FAO/GIEWS - Food Outlook 97/01

TRADE

World trade in cereals in 1996/97 is forecast to fall to 186 million tons, down 20 million tons or 10 percent from the previous year but some 1.5 million tons higher than was reported in November. At the current forecast level, global cereal imports would be the lowest since the mid 1980s. The bulk of this year’s sharp contraction is accounted for by lower imports of wheat and coarse grains, with the likely decline in imports of rice being less pronounced.

World trade in wheat and wheat flour (in wheat equivalent) in 1996/97 (July/June) is forecast at 84 million tons, unchanged from the previous report, and 10 million tons, or 11 percent, lower than the estimated total for 1995/96. Most of the decline in imports from last year is the result of much lower forecasts for China and some countries in Africa. Aggregate wheat imports by the developing countries in 1996/97 are likely to fall to 67 million tons, 8 million tons, or 11 percent, less than in 1995/96. In Asia, following this year’s bumper harvest and the corresponding slow pace in imports compare to the same period last year, the forecast for wheat imports by China (including the Province of Taiwan) has been cut to 6 million tons, 8 million tons, or nearly 60 percent, lower than the estimated imports in 1995/96 and 3 million tons smaller than was anticipated in November 1996.

By contrast, India is expected to import about 1.5 million tons this year to check the rise in prices and increase domestic supplies. The forecast for wheat imports by Pakistan has also been raised this month, to 2.3 million tons following the Government’s decision to raise the wheat import target to 2.3 million tons to compensate for a smaller crop than anticipated. Wheat imports by the Democratic Republic of Korea have also been raised to 250 000 tons, up 200 000 tons from earlier forecasts.

OVERVIEW OF WORLD CEREAL IMPORTS

Total wheat imports into the developing countries in Africa are anticipated to decline this year. This would be mainly due to a significant recovery in production in Morocco and Tunisia. This year’s purchases by Morocco are currently forecast at about 1 million tons, down 2 million tons from last year. As a result of a record wheat production, imports by Tunisia are expected to return to more normal levels, of around 500 000 tons, compared to 1 million tons imported annually during the past two years. Slightly smaller imports are also anticipated in some developing countries in sub-Saharan Africa, especially Ethiopia and Zimbabwe due to higher domestic production. For most other countries, this year’s imports are expected to remain close to last year’s estimated volume. Aggregate wheat imports into Latin America and the Caribbean are forecast to decline slightly compared to 1995/96. Imports by Mexico are forecast to remain unchanged at last year’s level of 1.6 million tons but somewhat smaller imports are anticipated by Brazil, Colombia and Peru.

Total wheat imports into the developed countries are expected to decline for the fourth consecutive year. This year’s imports are forecast to approach 17 million tons, 2 million tons down from the previous year, representing 20 percent of the world total. Wheat imports into the CIS are expected to drop to 2.7 million tons, 1.3 million tons below last year’s reduced volume, mainly on account of lower purchases by the Russian Federation. In Europe, the expected decline in imports by the EC is more than offset by likely higher purchases by Bulgaria and Romania.

Despite the anticipated contraction in global wheat trade in 1996/97 (July/June), aggregate exports from the top 5 major exporters are forecast to reach 80 million tons, some 600 000 tons more than in 1995/96, representing 95 percent of the world total compared to 88 percent last year. Among the major exporters, only the United States is expected to end the season with significantly smaller shipments than last year. By contrast, record crops in Argentina and Australia are likely to boost their share in this year’s export market while sales from Canada and the EC will probably also rise. Among the less important exporting countries, neither India nor Saudi Arabia are anticipated to be in the export market this season, while shipments from Turkey could remain at last year’s level of about 1 million tons. In Europe, exports from several countries outside the EC are also likely to be curbed substantially. Bulgaria will have no supplies for exports while shipments from Romania are expected to be insignificant after they had reached around 2 million tons in 1995/96. Poland is anticipated to export about 200 000 tons, the same volume as in the previous year. Exports from Hungary could reach 1 million tons, a drop of 50 percent from last year.

