The outlook for global cereal supplies has improved somewhat since the last report. With firmer information now available on the last of the 1997 cereal crop harvests, FAO's estimate of global cereal production has been revised slightly upward, indicating a larger increase from 1996 than earlier expected and a modest replenishment of aggregate carryover stocks. Nevertheless, despite the increase, global carryovers are forecast to remain below minimum safe levels for another year. Thus, global food security in the coming 1998/99 season will again depend on another good and above-trend cereal crop in 1998 for the third consecutive year, an unusual occurrence in the last 20 years. The condition of 1998 crops already in the ground is average so far, but contrary to earlier expectations the area sown to winter wheat in the United States and the CIS is lower than last year and wheat production is expected to decline in China. On the positive side, damage to coarse grain production in southern Africa due to El Niño has been less than anticipated and output is expected to recover in

North Africa. In the current situation, with the margin of security provided by reserve stocks at below desirable levels, the situation calls for continued close monitoring in the months ahead as a deterioration in prospects for the 1998 crops could lead to price rises with serious consequences for the food security of many Low-Income Food Deficit countries, particularly those which depend on imports to meet a large part of their food requirements.

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 1997 at 1 901 million tonnes (including rice in milled equivalent), 13 million tons above the previous forecast, mainly reflecting upward revisions to estimates of output in the CIS and Europe. At the forecast level, world cereal production in 1997 would be slightly above the previous year and above trend for the second consecutive year, with output of wheat rising significantly and more than offsetting the reduction in coarse grains. Global output of wheat is now put at 611 million tons, some 19 million tons above the previous forecast and 3.2 percent up from 1996. Production increased both in developed and developing countries. The latest estimate of coarse grains production is 908 million tons, about 8 million tons above earlier reports, but still 1 percent below the previous year. The latest revision mostly reflects upward adjustments to the estimates for Europe and the CIS. With regard to rice, harvesting of the 1997 main crop is over and FAO now forecasts global output of paddy in 1997 at a record 571 million tons, 3 million tons above the previous year's level.

Early prospects for 1998 wheat crops are mixed. In the United States, contrary to earlier expectations, winter wheat plantings were reduced by 4 percent to the lowest level since 1973, but crop conditions are favourable so far. In Asia, the outlook for winter wheat is unfavourable in China due to dry conditions and in Pakistan, while another good crop is expected in India. In Europe, winter wheat plantings are reported to be up again in the major producing countries in the EC but in the eastern European countries the outcome of the winter planting seasons is still very uncertain as plantings were reduced in several countries and unseasonably warm weather has diminished the protective snow cover. In the CIS, early indications point to a production decline. Winter wheat sowings were lower and a cold spell in late December has caused some crop damage; winterkill could be higher than last year. In North Africa, by contrast, conditions have been mostly favourable so far and production is expected to recover from the poor crops last year.

Regarding 1998 coarse grains, crops are in the ground in some of the major southern hemisphere producing countries. In southern Africa, the negative effects of the El Niño have been less than expected and the crop outlook is much more favourable than earlier anticipated, although the final outcome remains uncertain. Likewise, in South America, weather conditions have favoured crop development. A record maize output is expected in Argentina despite reduced plantings and in Brazil an above-average crop is expected, although lower than last year. 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 an increase in maize plantings due to more favourable market prospects than for wheat. In Europe, where the bulk of the coarse grain crop will not be planted until the spring, it is unlikely that production in 1998 will match last year’s record. In the equatorial belt and the southern hemisphere, conditions of the early 1998 rice crops are unfavourable in Indonesia and the Philippines due to drought attributed to El Niño which has reduced sowings and expected yields.

FAO's forecast of world imports in cereals in 1997/98 (July/June) has been lowered by some 0.7 million tonnes, to 201 million tonnes, since the last report. This would still be about 3 million tons, or 1.5 percent above the previous year's reduced volume. The latest revision reflects a sharp decrease in estimated coarse grains imports in Asia, only partly offset by an increase in the forecast for rice imports by the same region, while the forecast of global wheat imports in 1997/98 has remained almost unchanged at about 93 million tonnes. Global coarse grain imports in 1997/98 (July/June) are now forecast at 89 million tonnes, 1.3 million tonnes below the earlier forecast and only 1.6 million tonnes above the previous year’s volume. With regard to rice, world imports in 1998 are now forecast to increase to about 20 million tonnes, from 18.2 million tons traded in 1997. This reflects lower opening stocks in several of the major importing countries and the expectation of reduced yields in some southern hemisphere producing countries.

International export prices of all major cereals, except rice, have weakened considerably since October 1997 reflecting the improved supply situation for wheat and the impact of the financial crisis in Asia for maize. By contrast, rice prices have been supported by strong import demand by several Asian countries. By the end of January 1998, U.S. wheat No. 2 (Hard Red Winter, fob) was quoted at US$145 per tonne, US$8 per tonne lower than late October 1997 and some US$35 per tonne down from a year ago. International maize prices have also decreased and by late January, United States maize prices were quoted at US$116 per tonne, about US$2 per tonne lower than in October but unchanged from a year earlier. By contrast, international rice prices have risen in recent months reflecting a surge in import demand, especially by Indonesia and the Philippines. The FAO Export Price Index for rice (1982-84=100) averaged 123 points in January, slightly above the October level. By late January, quotes for Thai 100B rice rose to US$310 per tonne, up US$40 per tonne from October, while prices of lower grades weakened. Despite the recent strengthening rice prices are below those of a year ago.

FAO's forecast of cereal stocks for the crop years ending in 1998 has been raised since the last report to about 295 million tonnes, which would be about 1.5 percent above their opening levels. The latest increase mostly reflects improved coarse grains supply prospects in southern hemisphere countries coupled with lower expected demand in Asia. The increase in world cereal stocks from the previous year is entirely due to larger anticipated carryovers in wheat while those of rice and coarse grains are expected to fall by about 5 percent each. Although wheat inventories are forecast to increase for the second consecutive year, mostly among the importing countries, they would remain much below the levels of the early nineties. Globally, the ratio of end-of-season stocks in 1998 to trend utilization in 1998/99 is now forecast at 15.7 percent, slightly above the previous year but still well below the 17 to 18 percent range which the FAO Secretariat considers as the minimum necessary to safeguard world food security.