Food Outlook 10/96

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The forecast for world trade in cereals in 1996/97 has been lowered by 2 million tons to 184 million tons since September, down 18 million tons, or 9 percent, from the previous year and representing the lowest volume since 1990/91. This month's revisions take into account reduced trade forecasts for all major categories of cereals. However, compared to the previous year, most of the anticipated large contraction in world trade is in wheat and coarse grains as imports of rice in 1997 are expected to be only slightly below 1996.

World trade in wheat in 1996/97 is forecast to decline to 84 million tons, 9 million tons, or 10 percent below last year and 1 million tons lower than anticipated in September (Table A. 2). At the current forecast level, international wheat trade would be the smallest in volume since the late 1970s. While part of this decline would be on account of smaller imports by Morocco, the decrease has been influenced largely by developments in the CIS and China. The pronounced decline in purchases by the CIS since the early 1990s has had a dramatic influence on the wheat market. Imports by the CIS have fallen by over 15 million tons compared to the early 1980s and are expected to decline further this year to 3 million tons. At the same time, wheat imports by China rose from about 9 million tons in 1970s to over 16 million tons in the late 1980s and dropped back again to around 9 million tons in more recent years, except for exceptional purchases in 1995/96. This year's purchases are anticipated to not exceed 9 million tons as a result of bumper crops.

Analysis of aggregate wheat imports by other countries during the last two decades indicate a rather stable trend with only occasional large variations, mainly associated with changes in production levels. In more recent years, droughts severely reduced domestic wheat supplies in several countries in North Africa, a development which resulted in a surge in imports last year. During the 1996/97 season, however, imports by Morocco and Tunisia are forecast to fall by more than half, mainly due to bumper crops in 1996. Wheat imports into the developing countries of sub-Saharan Africa have remained stable during the past two decades, at between 4 to 5 million tons. Unlike the situation in Africa, wheat imports into Asia have been growing. In Asia, imports by several countries have increased significantly, including the Islamic Republic of Iran, Indonesia, and to some extent also Malaysia, a trend that is forecast to continue into the 1996/97 season.


Wheat Coarse grains Rice (milled) Total

1995/96 1996/97 1995/96 1996/97 1996 1997 1995/96 1996/97

( . . . . . . . . . . . . . . . . . . . . . million tons . . . . . . . . . . . . . . . . . . )
Asia 48.1 43.5 56.2 53.6 9.8 9.0 114.1 106.1
Africa 19.3 16.3 9.8 7.2 3.9 3.9 33.0 27.3
Central America 4.4 4.6 8.8 7.8 1.5 1.4 14.7 13.8
South America 10.1 10.4 4.3 5.3 1.5 1.5 15.9 17.3
North America 1.8 2.0 3.8 3.4 0.5 0.6 6.1 6.0
Europe 4.9 4.1 6.8 4.3 1.1 1.1 12.8 9.5
CIS 4.0 2.7 0.5 0.3 0.3 0.3 4.8 3.3
Oceania 0.4 0.5 0.2 0.1 0.3 0.3 1.0 0.9
WORLD 93.1 84.0 90.4 82.0 18.9 18.2 1/ 202.5 184.2
Developing countries 74.4 67.6 56.6 51.5 16.1 14.9 147.1 134.0
Developed countries 18.7 16.5 33.8 30.5 2.8 3.3 55.4 50.2

1/ Highly tentative.

Wheat imports into Latin America and the Caribbean have also expanded from 10-12 million tons in the early 1980s to 14-15 million tons nineties. Brazil and Mexico account for most of this increase, which together represent almost half of total wheat imports into the region. Current indications for 1996/97 point to a small increase in wheat imports by Mexico, up 200 000 tons from last year to 1.6 millions, provided the currently anticipated drop in production materializes. By contrast, in Brazil, as a result of very strong domestic demand, wheat imports in 1996/97 are expected to remain at last year's level of 5.5 million tons in spite of this year's anticipated bumper crop.

Aggregate imports by the developed countries, in 1996/97 are likely to decline mainly on account of smaller imports by the CIS and the EC and despite larger imports by Bulgaria and Romania. Although Bulgaria exported wheat last year, it is likely to import at least 600 000 tons of wheat this year in order to overcome the current scarcity that stems from a sharply reduced output caused by unfavorable weather conditions and lack of finance for inputs. Likewise, in sharp contrast to last year when Romania exported 2 million tons of wheat, the country is expected to resort to importing over 100 000 tons during 1996/97, as production is estimated at a record low due to a combination of unfavourable weather, insufficient funds to purchase fertilizers and the lack of state-run commercial banks to provide credits to the farming sector in time.

