FAO/GIEWS - Food Outlook No.2 - April 1999 p. 5

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TRADE 1/

The latest forecast for world trade in cereals in 1998/99 stands at 205.6 million tonnes, up 1.6 million tonnes from the previous report in February, but still some 7 million tonnes, or 3 percent, below the previous year's volume (Table A.2). Coarse grains imports are estimated to increase but not enough to offset reduced shipments of wheat and rice.

The current forecast of world trade in wheat and wheat flour (in wheat equivalent) in 1998/99 (July/June) is unchanged at 93.3 million tonnes, down 2.7 million tonnes from 1997/98. Most of this year's reduction reflects smaller wheat imports by the developing countries, now put at about 74 million tonnes, 3.5 million tonnes, or 5 percent, below the previous year. By contrast, total imports by the developed countries are forecast to rise slightly from the previous year by about 1 million tonnes, owing mostly to an increase in shipments to the CIS.

Aggregate wheat imports into Africa are forecast at nearly 22 million tonnes, 1.3 million tonnes less than in the previous season. The decline would be mostly on account of reduced imports by several countries in North Africa because of larger domestic production. However, imports by Egypt are expected to exceed 7 million tonnes, again making Egypt the world's largest wheat importing country. Imports into sub-Saharan Africa are likely to be reduced, mainly reflecting reduced purchases by Kenya, due to a drawdown of stocks, and the absence of Ethiopia as an importer because of a record crop and the expectation that food aid for vulnerable groups would be bought locally.

Total imports into Asia in 1998/99 are currently forecast at 43.3 million tonnes, down 2.5 million tonnes from 1997/98, but slightly more than was reported in February. Improved production in 1998 is expected to reduce wheat imports by the Islamic Republic of Iran and Pakistan. The upward revision of 200 000 tonnes to 2.4 million tonnes in this month's imports by Pakistan reflects a recent announcement by the United States that it would increase its donations to that country. Wheat imports by India are expected to be considerably less than in the previous year, largely because of higher stocks and prospects for bumper wheat crops in 1999. Indonesia's wheat imports are currently put at 2.8 million tonnes, 1.2 million tonnes less than last year mostly on account of large stocks of wheat flour. In China, an estimated smaller wheat harvest in 1998 is not anticipated to translate into increased imports because of large carryover stocks which are likely to be used to meet the production shortfall. Among the major increases expected in wheat imports this year, Bangladesh could receive 2.4 million tonnes, three times the level of the previous year, mostly as food aid to compensate for considerable crop losses caused by floods. A substantial proportion of the 300 000 tonnes increase in the wheat imports by Korea, D.P.R. is also anticipated to come from donations. In the Republic of Korea, the relatively low wheat prices this season are likely to continue to encourage a greater use of wheat for feed, all of which is imported. The forecast for wheat imports into Latin America and the Caribbean in 1998/99 is virtually unchanged from the previous report at 16.7 million tonnes. At this level, total imports would still be 1 million tonnes above those in 1997/98. Most of the increase over last year would be on account of larger purchases by Brazil and Mexico and larger food aid shipments to those countries in Central America which were affected by hurricane "Mitch".

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1/ World trade in wheat and coarse grains is based on estimated imports delivered through 30 June of the July/June trade year. Some late-season purchases may be included in the next season if deliveries occur after 30 June. In general, exports and imports are calculated based on estimated shipments and deliveries during the July/June trade season and thus they may not be equal for any given year due to time lags between shipments and deliveries.

OVERVIEW OF WORLD CEREAL IMPORTS - FORECAST FOR 1998/99

     
Wheat
  Coarse grains
Rice (milled)
Total 
1997/98
1998/99
1997/98
1998/99
1998
1999
1997/98
1998/99
( . . . . . . . . . million tonnes . . . . . . . . . . . )
Asia
45.8
43.3
54.1
53.2
17.4
12.2
117.4
108.8
Africa
23.4
22.0
10.4
11.8
4.1
4.1
37.9
37.9
Central America
5.1
5.5
10.0
10.5
1.4
1.4
16.5
17.5
South America
10.6
11.2
5.8
6.7
2.2
1.5
18.6
19.4
North America
2.6
2.7
4.0
3.2
0.6
0.6
7.2
6.4
Europe
5.3
4.7
4.7
4.5
1.1
1.1
11.1
10.4
CIS
2.7
3.5
0.3
0.7
0.3
0.3
3.4
4.5
Oceania
0.4
0.4
0.1
0.1
0.3
0.3
0.9
0.8
WORLD
96.0
93.3
89.4
90.7
27.5
21.6
212.9
205.6
Developing countries
77.5
73.9
57.6
59.0
24.2
18.2
159.2
151.2
Developed countries
18.5
19.4
31.9
31.6
3.3
3.4
53.6
54.4

