FAO/GIEWS - Food Outlook No.4, September1998

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Latest information continues to point to a satisfactory cereal supply outlook for 1998/99 despite a slight deterioration in the 1998 production prospects since the last report in June. World cereal output in 1998 is now expected to decline by 1 percent to 1 892 million tonnes (including rice in milled terms) from last year's record, but would still be above trend for the third consecutive year. At the forecast level, cereal output would be close to the slightly increased consumption requirements expected in 1998/99, and stocks would remain virtually unchanged from their revised opening level. Thus, the global stock-to-utilization ratio in 1998/99, at 17.3 percent, would remain within the 17-18 percent range that the FAO Secretariat considers the minimum necessary to safeguard world food security. Although many of the 1998 cereal harvests are completed, and the probability of a major further deterioration in the outlook for the 1998 cereal output is diminishing, the bulk of the world’s rice crops in Asia have yet to be gathered. From late June onwards, persistent rains, attributed to the La Niña phenomenon, have flooded large areas of cropped land in Asia (see box on page 7) where over 90 percent of the global rice output is produced. It is too early to estimate the full impact of the floods, and the situation will have to be closely monitored in the weeks ahead, as any significant deterioration in paddy production prospects could fuel further increases in world rice prices, which are already unseasonably high.





(. million tonnes .)

Production 1/

1 895

1 911

1 892





Coarse grains




Rice (milled)




Supply 2/

2 154

2 210

2 221


1 852

1 877

1 890

Trade 3/




Ending Stocks 4/




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.

Regarding production, as mentioned above, the FAO forecast for world cereal output in 1998 has been revised downward since the last report in June, by 19 million tonnes, to 1 892 million tonnes (including rice in milled terms). The latest revision is mostly due to a sharp reduction of the output estimates for the CIS, where severe drought and hot temperatures prevailed throughout the summer months, severely affecting yield prospects in several major producing areas. However, at the forecast level, world cereal production in 1998 would be just 1 percent below the 1997 record and still above the average of the past five years and above trend.

The forecast for world wheat output remains at 606 million tonnes, 1.5 percent down from 1997 but still just above trend. Upward revisions to the forecasts for the United States, several European countries and Australia have been offset by reductions elsewhere, most notably in the CIS, but also in Asia, Africa and South America. FAO’s forecast for 1998 world coarse grains output now stands at 907 million tonnes, somewhat below the forecast in the last report due to less than ideal growing conditions in some parts, particularly in the CIS, but virtually unchanged from the estimated crop in 1997. Although larger coarse grains outputs than last year are still estimated for Asia, Africa, and North and South America, the size of the increase is likely to be less than earlier expected. Nevertheless, the combined increase throughout these regions should offset smaller outputs expected in Europe and the CIS. Coarse grains production in Central America and Oceania would remain close to the previous year’s levels. Global paddy output in 1998 is now forecast to fall to 566 million tonnes, 2 percent down from the record crop last year. In the southern hemisphere and around the equatorial belt the harvest of the 1998 main season paddy crops is complete and preliminary estimates suggest a fall in production. In the northern hemisphere, where the bulk of the paddy is yet to be harvested, severe flooding has affected crops in several countries in Asia. The full impact of the flooding is still not known, and thus the final outlook of the 1998 paddy crop remains very uncertain.

FAO’s latest forecast of world trade in cereals in 1998/99 (July/June) is 199 million tonnes, 2 million tonnes lower than forecast in the last report, and 8 million tonnes down from the previous year. A significant reduction in global wheat trade and a return to a more normal level of rice trade, after the record level in 1998 are expected to more than offset a slight increase in coarse grain shipments. Global imports of wheat in 1998/99 are now forecast at 90.5 million tonnes, marginally above the previous forecast but still 5.6 million tonnes below the revised estimate for 1997/98. The sharpest decline is expected in Asia due to a combination of increased domestic production in some countries and also reduced purchasing power because of the financial crisis. World trade in coarse grains is now forecast at 88.5 million tonnes, 2.5 million tonnes less than earlier forecast, but still 1 million tonnes above the previous year. The bulk of the increase is accounted for by larger maize and barley imports in some Latin American countries. While it is still too early to make a realistic forecast of global rice trade in the 1999 calendar year, early indications point to a reduction in shipments after the record level forecast for the current year as a result of the adverse affect of El Niño on production in several importing countries.

Global cereal utilization in 1998/99 is forecast to rise to 1 890 million tonnes, slightly above the long-term trend. At this level, world utilization of all cereals combined would be only 0.7 percent up from 1997/98, compared to a 1.3 percent increase in the previous year and a nearly 3 percent expansion two years ago. A smaller expansion in feed use would be mainly responsible for this year’s expected slower growth in total global utilization. The gradual but steady decline in grain prices since their peak in 1995/96 stimulated increased global cereal utilization for animal feed, particularly in 1996/97. However, with the financial crisis in Asia since last year, the fast growth in feed utilization has subsequently faded despite an even steeper fall in international prices. While wheat and coarse grain prices have fallen further in recent months, in view of the continuing economic difficulties confronting the economies of several countries in Asia, and more recently also the Russian Federation, growth in global cereal utilization in 1998/99 is expected to be minimal.

