FAO/GIEWS - Food Outlook No.5 - November 2000 p. 6

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Record cereal trade forecast in 2000/01

The forecast for world cereal trade in 2000/01 has been raised again this month to 238 million tonnes, 6 million tonnes more than was reported in September, reflecting higher import demand in several countries, mostly because of reduced production prospects for grains as well as continued low level of international cereal prices. At the current forecast levels, world trade in cereals in 2000/01 would be some 2.5 million tonnes, or 1 percent, above the previous year's already record high volume. The expected increase from last year is mostly on account of higher demand for coarse grains and rice. The sudden sharp expansion in world cereal imports during last season, now forecast to be followed by an increase also this season, would put world trade in cereals at some 25 million tonnes, or 11 percent, above the average in the 1990s. This sudden expansion in world trade is also in sharp contrast to the more steady situation observed during the second half of the 1990s when world trade was rather static and well under 220 million tonnes.

Aggregate cereal imports by the developing countries in 2000/01 are forecast at a record 171 million tonnes, up 1 million tonnes from last season's already high level. Based on this forecast, and taking into account the current prospects for slightly higher cereal prices and freight rates during the course of the 2000/01 season, the cereal import bill of the developing countries is expected to rise to US$24 billion, almost US$2.4 billion, or 11 percent, above the previous year. Total imports by the Low-Income Food-Deficit Countries (LIFDCs) in 2000/01 is put at 74 million tonnes, around 2 million tonnes more than last year. At this level, the overall cereal import expenses for the LIFDCs, as a group, is forecast at US$10 billion, up US$1 billion, or 15 percent, from 1999/2000.


International trade in wheat and wheat flour (in grain equivalent) in 2000/01 (July/June) is now forecast at 109.5 million tonnes, nearly unchanged from 1999/2000 but 2 million tonnes more than was reported in September. Reduced production estimates in several countries is the reason for this month's upward revision. For the developing countries, as a group, imports are likely to exceed last year's record by almost 1 million tonnes and reach 83 million tonnes. At this level, the wheat import cost for the developing countries is estimated at around US$12.5 billion, up US$2 billion from the previous year and accounting for one-half of their total cereal import bills. For the LIFDCs, wheat imports are put at around 40 million tonnes, down slightly from the previous season. In value terms, this season's wheat imports by the LIFDCs could reach around US$6 billion, up US$1 billion from 1999/2000 due largely to higher average prices.

In Asia, aggregate wheat imports in 2000/01 are currently forecast at 50.4 million tonnes. This month's higher import forecasts for Uzbekistan brings total imports into Asia closer to the volume registered in 1999/2000. The forecast for imports by Uzbekistan has been raised by 600 000 tonnes to 800 000 tonnes, up slightly from the previous year following a decline in production. The drought-reduced production in several Asian countries, including Armenia, Afghanistan, Islamic Republic of Iran, Iraq and Tajikistan, would mean much higher import requirements for those countries. Among them, the largest wheat importer is expected to be the Islamic Republic of Iran as imports by that country could approach 7 million tonnes, nearly the same as in the previous year when a severe drought also affected domestic production. In addition, China (mainland) is likely to return to the international wheat market this year as a bigger purchaser of wheat, importing at least 3.6 million tonnes, 2.5 million tonnes more than in the previous season, due to a decline in production combined with growing demand for high quality wheat.

In Africa, the forecast for wheat imports has been raised slightly this month to just over 25 million tonnes, up 1.3 million tonnes, or 5 percent, from the previous year. The drought affecting several countries in North Africa is expected to boost imports by several countries, especially Algeria and Morocco. Imports by Egypt, the region's largest wheat importer, are forecast to reach 6.8 million tonnes, exceeding last year's reduced volume by 800 000 tonnes, despite an increase in its domestic harvest. The rise in imports by Egypt is mostly due to strong import demand for high quality wheat from the United States. In contrast to North Africa, aggregate wheat imports by countries in sub-Saharan Africa are expected to be smaller than in the previous season, declining by about 1 million tonnes. However, most of the reduction in the overall imports would be in Ethiopia mainly because of a likely decline in food aid shipments to that country after last year's surge.

In Europe, the forecast for total imports indicates a reduction from last season, mostly because of sharply reduced import requirements in the Russian Federation. Higher production and the expected decrease in food aid shipments to the Russian Federation could result in a drop of over 50 percent in imports by that country to 2.5 million tonnes. This decline is likely to be more than offset by the increase in imports in several other countries, including Bulgaria, Poland, Slovakia and Ukraine, due to reduced production.

The forecast for imports into the Latin American and Caribbean region has been raised this month to above 19 million tonnes, up 1 million tonnes from the previous report and 500 000 tonnes more than in 1999/2000. However, this month's upward adjustment in Brazil accounts for all of the increase. Strong domestic demand from the Brazilian milling industry and the recently announced removal of import restrictions on soft red winter and hard red spring wheat from the United States (starting in November) could boost imports to that country to even higher levels.