SOURCE: FAO

Among the developed regions, wheat imports into Europe are expected to fall by 11 percent, compared to the previous year, to 4.7 million tonnes in 1998/99. Although this level is slightly higher than that in the previous report, total wheat imports into Europe would still be about 600 000 tonnes lower than in 1997/98. The bulk of the decline would be due to reduced purchases by the EC, which harvested a record crop, whereas imports by most other countries are likely to remain close to last year's levels. The aggregate wheat imports of the CIS countries for 1998/99 are now forecast at 3.5 million tonnes, a downward revision of 700 000 tonnes from the previous report, reflecting delays in food aid shipments to the Russian Federation from the EC and the United States. Nevertheless, at this level, total wheat imports into the CIS would still be 700 000 tonnes above the previous year's level. The bulk of the increase is expected in the Russian Federation, where food aid deliveries could account for all of the 2 million tonnes of wheat imports forecast for this country.

As regards exports (Table A.3), prospects for the 1998/99 (July/June) season point to a substantial decline in aggregate shipments from the five major exporters. Three of the major wheat exporters together, i.e. Argentina, Australia and Canada, are forecast to ship 9.6 million tonnes less this season compared to last year. For these countries, this year's export prospects are less favourable not only because of increased competition from the two major exporters, but also because of lower domestic supplies and competition from some of the smaller exporting countries. In addition, a strike by dock workers in western Canada may have caused a delay in wheat shipments which could lower the final export forecast for the season. Turkey could boost its exports compared to last season by 1 million tonnes. Poland is also likely to expand its exports due to larger supplies. The EC and the United States are expected to expand their wheat exports this season, the increases coming largely from food aid shipments.

World trade in coarse grains in 1998/99 (July/June) is now forecast at 90.7 million tonnes, up 1.2 million tonnes from the previous report and 1.3 million tonnes above last year's revised volume. Imports by the developing countries are forecast to increase by 3 percent to reach 59 million tonnes, while those by the developed countries are likely to be slightly down from the previous year. Imports of maize, the most important coarse grain traded, are forecast to continue to grow to around 65 million tonnes, although the final volume will depend largely on the size of expected food aid shipments to Central America and the CIS. Trade in barley could reach 16 million tonnes, up 1.6 million tonnes from last year, mostly because of larger purchases by several countries in Asia, in part encouraged by export subsidies. There is also potential for an increase in rye imports this season, if expected food aid shipments from the EC to the Russian Federation materialize.

Total coarse grains imports into Africa in 1998/99 are now put at 11.8 million tonnes, 500 000 tonnes more than last reported and up 1.4 million tonnes from the estimated imports in 1997/98. The latest increase is due entirely to larger than expected barley purchases by Morocco as a result of last year's poor crop and concerns about this year's output. Compared to the previous season, the increased forecast for Africa also takes into account greater import demand by several countries in southern Africa, particularly Zambia and Zimbabwe. For Asia, the import forecast has been revised slightly upward to 53.2 million tonnes, which is still 800 000 tonnes down from last year's volume. Asian coarse grains imports are likely to decline this season because of larger domestic production and weaker demand from the animal feed sector, especially in countries affected by the financial crisis. The most pronounced decline is forecast for Indonesia, following an increase in domestic production. However, a few Asian countries are likely to buy more coarse grains this season, in particular Saudi Arabia and China, including the Chinese Province of Taiwan. Coarse grains imports into Latin America and the Caribbean are forecast at 17.2 million tonnes, about the same as reported earlier and 1.6 million tonnes more than last year. Among the Central American countries, the bulk of the increase over last year would be due to greater purchases by Mexico and larger maize food aid shipments to Honduras, the latter being the country in the region most affected by hurricane "Mitch". Reflecting lower production, Brazil is forecast to import 600 000 tonnes more maize than in the previous year. However, its imports are likely to be limited due to the currency devaluation combined with an anticipated slow-down of domestic feed use.

