Food Outlook 10/96

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The outlook for global food supplies in 1996/97 has improved somewhat since the last report. With most of the world's 1996 cereal crops already harvested or about to be gathered, FAO's forecast of global production has become more firm and now indicates a larger recovery from 1995 than earlier expected. Reflecting this, and notwithstanding an increase in global cereal utilization forecast for 1996/97, aggregate cereal carryover stocks are now anticipated to rise for the first time in four years. Nevertheless, global stocks will still remain below minimum safe levels, and the situation for wheat, the major food grain, will remain particularly tight. Thus, while the modest stock build-up is a welcome development for global food security, at the forecast level, carryovers would be insufficient in the event of a substantial production shortfall in 1997, particularly in wheat. Although international wheat prices have stabilized at much below their peak earlier in the year, and those for coarse grains and rice are seasonally declining reflecting the ongoing harvest of the major producers, a return to earlier market volatility cannot be ruled out in the coming months if weather conditions for planting and early development of next year's crops should be unfavourable in any of the major producing areas.


1994/95 1995/96

(. . . . . . million tons . . . . . .)
Production 1/ 1 780 1 731 1 849
Wheat 528 546 581
Coarse grains 890 811 888
Rice (milled) 362 373 380 2/
Supply 3/ 2 125 2 049 2 116
Utilization 1 799 1 791 1 827
Trade 4/ 198 202 184
Ending Stocks 5/ 318 267 285

1/ Data refer to calendar year of the first year shown. Rice in milled equivalent.
2/ Tentative forecast.
3/ Production, plus opening stocks.
4/ July/June basis for wheat and coarse grains and calendar year for rice.
5/ Does not equal the difference between supply and utilization due to differences in individual country trade years.

World Cereal Production Graph.Thus the situation for the Low-Income Food-Deficit Countries (LIFDCs), many of which continue to suffer from serious food supply difficulties (see box on Food Emergencies on page 6 and Special Feature on Africa on page 24), remains particularly delicate, also in view of the prospect of continuing low levels of cereal food aid availabilities in 1996/97.

As indicated above, FAO's forecast for world cereal production in 1996 now stands at 1 849 million tons (including milled rice), 28 million tons up from the previous forecast in August, and almost 7 percent above the revised estimate of output in 1995. Latest information on 1996 crops now being harvested or still to be gathered before the end of the year points to larger increases in global wheat and coarse grains outputs than earlier expected while global rice production is now also forecast to rise significantly from last year. The bulk of the increase in cereal output is forecast in wheat and coarse grains production in the developed countries. However, with the major wheat crops in the southern hemisphere, a large proportion of the northern hemisphere coarse grains crops and the major rice crop in Asia yet to be gathered, the outcome of the 1996 cereal harvest could still be affected by adverse weather in the coming weeks.

FAO's latest forecast for 1996 world wheat production is 581 million tons, 10 million tons up from the previous forecast, and 6.4 percent above the latest estimate of production in 1995. The revision since the last report reflects mainly an increase in the estimate of production in the EC, where the harvest is now virtually complete and bumper crops are reported. The only major crop in the northern hemisphere still not secured is in Canada where adverse weather hampered harvesting in September. However, conditions improved in early October and a bumper crop is still anticipated. Prospects remain very favourable for the southern hemisphere wheat crops now approaching maturity. Planting of the 1997 wheat crop is now underway throughout the northern hemisphere under generally seasonable weather conditions. For coarse grains, FAO's forecast has been increased by 13 million tons since the previous report to 888 million tons. The upward revision mainly reflects a higher official estimate for coarse grains output in the United States, where the harvest is now well underway. At the forecast level, global coarse grain output in 1996 would be 9.4 percent above the reduced output in 1995. Harvesting of the main 1996 rice crop in Asia, which accounts for 90 percent of world output, has already begun in some countries. Despite excessive rainfall and widespread floods in some countries in the region, the outlook for the crop is generally very favourable. Reflecting this, FAO has increased its forecast of global rice production in 1996 to 380 million tons in milled terms (paddy: 566 million tons), 5 million tons over the previous forecast and 2 percent up from last year's good crop.