Turning to wheat exports, shipments from Canada and the United States are again likely to register an increase. Because of the continuing high value of the US dollar, the forecast for exports from the EC has also been raised to above previous year's levels. The combination of weaker value of the Euro against the US dollar and stronger world prices provide better opportunities to increase exports without resorting to subsidies. This is of particular importance because, starting this season, rollover of `unused subsidy quota' is no longer allowed under the Uruguay Round Agreement on subsidized exports. As for other major exporters, Argentina and Australia are expected to export slightly less this season because of somewhat reduced supplies. Among smaller exporting countries, sales from Turkey are likely to recover from last year's reduced level. Also Pakistan and India are expected to be able to export at least some of their large surpluses into the world market. By contrast, export prospects remain weak for several European countries because of the drought, which severely reduced their exportable supplies, particularly in Ukraine, Poland and Romania. Exports from the Ukraine alone are forecast to fall by almost 3 million tonnes compared to the previous season.

Overview of World Cereal Imports - Forecast for 2000/01

    Wheat   Coarse grains Rice (milled) Total
1999/2000 2000/01 1999/2000 2000/01 2000 2001 1999/2000 2000/01
  ( . . . . . . . . . . . . . . . million tonnes . . . . . . . . . . . . . )
Asia 50.8 50.4 58.0 57.3 11.7 12.7 120.5 120.4
Africa 23.9 25.2 13.2 14.2 5.7 5.8 42.9 45.1
Central America 6.0 5.9 12.9 12.1 1.5 1.5 20.4 19.5
South America 12.6 13.2 7.1 6.9 1.1 1.1 20.9 21.2
North America 2.6 2.6 3.3 4.3 0.6 0.7 6.5 7.5
Europe 13.0 11.8 8.5 9.6 1.8 1.8 23.3 23.2
Oceania 0.5 0.5 0.1 0.1 0.4 0.4 0.9 1.0
WORLD 109.4 109.5 103.1 104.5 22.9 24.0 1/ 235.4 237.9
Developing Countries 82.5 83.2 68.4 67.9 18.9 19.9 169.8 171.0
Developed Countries 26.9 26.3 34.7 36.6 4.0 4.1 65.6 67.0

The forecast for world trade in coarse grains in 2000/01 (July/June) has been raised by 3 million tonnes to 104.5 million tonnes. The increase from the previous report is mostly on account of larger import requirements in several countries in Europe. Following this month's revisions, total coarse grain trade could exceed the previous year's volume by about 1.5 million tonnes, representing a growth rate of about 1.4 percent. Global maize trade, the largest traded coarse grain, is put at around 73 million tonnes, up 1 million tonnes from last year. For barley, imports are expected to reach 20 million tonnes, up 1 million tonnes from the previous season. However, imports of sorghum are forecast to decline slightly, to around 7 million tonnes.

In Asia, total imports of coarse grains in 2000/01 are put at roughly 57 million tonnes, some 700 000 tonnes below the previous year, mostly because of a likely decrease in imports (mostly barley) by the Syrian Arab Republic, due to higher domestic production. In fact, imports by most countries in Asia are forecast to remain close or increase slightly from last year because of the continuing strong demand from the animal feed sectors, especially in the Far East, and production shortfalls in several countries.

Coarse grain imports by the developing countries are currently put at 68 million tonnes, similar to last year. The cost of imports for the developing countries could reach US$8 billion, almost unchanged from the previous year. Imports by the LIFDCs are put at 21 million tonnes, up 1.5 million tonnes from the previous year. At this level, the import bill for the LIFDCs, as a group, is expected to rise slightly to US$2.4 billion, some US$200 million more than in the previous year.

The forecast for imports into Africa has been reduced slightly this month to just over 14 million tonnes, still some 1 million tonnes more than in the previous year. The increase over the previous season is most pronounced in Egypt because of strong demand, and in Morocco because of drought reduced output. By contrast, total imports by countries in the sub-Saharan region are expected to remain at about last year's levels, as higher imports by Ethiopia and Kenya, reflecting reduced production, would be largely offset by reduced imports in the Republic of South Africa (normally a leading regional exporter), Zambia and Zimbabwe because of higher domestic maize production.

In the Latin American and Caribbean countries, total coarse grain imports in 2000/01 are put at 19 million tonnes, down 1 million tonnes from 1999/2000. This forecast decline, however, would be mostly on account of a likely decrease in purchases by Brazil and Mexico, the region's two largest importers. In Brazil, the reported increase in planting may result in higher production and, hence, slightly smaller imports this season. In Mexico, favourable production prospects for maize and sorghum could lead to a decline of about 800 000 tonnes in imports.

By contrast, the 2000/01 forecast for imports into Europe is now raised to 9.6 million tonnes, up nearly 1 million tonnes from the previous year and nearly 2 million tonnes more than reported in September. The main reason for this year's increase, and also this month's upward revision, is poor crop prospects in several central and eastern European countries. In Poland, a fall in this year's output is expected to result in at least 1.3 million tonnes of imports, up some 500 000 from the previous year. In Romania, this year's sharp decline in coarse grains production could boost imports sharply compared to normal levels. In the Russian Federation, however, imports could decline significantly because of a likely increase in domestic production.