The forecast for international trade in coarse grains in 1996/97 (July/June), at 83.3 million tons, is well below last year’s estimated volume of around 92 million tons despite an upwards adjustment by 1.3 million tons since the last report. At that level, world trade in coarse grains would be the lowest since 1987/88 when imports were about 82 million tons. The anticipated decline in global trade is expected to affect nearly all major types of coarse grains with the exception of barley which could increase slightly. Maize imports, which normally represent about 70 percent of the total trade in coarse grains, are likely to decline the most, to about 60 million tons, some 9 million tons less than in 1995/96.

Similar to this year’s wheat situation, the bulk of the anticipated decline in imports of coarse grains in 1996/97 would be in the developing countries which, as a group, are forecast to import about 52 million tons this year, almost 8 million tons, or 13 percent, less than last year’s estimated volume. The largest fall is expected in Asia, mainly in China where, as a result of a bumper crop, imports are expected to fall from over 5 million tons in 1995/96 to below 2 million tons in 1996/97. Imports by the Republic of Korea, the world’s second largest importer of coarse grains after Japan, are forecast at 10 million tons, 500 000 tons lower than in the previous year with the decline likely to be offset by higher imports of low quality wheat. By contrast, Saudi Arabia, the world’s largest barley importer, is likely to increase its purchases this year, taking advantage of this season’s lower prices and large supplies in the world market.

In Africa, aggregate coarse grains imports by the developing countries are forecast to fall to about 6.5 million tons, 2 million tons less than in 1995/96. Most of the decline will be on account of reduced demand from Algeria, Morocco and Tunisia, mainly as a result of larger domestic output. Total imports by the developing countries in sub-Saharan Africa are also forecast to fall, by about 500 000 tons. The bulk of the decline is anticipated in several countries in southern Africa, particularly in Zimbabwe and Zambia, following a strong rebound in maize production,. By contrast, maize imports by Kenya will increase sharply due to reduced output in 1996.

In Latin America and the Caribbean, a decline in purchases by Mexico is likely to more than offset the forecast increase in imports by several countries in South America, particularly Brazil. In Mexico, with favourable prospects for this year’s sorghum crop, imports of that coarse grain could decrease. By contrast, Brazil is forecast to buy more maize this year in order to make up for a domestic production shortfall.

Total coarse grain imports into the developed countries in 1996/97 is expected to reach about 32 million tons, some 1.5 million tons less than their estimated imports in 1995/96. The bulk of this decline is expected in the EC, where this year’s large output will limit imports to about 2.5 million tons, compared to 4.4 million tons in 1995/96. By contrast, due to a fall in domestic production, Bulgaria may import around 500 000 tons of maize and barley. In Romania, smaller production is expected to lead to large imports of barley, of some 400 000 tons. Elsewhere, after a year of moderate decline, purchases by Japan, the world’s largest coarse grain importer, are forecast to rise by 500 000 tons to 20.6 million tons, mainly to replenish stocks.

While global trade in coarse grains is forecast to fall significantly this year as a result of higher production in several importing countries, rising output in almost all major exporting countries contributed to a substantial improvement in their domestic supply situation and hence to higher export availabilities. A significant recovery in the United States combined with a record output in the EC and above average harvests in nearly all other major coarse grain exporting countries brought relief to the market which, before the completion of major harvests in October, was exceptionally tight. In addition, this year’s export supplies from a number of smaller exporting countries, including South Africa, Turkey and Hungary, are also likely to return to more normal levels while recent reports from China suggests that the ban on exports of maize may be about to be lifted, allowing the country to return to the export market.