FAO's forecast for world cereal imports in 1996/97 has been reduced by 2 million tons since the last report to 184 million tons, which is sharply below the revised estimate of 202 million tons traded in 1995/96. The bulk of the reduction in world trade compared to the previous year is anticipated in wheat and coarse grains while imports of rice in 1997 are expected to contract only marginally. The forecast for world imports of wheat and wheat flour (in grain equivalent) in 1996/97 is now 84 million tons, or 9 million tons less than in 1995/96, and the smallest volume since the late 1970s. This contraction is due to increased production in several countries that had been large importers in the previous year, in particular China, Morocco and the CIS. The forecast for global trade in coarse grains in 1996/97 has also been reduced somewhat since the last report to 82 million tons, some 8 million tons down from the revised estimate of the volume traded in the previous year, and the smallest level in the last two decades. Most of the decline is forecast in the developing countries but also some reduction in shipments to developed countries is expected. With regard to rice, the latest information points to a 4 percent contraction in global trade in 1997 to 18 million tons, a larger drop than earlier anticipated. However, this forecast is still highly tentative as the bulk of the 1996 crop has yet to be harvested.

Preliminary indications of global cereal utilization in 1996/97 point to a 2 percent recovery, to 1 827 million tons, from the reduced level in 1995/96. This expansion reflects only a modest increase in cereal food consumption while feed use is expected to recover significantly because of improved supplies. Global food consumption of cereals is forecast to rise by 1.4 percent to 933 million tons, with most of the increase expected to occur in the developing countries. Global feed use is expected to rise significantly, by 3.1 percent, to 633 million tons, which marks a general return to normal levels of feed use of grains in the developed countries after the sharp contraction linked to the high cereal prices in 1995/96. Cereal feed use in the developing countries is also anticipated to continue its upward trend in 1996/97.

Early indications of cereal food aid shipments in 1996/97 point to a marginal recovery to about 7.5 million tons from the 1995/96 reduced level. However, this preliminary forecast is very tentative as the intentions of many donors remain unclear at this early stage of the year. Total cereal food aid shipments in 1995/96 (July/June) are now estimated at 7.2 million tons, some 2 million tons, or 23 percent, below the amount in the previous year and as much as 6 million tons, or 45 percent, below the annual average food aid shipments during the previous five years. Nearly all of the contraction was accounted for by reduced shipments to the LIFDCs, particularly in sub-Saharan Africa. Aggregate cereal shipments as food aid to the LIFDCs are estimated to have fallen to 5.7 million tons in 1995/96, 1.4 million tons less than in the previous year and the lowest level on record. Total food aid shipments to the developed countries in 1995/96 are estimated at 1.4 million tons, some 800 000 tons less than in the previous year, mainly due to smaller deliveries to eastern European countries and the CIS.

Following a sharp drop in July and August, international wheat prices stabilized at around U.S. $ 180 per ton in September and early October when volumes of export sales from the United States and the EC picked up and concern heightened once more over the low level of stocks, particularly in the United States. On 10 October the price of U.S. wheat No. 2 was U.S.$ 182 per ton (fob), down U.S.$ 115 per ton, or almost 40 percent, from the peak in April and U.S.$ 19 per ton less than at the same time last year. Maize prices fell further during September and early October influenced by prospects for a significant increase in production as the harvest got underway in the United States, the world's major producer. By 10 October, the price of U.S. No.2 maize (delivered Gulf ports) was U.S.$ 131 per ton, U.S.$ 90 per ton down from the peak in July and about U.S.$ 15 per ton below the price at the same time last year. International prices of both high and low quality rice from almost all origins declined in September and early October under the pressure of a large harvest coming onto the market and limited new demand for rice. By mid-October, the FAO Export Price Index (1982-84=100) averaged 129 points, 5 points down from September and about 13 points below its January level. The price of Thai 100 B fell to U.S.$ 310 per ton in October, down U.S.$ 30 from the previous month and some U.S.$ 100 per ton less than in the same period last year. In the United States, the comparable grade US No. 2, 4 percent brokens was quoted at U.S.$ 429 per ton, down U.S.$ 27 from a month earlier.

FAO's forecast for end-of-season cereal stocks for crop years ending in 1997 has been raised by some 8 million tons since the last report to 285 million tons, reflecting prospects of larger harvests in several countries than earlier anticipated. Assuming the forecast level of stocks materializes, this would be the first increase in four years, with carryovers rising by some 6.5 percent above their reduced opening level. However, despite the improved prospects over the past weeks, the ratio of end-of-season carry overs in 1996/97 to trend utilization in 1997/98, which is now estimated at 15.4 percent, would still remain well below the 17-18 percent range the FAO Secretariat considers the minimum necessary to safeguard world food security. Furthermore, all indications still point to a further erosion of stocks in developing countries, which are forecast to fall to their lowest level since 1991. The bulk of the recovery in global cereal stocks in 1996/97 is expected in coarse grains in the major exporting countries, mainly as a result of a recovery in the maize crop in the United States. Wheat stocks are also expected to increase, but remain at a relatively low level, while global rice stocks are tentatively expected to decline for the fourth consecutive year.

