FAO's forecast for world cereal trade in 2000/01 has been lowered to 236 million tonnes, some 2 million tonnes less than was reported in November. Nevertheless, this would be a record high level, over 1 million tonnes, or 0.5 percent, above the previous year's volume. Total cereal imports by the developing countries in 2000/01 are likely to reach 168 million tonnes. This would be above average but slightly below the previous season's record volume. In value terms, the cereal import bill of the developing countries is expected to total US$23 billion in 2000/01, almost US$2 billion, or 9 percent, more than in 1999/2000. Total imports by the Low Income Food Deficit Countries (LIFDCs) in 2000/01 are now forecast at around 70 million tonnes, down sharply from the previous report and over 1 million tonnes below the previous year's estimated level. The decline since last report is mostly on account of reduced forecasts for wheat imports by China and for rice imports by Indonesia. At the current forecast level, the overall cereal import expenses for the LIFDCs, as a group, could reach $9.5 billion, up 8 percent from 1999/2000, mostly because of relatively stronger prices this season.
The forecast for global trade in wheat and wheat flour (in grain equivalent) in 2000/01 (July/June) has been lowered by 1.5 million tonnes to 108 million tonnes. At this level, world wheat imports would be slightly smaller
than in the previous year. The reduction in this month's forecast reflects a cut in the forecast for imports by China, which more than offset the combined effect of increased forecasts for the Islamic Republic of Iran, the Republic of Korea and the EC. While reduced production is expected to be responsible for larger wheat import demand in several countries, overall trade is likely to remain below the previous year's volume mostly because of exceptionally large harvests in a few but important net-importing countries. For the developing countries as a group, imports are forecast at around 81 million tonnes, some 1.3 million tonnes smaller than last year's record. However, given the anticipated rise in export prices, the wheat import cost for the developing countries is forecast to rise by 14 percent to around US$12 billion. For the LIFDCs, wheat imports are put at around 38 million tonnes, down 2.7 million tonnes, or 7 percent, from the previous season. However, because of expected higher prices, the latest forecast puts total value of wheat imports by the LIFDCs in 2000/01 at US$5.3 billion, an increase of 8 percent from 1999/2000.
Total wheat imports by countries in Asia in 2000/01 are currently forecast at around 49 million tonnes, down 2 million tonnes from the previous year's estimated level. The forecast for imports by China has been lowered sharply this month to 2.6 million tonnes, compared to 4.7 million tonnes reported in November and the 2 million tonnes estimated for the previous season. Despite a sharp decline in 2000 wheat production in China, the slow pace of imports since the start of the season in July 2000 indicates that the country is relying on its large stocks to meet demand. Import demand in Asia has also been affected by this year's unexpectedly large domestic supplies in India and Pakistan. In 1999/2000, India and Pakistan together imported 3.6 million tonnes of wheat, but because of bumper 2000 production both countries have become net exporters in the 2000/01 season. However, not all countries in Asia are able to cut their imports this season, especially the drought-affected countries such as the Islamic Republic of Iran, where this year's imports are now expected to remain at last year's exceptionally high volume of around 7 million tonnes. Wheat imports by the Republic of Korea are forecast at 4 million tonnes, up slightly from the last report and the previous year. The increase would be mostly on account of higher imports of low quality wheat used as a substitute for maize in animal feed.
COMESA - Africa's Largest Free Trade Area
After almost 16 years of market liberalization and economic adjustments, the 20 Nation Common Market for Eastern and Southern Africa (COMESA) finalized the agreement for the establishment of a Free Trade Area (FTA) in October 2000. Earlier in 1984, the member States agreed to give themselves 8 years within which to gradually reduce tariffs to zero so as to achieve an FTA by 1992. The tariff reduction programme then was applied to a selected list of products. However, the objectives of the agreement had not been achieved fully by the 1992 deadline due to some concerns about potential revenue losses. The tariff reduction programme was subsequently extended to all goods originating from member States and the deadline for the FTA was deferred to 2000. By the year 2000, however, only 9 out of the 20 member Nations were ready to join the FTA, with the rest of the members given until October 2001.
