by Poland.

A moderate decline in wheat imports is also anticipated for the developing countries. At some 73.5 million tons, the current forecast of their aggregate imports would be only 600 000 tons below the estimated 1995/96 level. In Asia, despite an expected decline of shipments to China and Pakistan, mainly due to favourable crop prospects, total imports are forecast to remain close to this year’s volume. This is primarily due to a likely increase in shipments to Iraq following the recent agreement on limited oil sales. Wheat imports by Iraq are tentatively put at 1.5 million tons, below requirements but more than twice the volume estimated to have been imported during 1995/96 and still fall short of the 2 million tons imported annually during the 1980s. While shipments into Latin America and the Caribbean are expected to remain close to the 1995/96 levels, total imports by Africa are forecast to fall sharply in 1996/97. This would be mostly due to a recovery of the 1996 crops in North Africa which are expected to result in much smaller purchases.

Despite an anticipated increase in output, total wheat supplies of the major exporters in 1996/97 are projected to remain close to the reduced levels of the previous year because of the low opening stocks. Nevertheless, assuming only a small increase in the domestic use, their combined export availabilities should be sufficient to meet the currently projected reduced import. In addition, favourable crop prospects in several smaller exporting countries, such as Turkey, Hungary, Romania and India, point to larger export availabilities from these countries.

FAO’s early forecast of global trade in coarse grains in 1996/97 (July/June), currently put at 84 million tons, points to a decline of almost 5 million tons or 5 percent from the previous year. However, this assessment depends heavily on current production forecasts, which are still tentative as in several countries the 1996 crops have been planted only recently or have not yet been sown.

Imports by the developed countries in 1996/97 compared to the previous year are expected to fall the most, by 3 million tons, to nearly 30.4 million tons. The largest decline is anticipated in Europe where a sharp contraction in imports by the EC is forecast to more than offset larger purchases expected for Poland and Romania. Coarse grain imports by the CIS and Japan are also likely to decrease further in 1996/97. Aggregate imports of developing countries in 1996/97 are forecast at around 53.6 million tons, some 2 million tons less than estimated for the previous year. This would be mainly due to smaller purchases forecast for several countries in Asia, notably China and Saudi Arabia, as well as in Africa, especially in the southern sub-region where the 1996 coarse grain crop has recovered.

In spite of the low opening stocks, the aggregate coarse grain supply of the major exporters is tentatively forecast to recover significantly in 1996/97 as production in nearly all major exporters is currently expected to rise. In addition, as in the case of wheat and in contrast to the situation in 1995/96, larger supplies are anticipated from several smaller exporters, including Hungary and South Africa. This, combined with the forecast contraction in world coarse grain trade, is expected to result in some improvement in 1996/97 carryovers of major exporters, while the pressure on prices could also ease once the major harvests are completed, particularly in the United States.