FAO/GIEWS - Food Outlook No.1 - February 2000 p. 6

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Trade 1/

Global cereal trade in 1999/2000 to expand driven by stronger import demand in Asia and low international prices

Following this month's upward adjustments to wheat and rice import estimates, the forecast for world trade in cereals in 1999/2000 now stands at 222 million tonnes, up 1 million tonnes from the previous report in November (table A.2). At this level, global cereal imports would be 7.5 million tonnes, or 3 percent, above the previous season. The increase is attributed to an expansion in wheat and coarse grains trade as rice imports are projected to decline slightly. For the developing countries as a group, cereal imports are expected to rise to an all time high of about 161 million tonnes, up 2 percent from the previous season. While larger wheat imports would account for the bulk of this increase, the gradual economic recovery in southern Asia is likely to result in some expansion in coarse grains trade as well.

At the current forecast levels, this year's cereal import bill of the developing countries adds up to roughly US$21 billion, which is about US$500 million, or 2 percent, below the previous year's value. Weaker international cereal prices during the course of the 1999/2000 trade season are expected to more than offset the rise in import volume. In making this forecast, the total volume of this year's food aid is assumed unchanged from the previous year. For the Low Income Food Deficit Countries (LIFDCs), cereal imports are likely to remain at last year's estimated volume of around 71 million tonnes. However, given the prevailing low prices, the overall cereal import expenses for the LIFDCs, as a group, are seen to fall by at least US$500 million, or 5 percent, to around US$9.3 billion.

World trade in wheat and wheat flour (in wheat equivalent) in 1999/2000 (July/June) is currently put at 102.5 million tonnes, up 5 million tonnes, or almost 6 percent, from the reduced level in 1998/99 and 500 000 tonnes above the November forecast. Most of the increase is due to higher imports by the developing countries, which are expected to import around 79 million tonnes, some 3 million tonnes more than the previous season. This would be equivalent to an estimated value of nearly US$10 billion. Total wheat imports by the LIFDCs are expected to increase by about 1 million tonnes to 40 million tonnes, which would translate into US$4.7 billion in import costs, down US$100 million from the 1998/99 estimated level.

In Africa, total wheat imports this season are forecast at about 23 million tonnes, 600 000 tonnes more than in the previous season. The increase is mostly attributed to just a few countries, namely Algeria, Morocco and South Africa, where domestic production was reduced. Imports into most other countries in Africa are expected to remain at around the same levels as last year or decline only slightly, such as in Sudan and Nigeria.

In Asia, total imports in 1999/2000 are forecast at 48 million tonnes, some 3 million tonnes more than in the previous season. Imports by India are now put at 1.6 million tonnes, up 600 000 tonnes from the previous report and 200 000 tonnes from the previous season. Despite a record crop and large stocks, Indian millers continued to import large quantities mostly because of the lower cost of imported wheat. This prompted the Government of India to impose a 50 percent duty on imported wheat beginning in December 1999. In the Islamic Republic of Iran, last year's devastating drought resulted in a sharp decline in production, forcing the country to resort to large imports, currently put at 6 million tonnes, almost double the previous year's level and 200 000 tonnes more than was forecast in November. The sharp rise in petroleum prices, combined with low international wheat prices, has enabled the country to absorb the financial burden of larger imports. By contrast, the forecast for imports by China (Mainland) has been cut this month, by 800 000 tonnes, to 1 million tonnes, given the large domestic supplies.

Overview of World Cereal Imports - Forecast for 1999/2000

    Wheat   Coarse grains Rice (milled) Total
1998/99 1999/2000 1998/99 1999/2000 1999 2000 1998/99 1999/2000
  ( . . . . . . . . .. . . .. . . . . .million tonnes . . . . .. . . . . . . . . . . )
Asia 45.0 48.4 53.1 53.7 14.3 12.8 112.4 114.9
Africa 22.6 23.2 11.3 12.8 5.1 5.2 39.0 41.2
Central America 5.8 5.7 11.6 11.4 1.5 1.5 18.8 18.7
South America 12.2 11.6 7.0 6.8 1.4 1.6 20.6 20.0
North America 2.9 2.6 3.8 3.5 0.6 0.6 7.3 6.8
Europe 7.9 10.7 6.1 7.6 1.5 1.5 15.6 19.8
Oceania 0.5 0.5 0.1 0.1 0.4 0.3 1.0 0.9
WORLD 97.1 102.5 92.9 96.0 24.8 23.71/ 214.8 222.3
Developing Countries 75.7 78.6 60.5 62.1 21.2 20.0 157.3 160.7
Developed Countries 21.4 24.0 32.5 33.9 3.6 3.7 57.5 61.5

Wheat imports into Europe are forecast at 10.7 million tonnes, up almost 3 million tonnes from the previous year, largely due to a twofold rise in imports by the Russian Federation. The forecast for imports by the Russian Federation has been raised by 500 000 tonnes this month to 4 million tonnes. Some 1.3 million tonnes of this total would be in the form of food aid carried over from the previous season. In addition, the Russian Federation has asked for 5 million tonnes of food aid for this season but, so far, only the United States has agreed to donate 500 000 tonnes of wheat. Other countries in Europe that are likely to increase their imports this season, albeit slightly, include Bulgaria, Belarus, Poland, Romania and Ukraine.