The establishment of the FTA is an important phase in the creation of a Common Market. By 2004, a customs union with common external tariffs and free mobility of factors is expected to be established, followed in 2025 with a complete economic community similar to that of the European Union. To date, intra-COMESA trade accounts for only about 5-7 percent of the total value of trade of all the member States, with intra-COMESA imports of agricultural products less then 1 percent, even with average tariffs already close to the desired zero level. Between 1994-99, the cumulative value of recorded imports of cereals, the main food item, among the members was only about US$165 million. Although the potential exists for this to be a highly successful initiative given the huge and diverse resource base and a combined population of about 380 million people, some serious problems still have to be tackled before complete integration becomes feasible. These are:
To overcome some of these problems, co-operation programmes have been implemented by COMESA in the industrial, agricultural, energy and transport and communications sectors. A regional food security programme is being established to ensure adequate food supplies. In 1997, COMESA Heads of State advocated that the food sector be supported by the immediate implementation of an irrigation plan of action for the region. The organization also supports the establishment of common agricultural standards and phytosanitary regulations in order to stimulate trade in food crops.
Despite these problems, some countries are already realising the benefits from intra-COMESA trade. Egypt reported an increase in intra-COMESA trade by about one-third, from US$78 million in 1998 to US$107 million, in the first two quarters of 1999. Other major beneficiaries are Kenya and Zimbabwe, which together account for over half of COMESA's intra-trade.
Thus, given the right policies, including harmonization of non-tariff and technical barriers to trade among COMESA member States, the realization of the objectives of this initiative could help create opportunities for trade, food security and stability within the region.
1/ The member Nations of COMESA are: Angola, Burundi, Comoros, Congo-DR, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe.
2/ A survey conducted between just two member States (Kenya and Uganda) for one year, estimated the value of unrecorded food imports to be US$57 million: Chris Ackello-Ogutu and Protase Echessah, Unrecorded Cross-Border Trade Between Kenya and Uganda: Implications for Food Security, Technical Paper No.59, July 1997, Office of Sustainable Development Bureau for Africa, USAID.
In Africa, the forecast for wheat imports has been lowered slightly this month to around 25 million tonnes, up nearly 1 million tonnes from the previous year. The expected increase is due to larger imports by the drought-affected countries in North Africa, primarily Algeria and Morocco. In Algeria, wheat imports are forecast to reach a record 5.2 million tonnes, up 700 000 tonnes from 1999/2000. Imports by Egypt are also forecast to increase, even though its production rose in 2000. Larger import estimates for Egypt is mostly driven by strong demand for high quality wheat. By contrast, total wheat imports by countries in sub-Saharan Africa are expected to decline this year, by 1.3 million tonnes, or 15 percent. Most of this decrease would reflect a sharp reduction in imports by Ethiopia following an increase in domestic production. Imports by other countries are forecast to remain mostly unchanged from the previous season.
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In Europe, imports into EC are forecast to reach 3.7 million tonnes, up 500 000 tonnes from the previous year, mostly in response to concerns over the quality of the 2000 domestic crop. Imports by Poland and Romania are forecast to rise because of smaller harvests, whereas, an increase in 2000 wheat production in the Russian Federation is expected to result in a cut of over 50 percent in wheat imports by that country. The forecast for imports into the Latin American and Caribbean region has changed little since the previous report. Imports by Mexico, the largest importer in Central America, is likely to exceed last year's levels and reach 2.6 million tonnes. In South America, imports by Brazil, the region's largest importer, are forecast to surge to 7.7 million tonnes, up 500 000 tonnes, while imports by most other countries are anticipated to remain close to previous year's volume. The increase in Brazil would be mostly met by purchases from the United States. In November 2000, Brazil eliminated restrictions on imports of soft red winter and hard red spring wheat from the United States. All wheat imports from the United States had been suspended since December 1996 due to phytosanitary concerns over the presence of a fungus (Tilletia), but Brazil began to allow imports of hard red winter wheat from the U.S. Gulf and Mississippi river ports in March 1999.