In Europe, total imports are currently put at 4.5 million tonnes, slightly lower than last year. The current upward revision of 600 000 tonnes is due to a change in the EC forecast. The outlook for coarse grains imports into the CIS has been left unchanged since February due to delays in the shipments of food aid to the Russian Federation from the EC, geared at providing 500 000 tonnes of rye, and the United States, envisaging shipments of 500 000 tonnes of maize.

This year's expansion in trade would mean improved market opportunities for a few coarse grains exporting countries. Expanded credit facilities and additional food aid agreements are anticipated to be among the most important factors contributing to higher shipments by the EC and the United States, which should boost their combined coarse grains exports by about 10 million tonnes in 1998/99. While Australia is also likely to increase its sales by 600 000 tonnes, exports from Canada could remain unchanged from last season at 3.5 million tonnes. Among the major exporting countries, only Argentina could ship less during 1998/99 due largely to smaller exportable supplies resulting from a forecast of a sharply reduced maize crop in 1999. South Africa is also expected to experience another below-average maize crop this year and subsequently, smaller exports. Among other minor coarse grains exporting countries, smaller crops in 1998 could result in curtailed coarse grains exports from Hungary and Romania.

The forecast for global rice trade in 1999 has been revised upward by 500 000 tonnes since the last report to 21.5 million tonnes, which would be about 6 million tonnes down from the estimated record level in 1998 but still the second highest volume on record. The anticipated reduction reflects increased production in 1998 and the expectation of rising production in 1999 in many of the major importing countries whose output in1997 and/or 1998 was reduced by El Niño-related weather problems.

The forecast of expected imports by Indonesia in 1999 has been increased by 100 000 tonnes from the last report to about 2.5 million tonnes, still considerably below the estimated record high of 6 million tonnes in calendar year 1998. This is attributed to the anticipated recovery in production from the lows of the previous two seasons. The forecast for imports by Bangladesh has been raised by 200 000 tonnes from the previous report to about 1.3 million tonnes, but still well down from the 2.5 million tonnes in 1998 when it ranked as the second largest importer. This is based on the assumption of a return to normal weather after adverse conditions in the previous season. Imports by the Philippines are forecast at 1.2 million tonnes, 1 million tonnes below last year. For Brazil the forecast of imports has been increased by 200 000 tonnes from the previous report to 1 million tonnes which would still be 500 000 tonnes or 33 percent less than in 1998 when domestic output was sharply down. Improved production this year is of paramount importance for Brazil given the current economic and currency problems the country is experiencing, which might constrain its ability to import.

On the export side, Thailand is projected to ship 5.5 million tonnes in 1999, down by almost 1 million tonnes from the estimate for 1998. Export shipments from India, the second largest exporter in 1998, are expected to fall by about 50 percent to 2.3 million tonnes - up by 200 000 tonnes from the previous report. China (Mainland) is expected to ship about 1.1 million tonnes in 1999, about 150 000 tonnes more than reported previously but down from 3.7 million tonnes estimated for 1998. This sharp fall is attributed to reduced output in 1998 and the anticipated decline in global import demand during this year. On the other hand, Viet Nam has set a target of 3.9 million tonnes in 1999 which, if realized, would exceed the record 3.8 million tonnes exported last year. The Government is to allow shipments of 3 million tonnes during the first six months of the year and the remaining 900 000 tonnes during the second half. The forecast for the United States' rice export volume is about 2.8 million tonnes, down by 10 percent from 1998, as many of the South and Central American countries, the traditional customers of the United States' rice, are expected to import less.