Current prospects of above average to record crops, not only among the major exporters but also in several importing regions, indicate that export availabilities during 1996/97 will be more than sufficient to meet this year's reduced import demand, but also allow for a recovery in carryovers held by major exporters. With the exception of the United States, where this year's exports are forecast to be considerably smaller than last year, other major exporters are expected to ship more wheat during the 1996/97 season. The largest increase is expected for Argentina, where a bumper wheat crop could result in a doubling of wheat exports from last year to over 8 million tons. Exports from the EC are anticipated to reach 15 million tons, 4 million tons higher than in 1995/96. With near record crops in most major grain producing countries in the Community, it is anticipated that the Commission would relax its export policy and allow more grains from the Community to enter international markets. Similarly, Australia and Canada are also forecast to raise their exports. Higher shipments from major exporters would be more than offset mainly by reduced sales from several countries, especially in eastern Europe. Both Bulgaria and Romania are expected to become net wheat importers, while exports from Hungary are also forecast to fall sharply due to a below average crop. Smaller exports are also anticipated from India.

International trade in coarse grains in 1996/97 is now forecast at 82 million tons, 8.4 million tons, or over 9 percent, below the previous year's estimated imports and down 500 000 tons from the September forecast. At this level, world trade in coarse grains would be one of the smallest in the last two decades. Since the early 1990s, trade in coarse grains has stagnated at around 90-93 million tons, mainly due to a sharp reduction in purchases by the CIS, which especially affected the maize and barley markets. The increase in barley purchases by Saudi Arabia since the late 1980s offset the sharp decline in imports by the CIS to some extent. Current forecasts for 1996/97 point to a notable contraction in maize trade, which is expected to fall below 60 million tons, 9 million tons lower than last year. The decline in maize trade could be partially offset by a small increase in barley trade which is expected to reach 14 million tons. Global trade in sorghum is likely to remain at last year's reduced level of just over 5 million tons, as is the aggregate trade in other minor coarse grains, such as oats, rye and millet, at around 3.5 million tons.

Most of the decline in world trade of coarse grains is expected in the developing countries. Total imports into the developing countries are expected to fall by 5 million tons from last year to 51.5 million tons in 1996/97. The bulk of this drop in imports will be on account of reduced maize purchases by China. By contrast, barley purchases by Saudi Arabia and maize imports by the Philippines are expected to increase. Aggregate coarse grain imports by the developing countries in Africa are forecast to drop by 1.8 million tons, mainly due to a strong recovery in production in several countries in both northern and southern Africa. The forecast for coarse grain imports into Latin America and the Caribbean has been lowered by 300 000 tons since September to 13 million tons, almost unchanged from last year. The revision takes into account smaller imports than anticipated earlier for Mexico, which is currently expected to harvest a larger maize crop. By contrast, Brazil is anticipated to buy more maize this year in order to make up for a production shortfall.

Aggregate coarse grains imports by the developed countries in 1996/97 are forecast to decline for the fifth consecutive year to 30.5 million tons, 3 million tons less than in 1995/96. Most of this year's anticipated decline is expected in the EC, where a larger coarse grain harvest in 1996 is expected to lead to a fall in purchases by over 3 million tons, or nearly 70 percent, to reach 1.5 million tons. Also, as a result of a strong rebound in domestic maize production in South Africa, this year's imports are expected to be limited to around 50 000 tons compared to almost 1 million tons in 1995/96. Faced with lower domestic maize production, Bulgaria may resort to imports of more than 300 000 tons . Similarly, smaller production in Romania is expected to boost imports to 400 000 tons, four times the level of last year. In Japan, following a small decline in 1995/96 maize imports, caused mainly by larger imports of meat replacing domestic output, this year's total coarse grain purchases are forecast to rise by some 800 000 tons to 21 million tons.

The anticipated decline in global imports of coarse grains in 1996-97 will affect mostly exports from the United States which, despite the strong rebound in production, are expected to fall by 15 million tons. While maize exports from Argentina are also likely to shrink this year, total coarse grain shipments from the EC are anticipated to increase significantly. Most of the rise would reflect larger barley exports after a year of restricted sales due to domestic supply concerns. In addition, coarse grain exports from South Africa, Turkey, Hungary and Poland are also anticipated to expand in 1996/97 compared to last year.