As mentioned above, with many of the world's 1996 cereal crops already harvested or about to be gathered, FAO now forecasts a larger recovery in global production than earlier expected and thus an improvement in the global food supply situation. Nevertheless, even if these more favourable prospects materialize, the stock to use ratio would remain below minimum safe levels and the world food security situation would remain delicate for another year. In these circumstances, it will be crucial for good harvests to be gathered also in the coming year. Winter wheat planting is already underway in the major northern hemisphere producers under generally favourable conditions. Early indications suggest the area sown will remain similar to last year's in the United States and could increase in the EC. But to achieve an adequate global output in 1997, good levels of plantings must also be achieved in other countries and at least normal weather will need to prevail until next year's harvests.

Severe Food Emergencies Continue in Many Countries

Severe food shortages continue to grip several Low-Income Food-Deficit Countries (LIFDCs) in sub-Saharan Africa, Asia and the CIS despite a general improvement in food supplies in 1996. The causes of food shortages vary from region to region, and include civil strife,devastating floods and localized crop failures.

In sub-Saharan Africa, overall food supplies for 1996/97 have improved compared to the previous year, particularly in southern Africa where aggregate 1996 cereal output was above average. However, some 40 percent of the total population of sub-Saharan Africa is already chronically undernourished and this number could rise unless action is taken to stem the current trend. In Sudan, despite an overall satisfactory harvest, production was sharply reduced by insecurity in Juba and Gograil and by floods in parts of the Jonglei State. Food aid assistance is needed in these areas. In western Africa the food security situation remains very tight in Liberia where pockets of famine have developed in some areas following a sharp reduction in food production and serious disruption of relief distributions. This situation has resulted in severe malnutrition and deaths from starvation-related causes. The security situation is improving in Sierra Leone but the country will have to rely mostly on food aid for 1997 as the output of the 1996 growing season is expected to be poor. In the Great Lakes region, the presence of large refugee camps in many areas is affecting agricultural production while the security situation is now very precarious in the whole area. Continued relief to refugees and internally displaced people and sustained assistance is badly needed in Burundi, Rwanda and Zaire to help rebuild their agricultural sectors.

In the Horn of Africa, in Somalia, several producing regions continue to experience a sharp fall in production as a result of recurrent droughts, insect damage and/or floods. Some 200 000 tons of cereal imports continue to be required, and the food supply position of the country remains precarious. Despite good cereal harvests in southern Africa in 1996, Angola and Mozambique continue to require substantial cereal imports most of which as a result of the large population displacement.

Shortages of farm inputs continue to affect food production in Afghanistan and Iraq, where the security situation is also difficult, but also Mongolia and Yemen and a large number of vulnerable people are in need of relief assistance in these countries. The food security situation is also difficult in the Democratic Peoples' Republic of Korea, and Laos where extensive flooding has caused serious damage to crops.

In the CIS, the 1996/97 aggregate cereal import requirement of the five most vulnerable grain deficit countries (Armenia, Azerbaijan, Georgia , the Kyrghyz Republic and Tajikistan ) is estimated at 1.6 million tons, compared to actual imports of just over 2 million tons in 1995/96. Given, the rapid price liberalization of bread and the privatization of the grain distribution chain, the increase in wheat production this year, as well as the emergence of the private traders and importers, the food aid needs of these countries in 1996/97 are estimated to fall sharply to 570 000 tons, compared to deliveries of 1.1 million tons in the preceding year. Against this requirement some 171 000 tons have been pledged to date but in addition, alternative forms of assistance to these countries are being developed including negotiations for concessional credits and direct budget support. Food aid needs however, are expected to remain considerable in Tajikistan, and the grain supply situation in Turkmenistan is expected to remain tight in view of the partial crop failure in that country.

Overall, there is a pressing need for large-scale national and international intervention to bring about a rapid improvement in the food security situation of the affected countries. However, global food aid availability in 1996/97 is not expected to improve much from the low 1995/96 level of 7.2 million tons. In the short run, the attention of the international community is particularly drawn to the need for the speedy delivery of adequate relief assistance to people facing severe food shortages in countries such as Liberia and to affected populations in the Great Lakes region, in the Horn of Africa, in the CIS states and the Democratic Peoples' Republic of Korea. In the medium and long run, sustained donor assistance will be required for the rehabilitation of the agricultural sector in those affected LIFDCs where prospects of a lasting peace are become a reality following the devastation caused by prolonged civil strife.

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