FAO/GIEWS - Food Outlook 97/01

CEREALS

SUPPLY/DEMAND ROUNDUP

The outlook for global cereal supplies has improved further since the last report. With firmer information now available on the last of the 1996 cereal crop harvests, FAO's estimate of global cereal production has been revised upward, indicating a larger recovery from 1995 than earlier expected. This level of production is expected to lead to increased utilization of cereals in 1996/97 and to a substantial replenishment of aggregate carryover stocks for the first time in four years. Nevertheless, despite this increase, global carryovers are forecast to remain below minimum safe levels for another year with wheat stocks still well below normal. Thus, global food security in the coming 1997/98 season will once again depend on another good cereal crop in 1997. Although the early outlook for the 1997 crops is mostly satisfactory so far, international cereal markets, which have stabilized over the past months, remain poised to react to any signs of deteriorating conditions.

In Africa, the food supply outlook remains difficult in several parts of the Great Lakes Region. In Rwanda, the influx of hundreds of thousands of refugees from neighbouring countries has strained the already fragile and unstable food situation in the country and overall food prospects are bleak for a large number of people in the months ahead. The socio-political crisis in Burundi and the economic sanctions imposed by neighbouring countries threaten to aggravate the food supply situation in the coming months. The outlook for eastern Zaire gives cause for serious concern, where timely distribution of food will pose a major challenge to the international community. Displacement of the population due to civil strife in northern Uganda have resulted in severe food supply problems. In Tanzania, some 280 000 people need food assistance following a poor harvest in 1996. In other parts of eastern Africa, some good main crops were gathered in 1996 but food supply problems give cause for concern in Kenya where the main season output fell and a poor secondary crop is expected and in Somalia. Poor secondary harvests are also expected elsewhere throughout the sub-region following inadequate rains. In southern Africa the food supply situation has generally improved in Mozambique, but remains cause for concern in Angola, despite improvements in foodcrops production. In western Africa, 1996 cereal production was average to above average in most Sahelian and coastal countries. However, in Liberia civil disturbances continue to disrupt cereal production and the food supply situation remains tight in many areas as a result. In Sierra Leone, food production recovered in 1996 due to the on-going peace process, but remained well below the pre civil-strife average. In Asia, severe floods damaged the 1996 crops in Cambodia, Laos and Viet Nam. In Iraq, the implementation of the oil-for-food deal should improve the food and nutrition situation of the population, however, the allocation for food is estimated to cover slightly above 50 percent of the estimated food import requirements. In Korea DPR, substantial food assistance will be needed in 1997 to meet minimum food requirements. In the CIS, the cereal supply situation remains precarious in several vulnerable food deficit states, notable Armenia, Georgia and Tajikistan. In Europe, food security has improved in Bosnia-Herzegovina with the cessation of hostilities while it has deteriorated in Bulgaria due to sharply reduced 1996 harvests.

WORLD CEREAL PRODUCTION, SUPPLIES, TRADE AND STOCKS

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

FAO's latest estimate puts world cereal production in 1996 at 1 872 million tons (including rice in milled equivalent), 23 million tons above the previous forecast, mainly reflecting larger than expected wheat output in South America and Australia, where harvests have just been completed, and a significant upward adjustment in the final estimate of the United States’ coarse grains crop. At the forecast level, world cereal production in 1996 would be some 8 percent above that in 1995 and above trend, with output of both wheat and coarse grains rising significantly. Global output of wheat is now put at 588 million tons, about 7 million tons above the previous forecast and 7.5 percent up from 1995. Production increased considerably in both the developed and the developing countries. The latest estimate of coarse grains production is 905 million tons, about 7 million tons up from the previous forecast and 11.6 percent up from the previous year. This large increase is mostly occurred in the developed countries where in particular, the United States' maize production recovered strongly from 1995's drought-reduced level, but output also rose among the developing countries, particularly in sub-Saharan Africa. With regard to rice, harvesting of the 1996 main crop is over in most countries. Taking into account both the size of the main crops already collected, and the potential yields likely from the second and third rice crops still in the ground, FAO forecasts global output of paddy in 1996 at a record 556 million tons, 12.2 million tons above the previous year's level.

Early prospects for 1997 wheat crops are mostly satisfactory. In the United States, despite a 7 percent reduction in plantings, favourable conditions so far point to less winterkill this year, and the harvested area may turn out similar to that in 1996. In Canada, the bulk of the wheat crop will not be sown until the spring. Early indications point to a possible reduction of wheat plantings with rotation of land back to oilseeds. In Asia, the outlook for winter wheat is favourable reflecting ample water reserves for developing crops. A bumper crop is expected in China and above average harvests are anticipated in India and Pakistan. In Europe, winter wheat plantings are reported to be up again in the major EC producers. In the eastern European countries the outcome of the winter planting campaigns is still very uncertain and it is unlikely that much increase over last year's area has been achieved. However, if weather conditions are normal in the coming months, improved yields are likely, particularly in Bulgaria and Romania which suffered serious crop losses from adverse weather in 1996. In the CIS, early indications point to an aggregate reduction in winter wheat sowings but apart from the extremely cold spell in late December through early January, winter conditions have been generally mild.