Total imports into Latin America and the Caribbean are expected to decline slightly this year to just over 17 million tonnes, half of which would be comprised of imports by Brazil and Mexico, the region's largest importers. This year's imports by Brazil are seen down from the previous season due mostly to slightly higher domestic production.

Regarding exports (table A.3), the likely prospect for higher import demand during the 1999/2000 season is expected to benefit several exporters but not all. Among the major exporters, Argentina, Australia, Canada and the EC are expected to boost their sales well above the previous year's levels. Exports by Canada are expected to rise the most, by 33 percent, followed by Argentina, at 20 percent. However, shipments from the United States, the world's largest wheat exporter, are likely to remain unchanged from the previous year, resulting in a slight decline in its world market share, to about 28 percent, which would be significantly below the 30-35 percent range registered between the mid-1980s through the mid-1990s. The anticipated large increase in wheat shipments by most major exporting countries is also attributed to much lower export supplies in several other exporting countries, mostly on account of reduced production, including Hungary, Bulgaria, Poland, Romania, Syria, Turkey, and Ukraine. Among the exceptions, Kazakhstan is expected to export 4 million tonnes in 1999/2000, double the previous year's level, as a result of a sharp increase in production, while the Czech Republic may also increase shipments.

Global coarse grain imports in 1999/2000 (July/June) are forecast at 96 million tonnes, unchanged from the previous report, and 3 million tonnes, or 3 percent, above the previous season. Trade in nearly all types of coarse grains is likely to increase, with maize and barley taking the lead, reaching 69 million tonnes and 17 million tonnes, respectively. Overall, total imports by the developing countries are put at 62 million tonnes, up almost 2 million tonnes from the previous season. In value terms, this season's imports by the developing countries could total US$7 billion, similar to the previous season. For the LIFDCs, the cost of this season's coarse grain imports would come to roughly US$2 billion, unchanged from the previous season, although import volume would be up slightly, reaching 19 million tonnes.

Total coarse grain imports into Africa are expected to reach 13 million tonnes, up about 1.5 million tonnes from the previous season. This increase would be almost entirely due to larger imports by several countries in sub-Saharan Africa, namely Kenya, Zimbabwe, Rwanda, and the Republic of South Africa, Tanzania and Zambia. In nearly all cases, the rising imports would be in response to below average or even lower domestic production. By contrast, among the countries in northern Africa, Egypt is forecast to cut its maize imports by about 300 000 tonnes due mostly to a larger crop.

In Asia, total imports could exceed the previous season's volume and approach 54 million tonnes. Overall, the bulk of the anticipated increase would reflect larger import demand for barley and maize in the Islamic Republic of Iran, due to reduced domestic production; higher maize purchases in the Republic of Korea, given the faster rise in its economic growth and feed demand; and slightly higher maize purchases by Malaysia and the Philippines, mostly on account of improved demand from their poultry sectors.

In Europe, total imports are currently put at 7.6 million tonnes, up 1.5 million tonnes from the previous season, as higher imports by Belarus, the Russian Federation, Poland, and Romania would more than offset a forecast decline in the European Community. For Latin America and the Caribbean, overall imports could be slightly smaller this year as Mexico is forecast to reduce its maize purchases due to good domestic production and large stocks, with most other countries importing nearly the same volume as in the previous season. Despite good maize crop prospects in Brazil, imports may rise slightly this season in response to fast growth in poultry sector that has caused a sharp increase in domestic maize prices in recent months.

In the coarse grains export market, major exporters are forecast to maintain similar market shares to the previous years. In the EC, larger barley sales so far still point towards higher coarse grains exports in 1999/2000, but the overall increase from last season may be below earlier expectations. Canada is also seen to increase its barley sales following this season's higher production. Argentina is forecast to continue with larger shipments through June, given last year's record crop. In Asia, maize exports from China are expected to exceed 5 million tonnes, up almost 2 million tonnes from the previous season given the large domestic supply and strong demand from neighbouring countries. By contrast, barley exports from Turkey are forecast to decline sharply because of reduced domestic supplies. Among the CIS countries, only Kazakhstan is seen to increase its coarse grains exports this season. The Republic of South Africa is likely to export as much as last year's reduced volume following another below-average crop, but a larger maize harvest in Malawi could result in a relatively large exportable surplus in that country.

