FAO/GIEWS - Food Outlook No.1 - February 2000 p. 3

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The global cereal supply/demand situation in 1999/2000 has changed little since the last report in November. After a small upward revision, world cereal output in 1999 is now estimated by FAO at 1 872 million tonnes (including rice in milled terms), above the average of the past five years, and only slightly below the previous year's level. However, concurrently with this change, the forecast of anticipated global cereal utilization in 1999/2000 has also been adjusted upward, and thus, the shortfall in production for the year remains at some 10 million tonnes. This is similar to earlier expectations, and confirms that global cereal stocks will have to be drawn down for the first time in 4 years. Nevertheless, the ratio of expected global cereal carryovers in 2000 to trend utilization in 2000/01, at 17.4 percent, would remain within the 17-18 percent range that the FAO Secretariat considers as the minimum necessary to safeguard world food security. Moreover, the percentage share of global cereal stocks held by the major exporting countries, which are the main buffer against any major production shortfall, is expected to remain stable at around the previous year's level of 45 percent. While prices for most cereals have strengthened in recent weeks, the current outlook for supply and demand does not point to any significant change in prices over the medium term.

FAO's latest forecast puts world cereal production in 1999 at 1 872 million tonnes (including rice in milled equivalent), 6 million tonnes above the previous estimate in November. The latest increase reflects upward adjustments for wheat and rice, which more than offset a minor downward revision for coarse grains. At the forecast level, world cereal production would be 1.2 percent below the estimate for 1998, but above the average of the past five years. World wheat production is now forecast at 589 million tonnes, 3 million tonnes up from November. The latest adjustment reflects revisions to estimates of some of the later harvests around the globe, including Argentina and Australia. However, also in the northern hemisphere where harvests are normally concluded sooner, a major upward revision has been made to Kazakhstan's output following an exceptionally long harvest period made possible by the late onset of winter weather. The latest forecast of coarse grains production is 886 million tonnes, about 2 million tonnes down from the previous forecast, mostly reflecting downward revisions for some countries in Asia, Africa and South America. At the latest forecast level, global output of coarse grains in 1999 would be 25 million tonnes, or 2.7 percent below the estimate for the 1998 crop. Smaller harvests have been gathered throughout all regions of the globe with the exception of Central America, where production is forecast to remain unchanged, and in Europe, where a marginal increase is estimated. Harvesting of the 1999/2000 main-season paddy crops is virtually complete in the northern hemisphere and planting of the second-season crops is proceeding in some of these countries. Growing conditions have been generally favourable, although floods towards the end of 1999 caused some localized crop damage . Based on latest estimates of the southern hemisphere crops harvested early in 1999, and expectations of bumper harvests in several countries in the northern hemisphere, global paddy output in 1999 is provisionally forecast to reach a record 593 million tonnes, 11 million tonnes up from the previous year's crop.

World Cereal Production, Supplies, Trade and Stocks

  1997/98 1998/99 estimate 1999/2000 forecast
  (. . . . . . million tonnes . . . . . .)
Production 1/ 1 904 1 895 1 872
Wheat 613 595 589
Coarse grains 905 911 886
Rice (milled) 386 389 396
Supply 2/ 2 198 2 226 2 213
Utilization 1 870 1 877 1 882
Trade 3/ 218 215 222
Ending Stocks 4/ 330 342 334

Early prospects for the 2000 wheat crop are mixed but latest information suggests aggregate global production will remain close to the 1999 level and the average of the past five years. In North America, winter wheat plantings fell again in the United States because of poor price prospects at planting time, while in Canada, official forecasts point to an increase in spring wheat area at the expense of canola and flaxseed because of their relatively lower prices. In Europe, the wheat area in the EC is expected to increase, also at the expense of oilseeds because of large stocks and reduced producer aid for oilseed production in 2000. In the Russian Federation, winter plantings declined, but conditions are reported to be favourable. In Asia, a smaller wheat crop is in prospect in China reflecting reduced plantings and adverse weather in some areas but in India and Pakistan, conditions are reported to be generally satisfactory and outputs should be similar or slightly up from last year.