International rice trade in 1996 fell from the 1995 record level of nearly 21 million tons to just over 19 million tons. Many of the traditional exporters were affected by a substantially weaker import demand. Thailand's exports fell by 0.7 million tons to 5.3 million tons and the United States exports declined by 0.3 million tons to 2.6 million. India's rice exports which had reached a record 4.2 million tons in the previous year fell drastically to an estimated 3.4 million tons. By contrast, Viet Nam which lost a considerable share of its global trade in 1995 with the emergence of India as a strong competitor, expanded its exports of rice to a record 3.1 million tons. China’s exports which were negligible in 1995 recovered to 260 000 tons in 1996. In Pakistan, more competitive pricing, especially following the devaluation of the Pakistan Rupee raised exports to an estimated 1.5 million tons.

With global production of rice having reached another record high in 1996, global import demand is likely to be relatively weak in 1997. World trade in rice is projected at 18.5 million tons, a level which is smaller than in 1996 but higher than the forecast held previously. The upward revision reflects mainly a larger forecast import into Iraq, the Democratic Republic of Korea and Japan.

Japan's 1997 calendar year imports are expected to rise above the level in 1996. This is partly because its end-of-the year purchases of rice made in compliance with its 1996 fiscal year minimum market access commitments are likely to arrive in calendar year 1997. Moreover, Japan's rice market access commitment for fiscal year 1997 totals 531 000 tons (milled equivalent) compared to 455 000 tons for 1996 fiscal year. Whether the entire 1997 fiscal year commitment will be implemented in the calendar year would depend upon the performance of its 1997 rice crop. Expectations are that output could be cut-back following plans to reduce the support price for rice by 1.1 percent, the first reduction in six years.

Iraq's agreement to the UN conditions on sale of oil for food is expected to pave the way for the country's increased imports of rice. Reflecting this, the forecast for Iraq's rice imports in 1997 has been raised to 600 000 tons. Official indications are that about 340 000 tons of rice would be purchased in the first half of the year. Prospects for increased rice imports into DPR Korea have also brightened although virtually all its imports would be as food aid.

Despite expectations of larger rice transactions by Iraq, Japan and DPR Korea, total imports into Asia are forecast to decline because of a likely reduction in the imports of Bangladesh, China, Indonesia and the Philippines. Compared to previous years, the supply of rice in all 4 countries has improved following a recovery in their production and/or stocks. However, even in these countries the situation is relatively fluid and can still change if there should be any alterations in the performance of paddy crops currently in the ground. In the Philippines, apprehension over a possibility that domestic prices of rice would increase, as they did in 1995, continues and has resulted in discussions on the possible need for larger imports despite a recovery in production.

Outside Asia, import demand would remain relatively strong. Brazil is expected to increase its imports in 1997. With a likely poor output in 1997, which follows the decline in production by a million tons in 1996, stocks are expected to be drawn-down. Although most of its rice imports are normally supplied by its MERCOSUR trading partners, principally Argentina and Uruguay, in the case of rice, their capacity to meet demand in Brazil fully would depend upon the size of their 1997 rice crop. Imports into North and Central American countries, especially Canada and the United States, are likely to continue their upward trend. Mexico's recent removal of the import ban on rice from Asia could improve the export prospects of Asian exporters. Africa, which imported large quantities of rice in 1996, following the liberalization of its rice imports in several major rice consuming countries, could maintain a strong presence in the world market for rice although the final quantities that would be purchased would depend upon international rice prices.

Almost all exporters are likely to feel the impact of the weaker global demand for rice. The United States's exports in 1997 are forecast to fall by 300 000 tons to 2.3 million tons. India's exports could take a substantial drop. The re-introduction of the levy system which requires exporters to deliver 50 to 75 percent of their rice purchase to the Food Corporation of India could affect its export competitiveness especially in the face of weak international demand and increased competition for market shares.

Viet Nam's exports could also fall. However, much would depend upon the performance of the winter-spring crop which is harvested in 1997 and the policy it adopts with respect to exports. The lifting of the export quota of rice in Viet Nam in October last year contributed significantly to the recovery of its trade in 1996. Thailand's exports may increase in 1997 but the outlook remains somewhat uncertain. Over the past years, export prices of rice in Thailand have been more resilient and less responsive to the downward pressure exerted by weaker international demand. This could result in a further shift of its traditional buyers to new sources.