FAO/GIEWS - Food Outlook No.4 - September 2000 p. 3

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Supply/Demand Roundup

Latest indications still point to a larger world cereal output in 2000, although the growth will be less than anticipated earlier. FAO's current forecast of the world cereal crop in 2000 is 1 881 million tonnes (including rice in milled equivalent), 15 million tonnes lower than the forecast in June, but 6 million tonnes, or 0.3 percent, above the revised estimate for 1999. At this level, output would be 9 million tonnes below the expected utilization in 2000/01, causing cereal stocks to be drawn down by 6.5 percent to their lowest level since 1996/97. As a result, the ratio of global cereal stocks in 2000/01 to trend utilization in the following year is set to slip slightly below the 17-18 percent range that the FAO considers the minimum necessary to safeguard world food security. With the bulk of the 2000 cereal harvests now underway or already completed, the overall global situation is unlikely to change significantly for the year.

FAO's latest forecast of world wheat production in 2000 has been revised downward by about 4 million tonnes since the last report in June, to 587 million tonnes. At this level, global output would be just marginally below (-0.4 percent) the estimate of output in the previous year. The downward adjustment since June is largely attributed to Asia, and in particular to China, where a persisting drought had a larger impact on crops than earlier anticipated. A downward revision has also been made to FAO's forecast for coarse grains production, which now stands at 896 million tonnes. Although this is some 11 million tonnes less than the forecast in June, at this level, output would still be 14 million tonnes, or 1.6 percent, above the estimate for 1999. Again China accounts for a large part of the latest downward revision. However, significant reductions have also been made to the forecasts for several eastern European countries where a persistent drought since spring has been the main cause of declining yield prospects. Harvesting of the main-season rice crops in the northern hemisphere is expected to start in earnest around the September/October period, but the season has been hampered by weather-related problems in some Asian countries. In the southern hemisphere and around the equatorial belt, harvesting of the 2000 main-season crop has virtually been concluded. Overall, global rice output in 2000 is forecast at about 398 million tonnes (or nearly 596 million tonnes in paddy terms), 1.5 percent lower than the previous year. The reduction mostly reflects a fall in area due to low paddy prices or policies designed to reduce output and, in some countries, to weather-related damage.

World Cereal Production, Supplies,Trade and Stocks

  1998/99 1999/2000
  (. . . . . million tonnes . . . . .)
Production 1/ 1 898 1 876 1 881
Wheat 598 589 587
Coarse grains 911 882 896
Rice (milled) 390 404 398
Supply 2/ 2 232 2 228 2 223
Utilization 1 877 1 890 1 900
Trade 3/ 218 231 232
Ending Stocks 4/ 352 342 320

FAO now forecasts world cereal trade in 2000/01 at 232 million tonnes, some 11 million tonnes more than was anticipated earlier. This would be marginally above the revised estimate of cereal imports in 1999/2000, now put at 231 million tonnes. The pronounced revision in the 2000/01 forecast is largely for wheat and coarse grains and is based on latest information of reduced production prospects in several grain importing countries. FAO's first forecast for global cereal food aid shipments in 2000/01 (July/June) is put at 9.5 million tonnes, 5 percent below the revised estimate of 10 million tonnes in the previous year, as shipments to the Russian Federation are likely to be smaller this season.

Global trade in wheat and wheat flour (in grain equivalent) in 2000/01 is currently forecast to reach 107.5 million tonnes, 6 million tonnes more than reported in June but similar to the previous year's revised volume. For coarse grains, the forecast of world trade in 2000/01 has been raised by 4.5 million tonnes since the previous report to 101.5 million tonnes, which is slightly up from the estimate for the previous year. The forecast for global rice trade in 2000 (which is mostly influenced by production in 1999) has been adjusted upwards only marginally since June, to 22.4 million tonnes. This remains well below the previous year's volume, reflecting bumper harvests in many of the major importing countries.

World cereal utilization is forecast to expand marginally (by about 0.5 percent) in 2000/01 to 1 900 million tonnes, but still remain below the trend, by some 13 million tonnes, or 0.7 percent. Higher food consumption, particularly among the CIS countries, is likely to account for most of the growth. Nevertheless, cereal consumption in many other countries, especially those affected by production shortfalls this year, are expected to be lower. Besides continuing problems in Africa, a severe drought in parts of Asia could result in serious food shortages in several affected countries. The animal feed usage of cereals is likely to rise marginally in 2000/01, mostly driven by continuing growth in Latin America and the EC, while unfavourable market conditions may slow down feed usage in several CIS countries, especially in the Russian Federation. In Far East Asia, total animal feed usage is expected to increase slightly, with gradual economic recovery providing most of the support. In the United States, this year's anticipated bumper maize crop is likely to boost feed usage of maize to a new record. However, because of a possible decline in wheat feed utilization, total feed usage of cereals in the United States could remain unchanged from 1999/2000.

Latest information on production and utilization in the current 2000/01 year confirms that world cereal stocks are set to decline sharply compared to last year. FAO's latest forecast for global cereal stocks by the close of the seasons ending in 2001 has been lowered slightly since the previous report to 320 million tonnes, which is down 22 million tonnes, or 6.5 percent, from the revised opening level. At the current forecast levels, the ratio of total global cereal carryovers to trend utilization in 2001/2002 is 16.5 percent, nearly unchanged from the previous forecast but slightly below the 17-18 percent range that the FAO Secretariat considers the minimum necessary to safeguard world food security. However, cereal stocks held by major exporting countries are estimated to be sufficient to meet any unexpected increase in world demand. Major exporters' total cereal inventories could rise this season by at least 8 million tonnes to 156 million tonnes, boosting their overall share of the world total to nearly 49 percent, compared to 43 percent in the previous season.

International cereal prices have remained weak since the start of the current marketing seasons, mostly in response to continuing large export supplies in several countries. The downward pressure has been most pronounced for maize, given the prospects for a bumper crop in the United States. US maize export prices averaged US$76 per tonne in August, US$19 per tonne lower than in May and US$16 per tonne below August 1999. US wheat No. 2 (HRW, fob) averaged US$115 per tonne in August, down US$1 per tonne from May but similar to that a year ago. International rice prices also weakened further over the past three months, reflecting the oversupply situation on the international market relative to import demand and the arrival of new crop supplies in some countries. In August, the FAO Export Price Index for Rice (1982-84=100) averaged just 95 points, down by 1 point from May and 21 points below its level in August 1999.

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