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CARRYOVER STOCKS


The forecast for global cereal stocks by the close of the seasons ending in 1999 has been raised to about 330 million tonnes, up 2 million tonnes from the previous report but still 3.6 million tonnes below their opening levels. The largest decline from last season is expected in rice inventories, which could be reduced by 9 percent, but wheat stocks could also fall slightly while coarse grain carryovers may rise by about 1 percent. At the aggregate level, the ratio of global cereal carryovers to trend utilization in the 1999/2000 season, at 17.4 percent, would remain within the 17-18 percent range which the FAO Secretariat considers as the minimum level necessary to safeguard world food security 1/ .

World wheat stocks for crop years ending in 1999 are now forecast to reach about 137 million tonnes, 1 million tonnes less than was reported in February and about 400 000 tonnes less than their relatively high opening levels. At the forecast level, total wheat stocks held by the major wheat exporters are expected to rise for the third consecutive year and reach almost 53 million tonnes, a one-third increase, or around 13 million tonnes, from the previous year, mostly due to bumper crops and slow export shipments in the EC and the United States. In the United States, the official forecast for carryover stocks has been raised by 600 000 tonnes to reflect a cut back in export prospects. Carryover wheat stocks in Canada have also been increased due to lagging export sales. By contrast, in the EC, the current forecast for end-of-season stocks has been lowered by 500 000 tonnes, mainly due to higher than anticipated domestic use and in spite of a downward adjustment in exports. The aggregate volume of wheat stocks held by the other two major exporters is forecast to increase from its opening level to 3 million tonnes in 1998/99.

_________________
1/ The minimum "safe" level of total stocks is defined as the level of total carryover stocks required to ensure in the following season continuity of supplies on national and international markets, to maintain consumption levels and safeguard against acute shortages in the event of crop failures or natural disasters.

WORLD CARRYOVER STOCKS OF CEREALS

 
Crop year ending in:
1997
1998 estim.
1999 f'cast
(. . . million tonnes . . .)
Wheat
114.8
137.2
136.8
Coarse grains
131.3
140.9
142.7
Rice (milled)
56.4
55.3
50.3
TOTAL
302.5
333.3
329.8
of which:
     
Main exporters
100.6
125.8
147.7
Others
201.9
207.5
182.1

SOURCE: FAO

The level of world coarse grains stocks for crop years ending in 1999 is currently put at 142.6 million tonnes, up 1.7 million tonnes from last year and slightly higher than the previous forecast. Based on the latest official figures for March, the forecast for coarse grains stocks in the United States has been lowered to 49 million tonnes. However, this level would still represent an increase over last year of 10.6 million tonnes, or 28 percent, reflecting slower growth in exports of maize so far during the 1998/99 marketing season. By contrast, this month's forecast of closing coarse grains stocks in the EC for 1998/99 has been raised by 600 000 tonnes to 23.1 million tonnes, mainly because of an upward revision in imports and a small reduction in domestic

use. Intervention stocks, primarily barley, are expected to increase this season as a result of a record crop in 1998, which has been difficult to sell even during a period of falling prices. The 1998/99 coarse grain stocks of the other major exporting countries remain almost unchanged from and above their opening levels, except for Australia which slows a decline from last year. Among the smaller exporters, Turkey's coarse grain carryover stocks were revised upward this month, primarily for barley, although the year-on-year figure is lower.

FAO's forecast of world rice stocks at the close of the marketing seasons ending in 1999 is about 50 million tonnes, down by 5 million tonnes from the closing stocks for the marketing seasons ending in 1998. The bulk of the year-to-year decline is largely accounted for by countries whose production was severely affected by bad weather, particularly China (Mainland), Bangladesh and Indonesia. The final outcome, however, will also be influenced by the performance of the secondary crops to be harvested in early 1999. In addition, given the expectations of lower prices during most of 1999, some countries could choose to increase imports to rebuild stocks to more comfortable levels.

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EXPORT PRICES


International wheat prices recovered somewhat during the second half of March, after falling early in the month, mainly in response to an increase in export sales. Although by late March the price of US wheat No. 2 (HRW, fob) had risen to US$119 per tonne, it was still US$6 per tonne below the price in late January. The fundamentals that have characterized the market for some time, i.e. sluggish global import demand and large wheat inventories held by the major exporting countries, kept prices in March well below those of a year ago. In the futures market, prices in March also remained under downward pressure from the market fundamentals mentioned above. The Chicago Board of Trade (CBOT), late March quotations for nearby May wheat futures were US$104 per tonne, just below those in January (US$105 per tonne) and US$20 per tonne below the corresponding quotation a year ago.

