FAO/GIEWS - Food Outlook No. 3, June 1998 Page 3

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The outlook for cereal supplies for the forthcoming 1998/99 marketing season has markedly improved in the last two months. This reflects an increase in the estimate of ending stocks to be carried over to the new season and the expectation of another above average crop in 1998, the third in a row. Based on the condition of crops already in the ground and assuming normal weather for the remainder of the 1998 cropping seasons, FAO's latest forecast of world cereal output this year is 1 911 million tonnes (including rice in milled terms), some 16 million tonnes above the earlier forecast, slightly larger than output in 1997 and a new record. If current forecasts materialize, cereal supplies would be sufficient to meet expected consumption requirements in 1998/99 and allow for the replenishment of global cereal reserves to minimum safe levels. It should be pointed out that, with many of the 1998 crops just in the early stages of development, and the bulk of the rice crop in Asia still to be planted, these forecasts are still quite tentative. A deterioration in prospects for 1998 crops cannot yet be ruled out, particularly in several southern hemisphere countries affected by unpredictable El Niño-associated weather.


(. . . . . . million tonnes . . . . . .) 
Production 1 1 892  1 909  1 911 
Wheat  590  615  605 
Coarse grains  919  911  925 
Rice (milled)  383  383  380 
Supply 2 2 154  2 206  2 230 
Utilization  1 853  1 883  1 904 
Trade 3 203  205  201 
Ending Stocks 4 297  321  328 

However, the availability of bigger global cereal stocks than earlier anticipated has increased the margin of safety and allows for some cautious optimism for global cereal supplies in 1998/99.

As indicated above, FAO now forecasts world cereal production in 1998 at 1 911 million tonnes (including rice in milled terms), 16 million tonnes or about 1 percent more than the first forecast in the previous report and close to last year's above-trend crop. Wheat output is forecast at 606 million tonnes, 1.5 percent down from 1997 and just on trend after above-trend crops in the previous two years. In Asia, output is expected to slip back somewhat from the record harvest in 1997 but would remain well above the average of the past few years. In South America the continuing adverse El Niño-related weather is affecting production prospects in that region. However, although an aggregate reduction from 1997 is in prospect, output should be only slightly below average. In North America, wheat output is forecast to decrease considerably following a significant decline in plantings in the United States. In the CIS, adverse weather and farmers' economic problems are expected to reduce production in 1998. By contrast, in Africa, improved weather conditions in the major wheat producers has allowed a recovery from last year's drought-reduced crops, while in Europe, Oceania and Central America the wheat harvests are expected to remain close to the previous year's levels. For coarse grains, FAO forecasts global output in 1998 at 925 million tonnes, 1.6 percent up from 1997 and above trend for the third consecutive year. Larger crops are in prospect in Asia, Africa, and North and South America. The combined increase throughout these regions would more than offset smaller outputs expected in Europe and the CIS. Production in Central America and Oceania would remain close to the previous year's levels. FAO's forecast for global paddy output in 1998 is 567 million tonnes (380 million tonnes in milled terms), only 4 million tonnes less than the estimated record crop in 1997. However, this forecast is still very tentative as the bulk of the 1998 rice crop is yet to be planted in Asia pending the arrival of the monsoon rains.

FAO's first forecast of world cereal trade in 1998/99 (July/June) is 201 million tonnes, 4 million tonnes down from the estimated volume in the previous year. A sizeable reduction forecast in global imports of wheat and an expected return to more normal levels of rice trade after a peak in 1998, would more than offset the forecast increase in coarse grains imports. Global imports of wheat in 1998/99 are forecast to fall to 90 million tonnes, 5 million tonnes below the estimated imports in 1997/98 and the lowest level since the mid-1980s. The bulk of the reduction is accounted for by several countries in Asia and Africa where prospects for the current domestic crop seasons are considerably improved from the previous year and thus the need for imports should be significantly reduced. An expansion is forecast in coarse grains imports in 1998/99 to some 91 million tonnes, 4 percent above the previous year, mainly reflecting larger import demand for maize expected from southern African countries. For rice, while it is too early to make a forecast for the calendar year 1999, FAO tentatively estimates that rice shipments could be some 10 percent lower than the current year's, now estimated at 22 million tonnes.

World utilization of cereals in 1998/99 is forecast to grow by about 1 percent to 1 904 million tonnes, which would be slightly above the long-term trend. Most of the increase is expected to occur in the developing countries, particularly for food consumption in countries where domestic production is expected to increase most. The growth in total food consumption in the developing countries would exceed that for population by a small margin and, thus, lead to a slight increase in their per caput food consumption. Global feed use of cereals is also forecast to increase, although by less, despite ample supplies.

International wheat and coarse grain prices have remained under downward pressure reflecting the improved global supply/demand situation. Export prices for wheat have continued to decline in recent weeks and are now some 20-25 percent below the corresponding period a year ago and the lowest in five years. By the fourth week in May, the U.S. wheat No. 2 (HRW, fob) price was US$128 per tonne, down about US$13 per tonne from March. Maize, barley and sorghum prices have also fallen further, mostly reflecting slow trade activity, continued weak import demand from Asia and favourable prospects so far for 1998 crops. By the fourth week in May, U.S. maize prices were quoted at around US$103 per tonne, about US$8 per tonne down from March and US$12 per tonne lower than in the previous year. By contrast, international rice prices from most origins continued on an upward trend through May. As a result, the FAO Export Price Index for Rice (1982-84=100), which has been on the rise since December last year, averaged 128 points in May, up from 125 points in March. The increase in prices is partly attributable to the partial recovery of the Thai baht against the United States dollar and concerns about the availability of exportable supplies, especially in Viet Nam and Pakistan, following large purchases by Indonesia and the Philippines.

Latest information indicates that the replenishment of carryover stocks in the current 1997/98 season will be more substantial than earlier anticipated, mainly reflecting a slower growth in feed use of cereals. FAO's forecast of global cereal stocks at the end of the 1997/98 seasons is now put at 321 million tonnes, some 24 million tonnes, or 8 percent, above their opening levels, representing 16.9 percent of expected utilization in 1998/99. The bulk of this year's increase is expected in wheat, but inventories of coarse grains are now also expected to rise, while stocks of rice are forecast to decline. Early indications for 1998/99 based on current forecasts for 1998 crops and expected levels of consumption point to the likelihood of a further minor improvement. If current forecasts materialize, the global stock-to-utilization ratio could return in 1998/99, for the first time in four years, to the 17-18 percent range considered by the FAO Secretariat as the minimum necessary to safeguard global food security.

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