Regarding 2000 coarse grains, crops are already planted in some of the major southern hemisphere producing countries. In southern Africa, early prospects are favourable reflecting generally abundant rains over the past few weeks and increased plantings reported. Similarly, in South America, weather conditions are generally favourable for the developing crops. Plantings increased in Argentina but declined slightly in Brazil. In the southern hemisphere and countries around the equatorial belt the 2000/2001 paddy season (main crops) is well advanced. However, in view of the lower rice prices that prevailed at the time of planting, the planted area is reported to be smaller than the previous season. Harvesting of the crop is expected to begin around March. In the northern hemisphere, planting for the 2000/2001 season will not start until April/May.

FAO's forecast of world imports of cereals in 1999/2000 has been raised slightly, by 1 million tonnes, to 222 million tonnes, reflecting upward adjustments to the estimates for wheat and rice imports. At the current forecast level, the volume of cereal imports would be 7 million tonnes or 3.5 percent up from the previous year's revised volume. This increase is expected in wheat and coarse grains trade which are now forecast to expand by about 6 percent and 3 percent to 103 million tonnes and 96 million tonnes respectively. Regarding rice, despite this months minor upward adjustment, rice imports in 2000 are tentatively forecast to fall somewhat from the previous year to just below 24 million tonnes. For the developing countries as a group, cereal imports are expected to rise to a record level of 161 million tonnes. However, reflecting weaker international cereal prices during 1999/2000, the combined import bill of these countries could decrease by about US$500 million from the previous season to approximately US$21 billion.

The forecast for world cereal utilization in 1999/2000 has been raised by 6 million tonnes since the last report in November, to 1 882 million tonnes, mostly in response to the latest upward adjustments to 1999 production estimates. At the current forecast level, total utilization of cereals in 1999/2000 would be marginally above that in the previous season. Anticipated increases in food consumption of both wheat and rice would account for the bulk of this growth. The forecast for total utilization of coarse grains in 1999/2000 is unchanged from the previous report but it now indicates a slight decline from the previous season's revised level. This mostly reflects an upward technical adjustment to the 1998/99 estimates of coarse grains utilization.

International wheat prices have seen a marginal upturn in recent weeks. After several months of decline, a sharp market turnaround followed the USDA January report, which pointed to a tighter United States wheat balance (higher domestic use and smaller stocks) than earlier expected. By late January, US wheat No. 2 (HRW, fob) averaged US$111 per tonne, some US$6 per tonne up from December, although still about US$15 per tonne below January 1999. CBOT wheat futures also rose in January., mostly influenced by prospects for the United States 2000 crop: winter wheat plantings fell again, to the lowest level since 1972, and growing conditions so far this winter have been somewhat unfavourable. A small recovery was also noted in maize prices in January. CBOT maize futures rose sharply in response to unexpectedly low estimates for the United States 1999 maize output and ending stocks, as well as more favourable trade prospects. By late January, the nearby maize futures contracts were quoted at US$90 per tonne, some US$10 above December. International rice prices from most origins remained weak from November through mid-January, reflecting the continuing influence on the market of large export supplies combined with limited import demand. The FAO Export Price Index for Rice (1982-84=100) averaged just 105 in December, its lowest level in almost six years. In the first three weeks of January, the price index gained one point to reach 106, but this mostly reflected increased prices of some specific types of rice from Thailand and Viet Nam, affected by special factors, rather than any fundamental change in the market.

FAO's forecast for global cereal stocks for crop years ending in 2000 has been raised by 2 million tonnes since the last report to 334 million tonnes. However, despite the latest upward revision, at the forecast level, global carryovers at the close of countries' crop years in 2000 will be below their opening levels, by 2 percent, declining for the first time in four years. As a result, the ratio of global cereal carryovers in 2000 to trend utilization in 2000/01 is expected to fall from 18.1 percent in the previous year to 17.4 percent, but would, nevertheless, remain within the 17-18 percent range that the FAO Secretariat considers the minimum necessary to safeguard world food security.

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