In the export market, larger shipments are likely from nearly all major origins. Exports of coarse grains (mostly maize) from the United States, the world's largest exporter, are expected to climb to 60 million tonnes in 2000/01 (July/June), up more than 3 million tonnes from the previous year. Larger barley sales from the EC would also result in an overall increase of about 1 million tonnes in its shipments of coarse grains (mostly barley) this season. Argentina and Canada are also likely to benefit from stronger world demand, increasing their exports by more than 2 million tonnes and 1 million tonnes, respectively. Larger crops in the Republic of South Africa could boost exports from that country after last year's poor crop. Among the other exporters, maize shipments from China are expected to remain high, although not as high as in the previous season considering the expected sharp decline in production. In Europe, this year's exportable supplies will be more limited in Hungary and no exports are expected from Poland and Romania because of smaller harvests.

The forecast for global rice trade in 2000 has been raised, since the last report, by 500 000 tonnes to 22.9 million tonnes, as trade activities have picked up noticeably since the floods that hit some major exporting countries have started to recede. At the forecast level, this year's rice trade volume would be 2.2 million tonnes smaller than in 1999 and 4.6 million less than the 1998 all time high.

The latest revision of global imports in 2000 mainly reflects expectations for some 150 000 tonnes additional deliveries to the People's Democratic Republic of Korea, following the announcement of increased food aid to the country, and an upward adjustment of purchases by Nigeria and Côte d'Ivoire, by 110 000 tonnes and 100 000 tonnes, respectively. Import forecasts have also been augmented, by 100 000 tonnes for the Philippines, following the announcement of additional purchases by the National Food Agency, and by a combined 100 000 tonnes for South Africa, Guinea, Ghana, Guinea-Bissau, Barhain and Yemen. By contrast, the forecast of imports by Saudi Arabia has been lowered by 100 000 tonnes based on reported shipments to date. Forecasts of 2000 rice imports by other major players on the market are unchanged from the last report. They remain at 2.2 million tonnes for Indonesia, a level substantially lower than the 3.8 million tonnes imported in 1999, at 1.1 million tonnes for the Islamic Republic of Iran, up from 1 million tonnes last year, and at 700 000 tonnes for Brazil, down from 1 million tonnes. Purchases by Bangladesh are still forecast to tumble, from 1.8 million tonnes in 1999 to only 500 000 tonnes this year, following two years of bumper crops.

Most of the adjustment in the world rice export estimate for 2000 is on account of a 500 000 tonnes increase in forecast sales by China (Mainland), to 3.5 million tonnes. Despite the contraction in production, domestic prices have continued to fall, allowing the country to increase its share in a shrinking international rice market. In addition, the export forecast for Japan has been raised by 200 000 tonnes to 600 000 tonnes in 2000, since the country is considering stepping up external food aid as one of the policy options to cut surpluses. By contrast, rice sales by the United States have been reduced by 100 000 tonnes from the previous forecast to about 2.8 million tonnes, reflecting a continued poor demand from its traditional customers in Latin American and the Caribbean. Estimates of exports for the year by Thailand and Vietnam are unchanged at 6.0 million tonnes and 3.8 million tonnes, respectively.

In 2001, world trade in rice is tentatively forecast to reach about 24 million tonnes, up 1.1 million tonnes or 5 percent higher than the current forecast for 2000. The increase would be mainly on account of larger purchases by Indonesia and Bangladesh. In addition, imports by the Islamic Republic of Iran are expected to rise, to make up for the drought-related losses, while those by China (Mainland), might double to 400 000 tonnes. Forecasts for the Democratic Republic of Korea also point to some increase in imports, to offset the current production shortfalls, much of which might take the form of food aid.

All of the foreseen increase in exports in 2001 is expected to be met by Asian suppliers, especially Thailand and Viet Nam. Sales by Myanmar could also rebound next year. China (Mainland) is forecast to raise its exports further in 2001, again by drawing from rice inventories. Such a behaviour is an indication of the Government's on-going efforts to reduce the large costs associated with their holding. The stock-drawdown might also reflect concerns over the implications the forthcoming accession to WTO might have on the country's rice balance. By contrast, in South America, both Argentina and Uruguay are expected to reduce exports in 2001, a consequence of depressed regional demand. Little change in sales by the United States and Australia is currently anticipated.

The volume of rice imported on commercial terms by the developing and LIFD countries is forecast to fall by 8 percent and 15 percent respectively in calendar year 2000. This contraction combined with the very weak prices over the year should lower substantially the overall import bills for the two country groupings. In the case of the developing countries, the value of commercial rice imports is estimated to fall by 27 percent to US$3.2 billion in 2000, the lowest level in five years. For the LIFD countries, it is estimated to reach US$1.9 billion, 31 percent less than in 1999. Expectations for 2001 suggest a 7 percent and an 8 percent rise in the rice import bills of the developing countries and LIFD countries respectively, based on current forecasts of increased rice purchases and of a slight strengthening in world prices next year.

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