LATEST CEREAL EXPORT PRICES *

  1998 1999
March
January
March
(. . . . . . US$/tonne . . . . . .)
United States
     
Wheat 1/
119
125
141
Maize
101
97
111
Sorghum
95
96
109
Argentina 2/
     
Wheat
118
105
125
Maize
96
93
99
Thailand 2/
     
Rice white 3/
254
296
306
Rice, broken 4/
195
223
193

SOURCE: FAO, see Appendix Table A.9
* Prices refer to the fourth week of the month.
1/ No. 2 Hard Winter (Ordinary Protein).
2/ Indicative traded prices.
3/ 100% second grade, f.o.b. Bangkok.
4/ A1 super, f.o.b. Bangkok.


Export Prices (Weekly quotations)

Looking further ahead, however, a moderate upturn in wheat prices towards the end of the current season may be expected. The reduced winter wheat plantings in the United States and the EC could result in a tighter supply situation during the next season and a draw-down in inventories. However, much will also depend on the size of the 1999 wheat crops in major importing countries which are the main driving force affecting global import demand.

Coarse grains export prices have risen slightly since the last report under pressure from indications of tightening supplies. The USDA March grains report raised the US export forecast for the
marketing year, thus reducing their carryover stocks for the season which have been one of the strongest downward influences on the market in recent months. The market was also supported by the forecast sharp decline in Argentina's maize production in 1999, dry conditions for the developing crop in South Africa, and smaller plantings anticipated in some other major exporting countries. By late March, US maize was quoted at US$101 per tonne, US$3 per tonne up from January but still US$10 per tonne lower than a year earlier. Because larger than normal stocks are still overhanging the market, in late March, the nearby May maize future contract quoted at the CBOT was US$88 per tonne, still US$19 per tonne, or 18 percent, down from the corresponding period last year.

International rice prices remain under downward pressure from large exportable supplies and the decrease in import demand. The FAO Export Price Index for Rice (1982-84 =100) averaged 116 points during March, down by 4 points from the previous month. In comparison, the Index had been 124 points at the same time in 1998 and the annual average for the whole of 1998 was 127 points. At 116 points, the price index is at its lowest level since April 1995. Thai 100B averaged US$262 per tonne, down by US$19 per tonne from the previous month and the lowest since August 1994. Prices for the lower quality grades have also been on the decline. Thai A1 Super averaged US$198 per tonne during March, down from US$209 per tonne in February and the lowest level since May 1998. A similar trend has been observed in 1999 in all the other major exporting countries in Asia, including Viet Nam, India and Pakistan. In the United States, the market has also been generally quiet. Prices for high quality No. 2/4 percent broken rice averaged US$360 per tonne in March, down from US$377 per tonne in February and the lowest since May 1995. By comparison, the price was US$423 per tonne in March 1998 and the average for the whole of 1998 was US$413 per tonne. For the rest of 1999, international rice prices are expected to remain subdued primarily due to exportable supplies exceeding import demand, assuming normal growing conditions for the rest of the year. A further fall cannot be excluded.

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FOOD AID

Cereal food aid shipments are expected to increase further in 1998/99

FAO's forecast of cereal food aid shipments in 1998/99 stands at 9 million tonnes, 3.2 million tonnes up from the revised estimate for 1997/98, reflecting greater availability of grain supplies among the major donor countries combined with higher food aid requirements, particularly from Asia, Central America and the CIS. The bulk of the increase reflects the food aid packages agreed by the Russian Federation with the EC and the United States. However, delays in implementing the agreements may prevent all of the commitments from being shipped by the end of the July/June trade year. In Africa, cereal food aid shipments are expected to be about 24 percent lower than in the previous season, mainly due to the average-to-record 1998 harvests in several major cereal importing countries. By contrast, shipments to Asia and Central America are expected to rise reflecting the ongoing financial and economic difficulties coupled with civil strife and unfavourable climatic conditions in many food deficit countries there.