The leading feature in this season's wheat trade is the presence of relatively large exportable supplies in India and Pakistan. In India, following successive bumper crops over the past few years and the subsequent excess supplies, exports are being regarded as an important policy option to maintain domestic prices and reduce storage costs. Wheat sales from India are currently forecast to reach 1 million tonnes in 2000/01, up 500 000 tonnes from the previous year. The final estimate may prove even higher considering that nearly 800 000 tonnes have already been committed, most notably to Iraq (some 350 000 tonnes under the UN administrated food for oil programme), Bangladesh, Indonesia and the Republic of Korea. Large exports are also anticipated from Pakistan, following a record harvest in 2000. Wheat exports of around 500 000 tonnes are likely, of which Afghanistan is reported to have already purchased 300 000 tonnes. Nevertheless, this year's expected sales from India and Pakistan are not likely to offset the decline in wheat exports in several European countries outside the EC, especially the drought affected Poland, Romania and Ukraine.
Among the major grain exporting countries, wheat exports from the United States are forecast to increase by some 4 million tonnes to 33.5 million tonnes. This year's stronger demand is expected to favour the United States, which has a relatively large supply of high quality wheat. Argentina is also forecast to increase sales slightly. In the EC, exports may reach last year's volume despite the slow pace of sales during the first half of the season. In late December 2000, the Commission resumed granting export refunds for the first time since August 2000, a move which is expected to accelerate exports during the second half of this marketing season. The recovery in the Euro against the US dollar was one of the factors in the decision to resume wheat export subsidies. The concern over the adequacy of high wheat quality supplies in the Community discouraged larger sales during the first half of the season but with the situation improving, exports from the EC are beginning to accelerate. Exports from Canada are also likely to remain unchanged from the previous year, while wheat sales from Australia could decline because of smaller domestic production.
The forecast for world trade in coarse grains in 2000/01 (July/June) has been raised by 500 000 tonnes since the last report, to 105 million tonnes. This would be a record high level, almost 2 percent above last year's volume. World maize trade is put at around 74 million tonnes, up 1 million tonnes from 1999/2000. 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. Total coarse grain imports by the developing countries are expected to reach 68 million tonnes, unchanged from the previous report and similar to last year. At this level, the cost of imports for the developing countries is estimated at around US$8 billion. Imports by the LIFDCs are put at 21 million tonnes, some 1.4 million tonnes, or 7 percent, more than in 1999/2000. The import bill for the LIFDCs is also expected to rise in 2000/01, by about US$200 million, to US$2.4 billion.
In Asia, aggregate coarse grain imports in 2000/01 are put at around 57 million tonnes, down slightly from the previous report and some 700 000 lower than in the previous year. Imports by Japan, the world's largest importer, and the Republic of Korea, another major importer, are likely to remain unchanged from the previous year. The forecast for coarse grains imports into the Republic of Korea has been lowered slightly this month in the light of larger wheat purchases in recent months. Most other countries in Asia are likely to import the same amount as they did in 1999/2000. However, a sharp decline is anticipated in imports of barley by the Syrian Arab Republic, following an increase in domestic production, which is expected to more than offset the forecast rise in imports of maize and barley by the Islamic Republic of Iran, following two consecutive years of severe drought. Also, barley imports by Saudi Arabia, the world's largest importer, could increase slightly because of stronger demand and a decline in domestic production.