Regarding 1997 coarse grains, crops are in the ground in some of the major southern hemisphere producing countries. In southern Africa, the outlook is favourable following good planting rains throughout the region. Likewise, in South America, weather conditions have favoured planting. Output is set to increase significantly in Argentina after last year's drought. In the northern hemisphere, some winter coarse grains are already in the ground but the bulk of the crops will be sown in April/May. In the United States, early indications point to a maize area at least equivalent to the previous year's. In Europe, as for wheat, the coarse grain area could expand somewhat in the EC but will likely remain restricted in the eastern European countries because of financial constraints on farmers. In the equatorial belt and the southern hemisphere, the newly planted 1997 season rice crop is progressing under generally favourable conditions.

FAO's forecast of world trade in cereals in 1996/97 is now put at 186 million tons, some 1.5 million tons up from the forecast in the previous report but down 20 million tons or 10 percent from the estimated volume traded in 1995/96. The forecast for wheat and wheat flour (in wheat equivalent) in 1996/97 (July/June) remains at 84 million tons, unchanged from the previous report, and 10 million tons, or 11 percent, lower than the estimated volume for 1995/96 mainly reflecting smaller imports by the developing countries. Despite the anticipated contraction in global wheat trade in 1996/97 (July/June), aggregate exports from the top 5 major exporters are forecast to increase marginally to 80 million tons, representing 95 percent of the world total compared to 88 percent in the previous year. The forecast for world trade in coarse grains in 1996/97 (July/June) has been revised upward since the last report to 83.3 million tons, but would still remain well below the previous year and be the lowest since 1987/88. The bulk of the decline is expected in the developing countries, as a result of higher production in several importing countries. Output has also risen in exporting countries and this has contributed to a substantial easing of the previously tight market situation. With regard to rice, latest information continues to point to a contraction of trade in 1997. World trade in rice is now forecast at 18.5 million tons, slightly above previous forecasts due to increased imports expected by Iraq, the Democratic Republic of Korea and Japan, but 2.6 percent down from the previous year's level.

International wheat prices remained firm over the last two months, although generally lower than in November. By late January, US wheat No. 2 was traded at U.S.$ 180 per ton, down U.S.$ 7 per ton from November and U.S.$ 37 per ton below the same period a year ago. On the futures market, prices have remained highly sensitive to the prospects for the 1997 crops. After a sharp fall since late August 1996, international maize prices stabilized somewhat over the past two months. By late January, following confirmation of above-average 1996 harvests in most regions, the export price for maize (U.S. No. 2 yellow) fell to around U.S.$ 119 per ton, some U.S.$ 80 per ton less than in July and nearly U.S.$ 37 per ton below the corresponding period a year ago. After a steady decline since July last year, international rice prices recovered in early January in response to a temporarily tight supply situation in Thailand where heavy rains delayed the main harvest. The FAO Export Price Index for Rice (1982-84=100) averaged 132 points in January, 3 points up from December but still 11 points below the corresponding period a year ago.

FAO's latest forecast of aggregate cereal carryovers for crop years ending in 1997 has been revised upward by 9 million tons since the last report to 294 million tons, 32 million tons, or 12 percent, above their reduced opening volume. The bulk of this year’s anticipated stock replenishment is expected in the major exporting countries, where combined cereal carryovers are expected to increase for the first time in four years approaching about 40 percent of the world total, compared to 30 percent at the beginning of the season. By contrast, total cereal stocks held by other countries, particularly developing countries, are forecast to decline for the third consecutive year. World wheat stocks for crop years ending in 1997 are now put at some 117 million tons, 6 million tons up from earlier forecast, and 12 million tons above their reduced opening level. The forecast for world coarse grain stocks for crop years ending in 1997 has also been revised upward further since the last report, to 124 million tons, about 22 million tons, or over 20 percent, above their reduced opening levels. FAO's forecast for global rice stocks at the end of the marketing seasons in 1997 is little changed at just under 52 million tons, some 2 million tons less than their opening level. The bulk of the reduction is expected in Asia.

As indicated above, although latest information confirms a recovery in global cereal carryovers at the end of the 1996/97 seasons, the ratio of end-of season stocks to trend utilization in 1997/98, now estimated close to 16 percent, would still be below the 17-18 percent range the FAO Secretariat considers the minimum necessary to safeguard world food security. Assuming utilization of cereals remains on trend in 1997/98 another good cereal crop will be required in 1997 to avoid the need to draw on limited available reserves. At this stage of the season, with most winter cereals in the northern hemisphere still dormant, and the major coarse grain and paddy crops yet to be sown, it is still too early to forecast aggregate global cereal output in 1997. However, early indications for crops already in the ground and expectations for those to be sown later this year are mostly satisfactory. On current preliminary indications, a good cereal crop is in prospects for 1997, although it is unlikely to be as large as last year’s record. A deterioration in 1997 production prospects, which cannot yet be ruled out, could reverse recent improvement in the global food supply situation and return volatility to international cereal markets with severe implications for the low-income food-deficit countries. Thus the situation calls for continued close monitoring in the months ahead.