FAO/GIEWS - Food Outlook No.5 - November 2000 p. 3

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Supply/Demand Roundup

As more of the 2000 cereal harvests are drawing to a close, it has become clear that drought in several important producing countries has had a greater impact than anticipated earlier. FAO's latest forecast points to a reduction in world cereal production in 2000 to 1 848 million tonnes (including rice in milled equivalent), which would be 33 million tonnes below the forecast in September, and 32 million tonnes, or 1.7 percent, below the estimate for 1999. At this level, cereal output would be well below the anticipated utilization in 2000/01 and, as a result, stocks will have to be drawn down significantly. Moreover, with continuing strong cereal import demand around the world, a somewhat tighter market is likely in the course of the current season. In this context, the size of plantings for the 2001 cereal crops will play an important role in determining price developments in the cereal market in the coming months.

FAO's forecast for world wheat production in 2000 has been lowered by a further 5 million tonnes since the last report to 582 million tonnes. The latest revision is largely the result of significant reductions in the forecasts for the southern hemisphere crops still to be harvested in Brazil and Australia, because of a deterioration in weather conditions, as well as several small adjustments to estimates of crops already gathered in the northern hemisphere. These downward revisions more than offset a significant increase in the estimate for the Russian Federation. At the current forecast level, world wheat output in 2000 would be 1.4 percent down from 1999, a decline for the second consecutive year, but would remain about the average of the past five years. Output has increased this year only in Europe and Central America and these gains were more than offset by significant declines in all other regions. Planting of the winter wheat crops for harvest in 2001 is already well underway in the major northern hemisphere producers but weather conditions are far from ideal in many parts and overall prospects are still uncertain. In the United States, planting pace and crop establishment in the main winter wheat plains is well behind normal due to adverse dry conditions. In Europe, planting in most of the EC countries is somewhat hampered by wet conditions, while in the Iberian Peninsula, and also throughout the bulk of the eastern European countries, dry weather is also the main constraint on planting.

World Cereal Production, Supplies, Trade and Stocks

  1998/99 1999/2000
  (. . . . . . million tonnes . . . . . .)
Production 1/ 1 898 1 880 1 848
Wheat 598 590 582
Coarse grains 911 883 870
Rice (milled) 390 406 397
Supply 2/ 2 234 2 233 2 188
Utilization 1 878 1 898 1 895
Trade 3/ 219 235 238
Ending Stocks 4/ 354 340 288

FAO's forecast for the 2000 world coarse grain output has been revised downward substantially by 27 million tonnes since the last report, to 870 million tonnes, mostly as a result of weather-related downward adjustments for Asia, North America, South America and Europe. Persisting drought in southern and central parts of the United States, and throughout most of eastern Europe has been particularly hard on the maize crop; yields have shrunk well below normal in many parts and in some cases whole crops have been wiped out. At the forecast level, global output of coarse grains in 2000 would be 1.5 percent below the 1999 crop, a decline for the second consecutive year, and would fall slightly below the average of the past five years.

Harvesting of the 2000 paddy crop is proceeding in the northern hemisphere countries. Paddy production has been affected by heavy rains and flooding in parts of Asia, particularly in China (Mainland), India, Bangladesh, Nepal, Cambodia, Thailand, Viet Nam and Laos. In the Southern Hemisphere and around the equatorial belt, the 2000 paddy season has generally been concluded and, in some countries, planting of the 2001 crop has already begun. Forecasts for the 2000 global paddy output have been lowered by 1.4 million tonnes from the last report, to 593 million tonnes. At that level, production would be almost 15 million tonnes or about 2.5 percent below the revised estimate for 1999. Most of the contraction can be attributed to the low prices that farmers have received over the last two seasons, which have encouraged them to diversify towards other crops. In some instances, that shift has been supported by government policies aimed at cutting the size of rice inventories. Weather and flood problems contribute only to a minor extent to the contraction in output.

FAO's forecast of world cereal trade in 2000/01 (July/June) has been raised by 6 million tonnes, to 238 million tonnes, reflecting stronger demand in several countries, mostly because many cereal crops have turned out smaller than anticipated earlier but also reflecting continuing low international cereal prices. At the forecast level, the volume of cereal imports would be some 2.5 million tonnes, or 1 percent, above the previous year's already record high level. Most of the increase compared to 1999 is accounted for by coarse grains and rice. The forecast of global wheat imports has been revised upward by 2 million tonnes to 109.5 million tonnes, which is virtually unchanged from the previous year. However, imports of wheat by the developing countries as a group, are likely to reach 83 million tonnes, almost 1 million tonnes up from last year's record. Global coarse grain imports in 2000/01 are now forecast at 104.5 million tonnes, 3 million tonnes up from the September forecast and about 1.5 million tonnes above the previous year's volume. Developing countries' imports of coarse grains are expected to remain close to their 1999/2000 level at about 68 million tonnes. World trade in rice in 2001 is tentatively forecast at about 24 million tonnes, up 1.1 million tonnes or 5 percent from the revised forecast for 2000, which is now put at 22.9 million tonnes.

The FAO forecast for world cereal utilization in 2000/01 has been lowered by about 5 million tonnes from the previous report to 1 895 million tonnes. This would be marginally lower than in the previous year and also below the trend by some 1 percent. Total cereal use for direct human consumption is forecast to rise by about 1 percent. The most significant increases are anticipated among the developing countries in Asia. However, considering that the forecast rise in consumption would be close to the overall growth in world population, the global per caput food consumption level is expected to remain virtually unchanged. By contrast, the animal feed utilization of cereals in 2000/01 is currently forecast to decline by slightly more than 1 percent from the previous season. The decline would be most pronounced in countries worst affected by drought this year, especially in central and eastern Europe and in the Near East. In China, feed use is expected to remain at last season's level despite a sharp decline in domestic production. Among the other major feed markets, the record maize crop in the United States is expected to give rise to higher feed use in that country while strong feed demand in the EC and this year's exceptionally large supplies of low quality wheat would also result in higher feed use among this group of European countries.

World cereal stocks by the close of the seasons ending in 2001 are now forecast at 288 million tonnes, down 52 million tonnes from their opening level. This significant reduction comes mostly because of lower world cereal production. As a result, the ratio of world stocks to the expected utilization in 2000/01 could fall to around 15 percent. However, despite the prospect of smaller stocks, the price response in international cereal markets has, so far, been limited mostly because major exporters continue to have large exportable supplies, and some countries are currently disposing of their excess stocks.

International cereal prices made some small gains by October, compared to their August levels. For wheat, the increase in higher quality categories was most pronounced with the US wheat No. 2 (HRW, fob) averaging US$131 per tonne in October, up US$16 per tonne from August and US$20 per tonne more than a year earlier. Strong import demand has provided most of the support for higher wheat prices in view of a decline in world output and prospects for lower stocks. International maize prices also benefited from strong import demand, amid lower global production and reduced stocks, especially in the major exporting countries and in China. In October, the price of US No. 2 maize (fob) averaged US$92 per tonne, which was up US$16 per tonne from August and US$8 per tonne up from last year. The FAO Export Price Index for Rice (1982-84=100) made a slight recovery in October, rising by 1 point to 95 points, mostly on the strength of increased prices for high quality rice. However, at this level, the Index remains close to the lowest level in the past 10 years.

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