International wheat and coarse grains prices remained under downward pressure reflecting generally favourable 1998 crop prospects and stagnant import demand. Export prices for wheat are now 30 percent below a year ago and at their lowest level since the early 1990s. In late August, the price of U.S. wheat No. 2 (HRW, fob) was US$ 110 per tonne, down US$ 17 per tonne from May and US$ 44 per tonne less than a year ago. Export prices for most of the major coarse grains have also continued to fall over the past three months. By late August, the price of U.S. maize had fallen to a 10-year low of US$ 84 per tonne. World coarse grain markets continue to be largely influenced by abundant exportable supplies, favourable 1998 crop prospects in several major producers, large supplies of competitively priced wheat which could be used for feed, and weak import demand. By contrast, export prices of rice from most origins remained firm through July and August, mostly due to limited exportable supplies and larger than normal purchases. The FAO Export Price Index for Rice (1982-84=100) averaged 131 points in July and August, up from 130 points in June and well above the low of 119 points in November last year.

FAO’s latest forecast for cereal stocks for crop years ending in 1999 is 330 million tonnes, marginally above the revised estimate of their opening level. A small build-up of wheat and coarse grain inventories would offset a significant reduction in those of rice. Assuming that current forecasts of production and utilization materialize, the global stock-to-utilization ratio is estimated to remain above 17 percent in 1998/99, close to the revised level for 1997/98, and within the 17-18 percent range considered by the FAO Secretariat to be the minimum necessary to safeguard global food security.


The number of developing countries facing food emergencies has risen to 40 from 38 in early June 1998, mainly due to the effect of both El Niño and La Niña weather phenomena.

In East Africa, food supply difficulties stem from weather adversities and/or civil strife. In Sudan, despite an overall satisfactory harvest in 1997, famine conditions have developed in the South affected by civil-strife and drought; overall some 2.6 million people are in need of food assistance. In Somalia, the food supply situation gives cause for serious concern as a result of a sharply drought-reduced 1998 main "Gu" crop, which followed the worst floods in decades. In Kenya, despite a good cereal harvest in prospect, food assistance continues to be needed for flood-affected pastoralist areas. In Uganda, emergency food assistance is still needed for some 400 000 displaced people in northern areas, affected by continuing insurgency, as well as for 130 000 persons in eastern parts where the harvest was poor. In Tanzania, despite an overall increase in the 1998 food production, some 300 000 people in central, northern and coastal areas will need food assistance in the coming months. In Ethiopia, over 5 million vulnerable people, including those affected by a poor 1997 harvest, need food aid. In Eritrea, following two successive reduced cereal harvests the overall food supply is tight and food prices have increased sharply. In Burundi and Rwanda, despite a recovery in food production this year, food assistance is needed for large numbers of displaced people affected by persistent insecurity in parts.

In West Africa, despite above-average 1997 harvests in coastal countries, food supply difficulties are reported in several countries. In Liberia and Sierra Leone, the agriculture sector is improving, with rehabilitation programmes underway, but both countries remain heavily dependent on international food assistance. In Guinea-Bissau, civil disturbances have hampered agricultural activities and the overall food supply situation has deteriorated. In the Sahel, several countries are facing localized food supply difficulties following poor harvests in late 1997, notably in northern Senegal, Mauritania, The Gambia and parts of Burkina Faso and Niger.

In Central Africa, intensified civil strife in the Democratic Republic of Congo since early August will disrupt agricultural and marketing activities in the Kivu region in the east, and fresh population displacements are likely.

In Southern Africa, although the impact of El Niño on crop production has been relatively limited, the food supply situation in the sub-region will be tighter during 1998/99. In Zambia, production of cereals has been much below average due to weather anomalies. In Angola and Mozambique, production of food crops improved this year, but relief assistance will be required for the internally displaced, vulnerable and drought/flood affected population.

In Asia, from late June onwards, persistent rains and floods attributed to the La Niña phenomenon have taken a heavy toll on human life, crops and property. Food supply difficulties are expected in some countries. In Bangladesh the floods destroyed standing summer (Aus) rice crops and delayed autumn planting. Floods in the south and eastern parts of Korea DPR have damaged crops, and this will exacerbate the already serious food supply situation in the country. In Indonesia, the poor food situation due to last year’s prolonged drought and the continuing financial crisis could be aggravated by severe floods in some parts. Similarly, in Nepal, heavy monsoon rains have caused flood damage to crops. Although the 1998 cereal production in Afghanistan is the highest since 1978, the food situation is likely to remain tight in the areas affected by civil strife and recent earthquakes. In Iraq, despite some improvement in the overall food supply situation following the implementation of the "oil for food" deal, malnutrition still remains a serious problem. In Laos, adverse weather conditions have caused crop damage in some regions exacerbating food supply problems. In Mongolia, the food security situation of vulnerable groups continues to be precarious.

In Latin America, abnormally dry weather associated with El Niño has affected the 1998/99 first season cereal crop in several Central American and Caribbean countries. Emergency food assistance is being provided in Cuba, El Salvador, Guatemala, Haiti, Honduras, Nicaragua and Panama.

In the Commonwealth of Independent States (CIS), the need for targeted food aid has increased in Tajikistan following widespread damage caused by floods and landslides. Vulnerable people in Armenia, Azerbaijan and Georgia continue to need relief food assistance. Elsewhere, displaced people in Bosnia-Herzogovina, Albania and the Kosovo Province of the Federal Republic of Yugoslavia are receiving food assistance.

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