FAO's forecast for global rice trade in 1996 is little changed at 18.9 million tons, 1 million tons down from the previous year's level of trade. Demand for rice in the international rice market in recent months has continued to slacken, affecting export sales and shipments of almost all major rice exporters. Thailand's exports by mid-October totalled 4.2 million tons, about 0.6 million tons down from the previous year. In the United States, exports of rice have continued to fall, and although there have been significant sales under its PL480 programme to Jordan, Côte d'Ivoire, Moldova and Sri Lanka, total exports for the year could still fall below the official expectation of 2.7 million tons. In India, shipments of rice out of its principal outlet, Port Kandhla, continue to decline. In Myanmar, rice exports have virtually come to a halt despite the large harvest of last year. Exports of rice out of Australia are also likely to fall sharply below its original year-end forecast of 620 000 tons.

By contrast, both China's and Viet Nam's rice exports have remained relatively high. Between January and August, China's exports of rice totalled 150 000 tons, nearly 5 times the quantity exported in the same period last year. In Viet Nam, large supplies have prompted the request for an enlargement of the export quota for rice to 2.8 million tons for calendar year 1996, 0.8 million tons more than in 1995. This, combined with the likely improvement of credit availability to exporters and a reduction in the export tax on broken rice, has increased the prospect for Viet Nam to ship its full export quota of 2.8 million tons this year. Under the new proposed credit scheme, exporters would pay a 1 percent interest rate for a 3-month loan to procure rice for export. By end-September, the country's rice exports totalled 2.2 million tons, compared to 1.5 million tons shipped in the same period last year.

While the forecast for global rice imports in 1996 has changed little from the previous month, significant revisions have been made to the imports of some countries. The forecasts for imports into the Korea, D.P.R. and Iraq have been reduced. Although both countries continue to face serious food shortages, the likelihood that they would be able to import the volume earlier projected has declined. Imports by the Democratic Peoples' Republic of Korea, for the first nine months of 1996 were substantially below last year.

The forecast for imports into Bangladesh and Japan have also been reduced. With its rice inventories expected to stand at 2.3 million tons by end-October and a good 1996 crop in the offing, Japan is not expected to import much in the next few months but would most likely import the bulk of its 1996 fiscal year WTO commitment in early 1997. In the case of Bangladesh, expectations of a good harvest have led to a rescheduling of its imports to 1997. By contrast, the forecast for imports into the Islamic Republic of Iran in 1996 has been raised sharply. By end-August, estimated deliveries to the country had reached about 1 million tons.

The recovery in production seen in major importing countries in 1996 is expected to result in a weakening of international import demand for rice in 1997. Preliminary indications point to a 4 percent fall in trade to 18.2 million tons in 1997, a larger decline than had been anticipated previously.

Imports into Asia are expected to fall substantially. Following a recovery in its production in 1996 and the replenishment of its stocks, the Philippines is expected to reduce its 1997 rice imports to a fraction of the near one million tons imported in 1996. Bangladesh and China are also expected to buy less. Likewise, following the big increase in their procurement in 1996, Near Eastern countries are expected to reduce their imports next year.

By contrast, Indonesia may still remain a substantial importer in 1997. Although a larger harvest was gathered in 1996, its state procurement agency - BULOG - which is responsible for the rice distribution and price stabilization programme of the country, has not been able to meet its procurement target so far. This could lead to relatively large imports in 1997 although the final outcome would depend heavily on the country's 1997 harvest, the bulk of which is gathered early in the year. As regards Japan, its 1997 imports could well rise above the level of 1996 because of a carry-over of its market access commitments to buy rice in the international market.

The weakening of import demand is expected to affect almost all exporters. The continued downward pressure on international rice prices could affect adversely India's export competitiveness. Domestic food grain prices in India (both for wheat and rice) have already risen in 1996 and while stocks of rice in the country remain large, the vast quantities exported in the recent two years have reduced the large rice holdings to the levels of the early 1990s. Exports from the United States are likely to fall to 2.3 million tons. Viet Nam's exports are also likely to decline. Thailand's exports, which had fallen substantially in 1996, could recover marginally in 1997 with an improved 1996 crop.

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