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Non-Cereal Food Aid Shipments fell in 1998 compared to 1997

Non-cereal food aid shipments fell for the fifth consecutive year in 1998 to a low of 721 000 tonnes, some 7 percent, or 51 000 tonnes, below 1997. The decline reflects smaller shipments by the EC and other donors which have more than offset a

sharp increase in non-cereal food aid shipments from the United States. Of the total non-cereal aid shipments for 1998, over 40 percent went to Asia; Africa received about 30 percent and the balance went to the CIS and Latin America and the Caribbean.

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Contributions to IEFR and PRROs 1/ are likely to increase in 1999

In 1998, the contribution to the WFPs International Emergency Food Reserve (IEFR) stood at about 2 million tonnes for cereals and about 194 000 tonnes of non-cereals. For cereals, this represents an increase of over 1 million tonnes, more than double the 1997 level, while for non-cereals, contributions to the IEFR increased by 16 percent in 1998 from about 167 000 tonnes in 1997 (Table A.11). Contributions as of February 1999 to the Protracted Relief and Recovery Operations (PRRO), also administered by the WFP, increased slightly for cereals by about 2 percent to 540 000 tonnes, while non-cereals contributions increased by about 46 percent to 102 000 in 1998 compared with 1997. Over the last two years, a combination of factors, ranging from civil strife, economic crisis and weather-related disasters, have served to accentuate the need for more emergency relief operations around the world and, hence, the need for more resources to be devoted to these activities. In response, the WFP is converting all its emergency operations into PRROs over a two-year period, 1998-2000. For 1999, the WFP estimated that it would require about 800 000 tonnes of food aid for its protracted relief and recovery operations around the world.

_____________________
1/ Note: In previous issues of Food Outlook, this was reported as Protracted Refugee Operations. The WFP has recently expanded this operation to include recovery (resettlement and rehabilitation) and now refers to this programme as the Protracted Relief and Recovery Operations (PRRO).

FOOD AID SHIPMENTS - CEREALS (July/June)

 
1994/95
1995/96
1996/97
1997/98
1998/99
f'cast
( . . . . . . . thousand tonnes . . . . . . . )
WORLD
9 443
7 397
5 298
5 813
9 000
LIFDC
7 910
6 400
4 447
5 273
5 600
Africa
3 593
2 526
1 960
2 095
1 600
Sub-Saharan
3 348
2 305
1 770
1 986
1 500
Others
246
221
190
109
100
Asia
4 067
3 911
2 388
3 002
3 700
East Asia and SE Asia
308
877
646
1 016
1 000
South Asia
1 600
1 210
905
1 152
1 960
Others
2 160
1 824
837
834
740
Latin America and the
         
Caribbean
1 146
602
596
522
700
Others
637
358
354
194
3 000

SOURCE: 1994/95 - 1997/98, WFP; 1998/99 forecast, FAO
Note: Totals computed from unrounded data.

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E-MAIL INFORMATION EXCHANGE SERVICE FOR THE PULSES SECTOR

The Basic Foodstuffs Service of the Commodities and Trade Division has recently established an e-mail based network for the exchange of information on developments in the world's pulses market. The service is called Pulses Market Network (PMN).

To subscribe to the service by e-mail (which is free-of-charge) leave the subject blank and type the following message:

subscribe Pulses-L

This should then be sent to: mailserv@mailserv.fao.org

The primary purpose of the PMN is to provide a forum for the discussion of issues relevant to the national and international markets for pulses. Registered users are invited to supply articles, publications and statistical reports on the pulses sector in their own countries/regions while they are also encouraged to post questions and answers on topics of interest related to pulses. Since global coverage is an essential feature of this service, users can send their messages in English, French or Spanish. This multilingual service will also include one annual and one semi-annual report based on FAO's latest analysis and forecasts for global situation and outlook for pulses, including production, consumption, trade and prices.

In summary, the objectives of this new FAO service are:

a. To exchange information on pulses markets between list members via the FAO mail server;
b. To circulate FAO's reports dealing with current developments in the world pulses economy.

Begin your participation in the PMN exchange system by forwarding some information on the pulses sector to which you have access and which may be of interest to others. Please address your contribution to Pulses-L@mailserv.fao.org and the moderator will forward your message to the whole participant list.

 


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