FAO/GIEWS - Food Outlook No.3 - June 2000 p. 3

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Supply/Demand Roundup

Latest information continues to point to a slightly larger global cereal output in 2000 than in the previous year. However, based on current forecasts, total cereal production would not be sufficient to meet expected utilization requirements in 2000/01 and global cereal reserves would have to be drawn down. To avoid any further deterioration of the cereal supply and demand balance in 2001/02, a more significant increase in cereal production would be necessary in 2001.

FAO's latest forecast of world cereal production in 2000 is 1 896 million tonnes, (including rice in milled equivalent), 6 million tonnes more than the forecast in the previous report and about 1.3 percent above the revised estimate of 1 871 million tonnes for 1999. The forecast for wheat has been revised down since the last report, by 5 million tonnes, to 590 million tonnes. This would be virtually unchanged from the previous year's output and close to the average of the past five years. In Asia, aggregate output in the region is forecast to remain virtually unchanged from the previous year. Although, serious drought could reduce the main rainfed crops in several countries throughout the region, the main irrigated crops have performed well. In Africa, reflecting persisting drought in the main wheat producing countries in the north of the region, the wheat output forecast has been reduced since the last report and now points to a decrease compared to 1999. Also in Europe, the forecast for wheat has been revised downward slightly, mainly reflecting a deterioration of prospects in the Russian Federation. Nevertheless, output in this region is still expected to rise sharply from the previous year following a significant increase in area in the EC. The forecasts for North America and Central America remain virtually unchanged since the last report. A smaller crop is expected in North America this year due to reduced plantings. The Central American crop may increase slightly but will remain close to the normal level. In the southern hemisphere, although the main 2000 wheat crops are still being planted in some areas, early indications are generally favourable; above average crops are expected in South America and Oceania, although slightly below the previous year's levels.

World Cereal Production, Supplies, Trade and Stocks

  1998/99 1999/2000
  (. . . . . . million tonnes . . . . . .)
Production 1/ 1 899 1 871 1 896
Wheat 597 589 590
Coarse grains 912 879 908
Rice (milled) 390 403 398
Supply 2/ 2 229 2 216 2 227
Utilization 1 876 1 892 1 903
Trade 3/ 216 225 221
Ending Stocks 4/ 345 331 321

FAO's forecast for global coarse grains output in 2000 now stands at 908 million tonnes, 8 million tonnes up since the last report, and 3.3 percent above the revised estimate of 879 million tonnes for 1999. The bulk of the revision since the previous report, is accounted for by North America and Europe, where planting conditions have been generally favourable and more land has been devoted to coarse grains this year. Elsewhere in the northern hemisphere, coarse grains production in Asia is expected to decline marginally, while slight increases may be recorded in Africa and Central America. In the southern hemisphere, larger coarse grain crops are expected in South America and Oceania.

The 2000/01 paddy season is underway in some northern hemisphere countries while, in others, the season still awaits the onset of monsoon rains, which generally begin during June. Current indications suggest that rice area could contract in some countries, reflecting the effects of government policies and/or low international rice prices relative to alternative crops. In the southern hemisphere and around the equatorial belt, harvesting of this season's main paddy crop has already been completed in some countries and is nearing completion in others. Preliminary assessments, particularly in the major producing countries, point to a lower paddy production, mostly attributed to a fall in area, resulting from depressed rice prices. FAO tentatively forecasts global rice output in 2000 at 398 million tonnes (596 million tonnes in paddy terms), about 1 percent less than the record 1999 crop.

FAO's first forecast of world cereal trade in 2000/01 is 221 million tonnes, about 4 million tonnes, below the estimated volume in 1999/2000. Global wheat trade is forecast to fall by over 2 million tonnes in 2000/01 to 101.5 million tonnes, still above the average of the past 5 years. Most of the decrease is accounted for by the Russian Federation and Pakistan in view of improved production prospects this year. Trade in coarse grains is also expected to be smaller, by about 2 million tonnes, at 97 million tonnes, mostly because of increased production in a few importing countries, especially the Russian Federation. For rice, while it is still too early to make a forecast for the calendar year 2001, FAO tentatively expects that, at the global level, rice shipments could remain close to the current year's level, now forecast at 22 million tonnes. Regarding 1999/2000, forecasts for wheat and coarse grains are now firmer as the season is drawing to a close. Except for rice, world trade in most other major cereals is expected to be notably larger, in spite of smaller food aid shipments.

FAO's forecast for world cereal utilization in the current 1999/2000 season has been raised since the last report, by 7 million tonnes, to 1 892 million tonnes, mostly in line with the upward adjustments made to the production estimates for 1999. At this level, world cereal utilization will be nearly 1 percent up from the previous year, largely on account of increased food consumption. While the rise in feed utilization at the global level is expected to be negligible, weak feed grain prices are the main driving force for much faster growth rates in demand in North and South America. Preliminary indications for 2000/01 point to a further rise in total cereal utilization. The overall outlook is expected to be similar to this season, but the growth in feed use may prove more significant, especially in Europe where a recovery in production in many parts could boost domestic utilization. Unknown at this time is the impact of the foot-and-mouth disease outbreak in Far East Asia on the demand for feed grains in 2000/01.

International wheat prices edged slightly higher since the previous report, mainly in response to less favourable weather conditions affecting crops in the United States. In May, the price of U.S. wheat No. 2 (HRW, fob) averaged about US$116 per tonne, up US$4 per tonne from March and US$4 per tonne above the price in May 1999. Developments on the international maize market have been uncertain in recent weeks, reflecting the strong influence of weather on new crop conditions at this time of the season. Overall, U.S. maize No. 2 (fob), averaged US$95 per tonne in May, unchanged from March but US$2 above the corresponding month a year ago. By contrast, the declining trend in international rice prices persisted in recent weeks as ample supplies of new crop in the major exporting countries and dull import demand continue to pressure prices downward. The FAO Export Price Index for Rice (1982-84=100) averaged 98 points in May, down by 2 points from the previous month, 15 points below a year earlier and the lowest level since September 1993.

FAO's latest forecast of global cereal stocks at the end of countries' 1999/2000 crop years now stands at 331 million tonnes. Although this is slightly less than the previous forecast and 14 million tonnes below their opening level, the ratio of global cereal carryovers in 1999/2000 to trend utilization in the following year remains within the minimum safe range. However, turning to the next (2000/01) season, if current forecasts for cereal production in 2000 materialize, a further draw-down of cereal stocks would be required to meet expected global utilization in 2000/01, in which case, the stock-to-use ratio could fall to 16.6 percent, slightly below the minimum safe level of 17-18 percent.

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