Although the 1999 rice trade volume did not match the peak established in 1998, the estimated figure is much higher than anticipated at the beginning of the year. Based on current information from the major importing and exporting countries, FAO's estimate for global rice trade in 1999 has been adjusted upwards by 1.3 million tonnes from the last report to about 24.8 million tonnes, 2.8 million tonnes below the 1998 record volume. Most of the contraction in the 1999 trade reflected smaller imports by Asian and Latin American countries.

In Indonesia, the world's largest rice importer, the Government ban on private sector imports of lower quality rice grades imposed in September of 1999 was lifted on January 1, 2000. Since then, all rice imports, either channeled through the public or private sector, have been subject to a 30 percent duty. The level of the tariff will be re-evaluated every six months, depending on the prevailing international rice prices, and taking into consideration the interests of local producers. As traders pre-empted the introduction of the new tariff by accelerating the pace of imports towards the end of 1999, the country's rice import estimate in 1999 has been increased by 500 000 tonnes from the previous report to 4 million tonnes, 33 percent less than in 1998 but still the largest single country import volume in 1999. Likewise, purchases by Brazil have been adjusted up by 100 000 tonnes to 1 million tonnes, compared with 1.5 million tonnes in 1998. The country's imports during the first nine months of 1999 are estimated at about 720 000 tonnes. The production shortfall in the Islamic Republic of Iran boosted the country's rice requirements and its imports have been raised by 100 000 tonnes to 1 million tonnes, 60 percent of which were supplied by Thailand under Government-to-Government arrangements. Purchases by Nigeria were also increased by 100 0000 tonnes to 900 000 tonnes, which consisted mainly of parboiled rice from Thailand. Import shipments by several other countries including Saudi Arabia, Japan, Turkey, United States, Senegal, Ghana, and Russia were revised upward by a total of 600 000 tonnes. By contrast, the estimate of imports by Bangladesh, one of the major rice markets in 1998, was reduced by 100 000 tonnes from the previous forecast to about 1.7 million tonnes or 32 percent below the 1998 volume. The sharp reduction reflects the recovery in domestic paddy production, which has led to higher stock levels. The Government has also imposed a five percent tax on rice imports. Shipments to China (Mainland), mostly of high quality rice from Thailand, are estimated at 150 000 tonnes or 39 percent below the 1998 volume.

On the export side, the forecast of shipments out of Thailand, the world's leading rice exporter, has been revised upward by 1 million tonnes from the last report to a record 6.7 million tonnes, or 5 percent more than the record in 1998. The pace of exports accelerated substantially during the last two months of 1999, supported by large sales to Indonesia. Exports from Viet Nam also reached a record level in 1999. The current official estimate is about 4.6 million tonnes, 300 000 tonnes higher than previously reported. The forecast of China's rice shipments in 1999 has been adjusted upwards by 600 000 tonnes since the last report, to 2.6 million tonnes. This volume would rank it fourth among the world's rice exporters, a position already attained in 1998 when its exports reached 3.7 million tonnes. By contrast, the estimates for rice sales by Pakistan and Myanmar have been reduced respectively by 300 000 tonnes to 1.8 million tonnes and by 130 000 tonnes to 70 000 tonnes. Pakistan has consistently increased its rice shipments in the 1990s from 1.3 million tonnes in 1991 to 2 million tonnes in 1998. Such an achievement has been made possible by bumper harvests over the last few years. Exports by India have been more sporadic: when exportable supplies on the international market are abundant and prices are under downward pressure, as was the case in 1999, Indian rice has difficulty to compete with supplies from other origins, particularly Thailand and Viet Nam. In fact, shipments for 1999 are estimated at 2.6 million tonnes or 42 percent below 1998. Like Pakistan, India exports both the premium priced basmati and low quality rice. The estimate for the United States' rice exports in 1999 is about 2.8 million tonnes, down by 13 percent from 1998, because many of the South and Central American countries, the traditional customers of the United States, imported less owing to a recovery in their domestic production. The USA Rice Federation is currently pressing for the reform of the trade sanctions the country applies to Cuba. Historically, the United States used to ship more than half of its rice exports to Cuba, a market that has been lost to its Asian competitors.

For 2000, exportable supplies are expected to be abundant but import demand is likely to remain sluggish, given the good production prospects in many of the major importing countries. Assuming no major supply and/or demand shocks, global rice trade is tentatively forecast to be about 24 million tonnes, which would be the third highest on record. The major players are expected to be the same, with Thailand, Viet Nam and the United States leading on the export side, while Indonesia, Bangladesh, the Philippines and Brazil will likely be the chief importers. However, it should be noted that changes in the rice import policies of some of the major importing countries could greatly influence the volume of rice traded during the year.


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