The forecasts for imports by most countries in Africa in 2000/01 have remained generally the same as in the previous report. Total imports into Africa are expected to reach 14.3 million tonnes, up slightly from the previous year. The increase over last year is expected to be most pronounced in North Africa, where Egypt, because of continuing strong demand, and Morocco, because of drought-reduced output, are expected to increase their imports. Aggregate imports by countries in the sub-Saharan region are likely to remain at about last year's levels as higher maize imports by Kenya, reflecting reduced production, would be largely offset by reduced imports by several countries in southern Africa, mostly because of bigger harvests.
The forecast for coarse grains imports into the Latin American and Caribbean countries has been raised slightly this month, mostly in view of stronger demand in Brazil. However, overall, total imports into the region are likely to decline by around 1 million tonnes compared to the previous season, largely because of Mexico. In Europe, total imports are forecast to increase sharply, mostly in response to higher import demand in several central and eastern European countries, especially the drought-affected ones. In Romania, the sharp decline in 2000 production is expected to result in a rise of about 1.7 million tonnes in maize imports. In Poland, lower barley production is likely to result in an overall increase in imports of at least 500 000 tonnes. Imports in the EC are likely to remain close to last year's volume despite stronger demand. This is mostly because of the exceptionally large supplies of low quality wheat, which could substitute for maize in animal feed, especially in France. Elsewhere, imports by the Russian Federation could fall sharply because of larger domestic production.
Turning to export prospects during the current season (July/June), the largest beneficiary of the anticipated expansion in world trade is likely to be the United States. Total shipments from the United States are forecast at over 59 million tonnes, nearly 3 million tonnes more than in the previous year. In China, despite a sharp decline in domestic production, large maize exports continue. Higher exports are also anticipated from Argentina, but shipments from other major origins could remain similar to 1999/2000. Among the smaller exporting countries, larger crops in the Republic of South Africa could boost exports from that country. However, as in the case for wheat, the decline in output is the prime reason for reduced export supplies in Hungary, while Poland and Romania are expected to remain absent from the export market this season.
The forecast of rice trade in 2000 has been adjusted downward, from the last report, by 500 000 tonnes to 22.4 million tonnes. At this level, it would be 2.5 million tonnes below the volume traded in 1999 and 5.2 million tonnes less than the all time-high achieved in 1998. Most of the revision in the 2000 global import estimate originates from downward adjustments for Indonesia and DPR Korea. The estimate of Indonesia's purchases has been revised down by 200 000 tonnes from the previous forecast to some 2.0 million tonnes. This would be less than half the revised level for 1999. The estimate of shipments to DPR Korea has also been reduced by 400 000 tonnes from the earlier forecast to 350 000 tonnes, due to smaller food aid deliveries than were anticipated. The estimates of imports by Sri Lanka and the United States were also lowered by some 100 000 tonnes each, reflecting reports of abundant domestic supplies. By contrast, some upward revisions have been made to the import estimates for the EC, Mexico and Saudi Arabia as well as of some other minor rice importers.
With regards to exports, the pace of shipments from Thailand picked up dramatically during the last quarter and the country's exports in 2000 are now estimated at 6.6 million tonnes, 600 000 tonnes above earlier expectations and only slightly below 1999. By contrast, the estimates of anticipated sales by other major exporters have been revised downward. This was especially the case for China, whose shipments are now estimated at 3 million tonnes, down 500 000 tonnes from the previous forecast. A reduction in Viet Nam's estimated exports, by 400 000 tonnes, has also been made, on account of the difficulties caused by the floods, including rice quality and logistic problems, which slowed substantially the movement of rice out of the country in the last quarter of 2000. Similarly, Pakistan and Argentina are now expected to export slightly less than earlier anticipated, while the estimate for Myanmar's exports has been raised by some 60 000 tonnes.
Rice trade in 2001 is currently forecast at 23.2 million tonnes, about 3.5 percent more than in 2000, but 0.8 million tonnes less than previously anticipated. The cut in the 2001 trade forecast was mainly on account of reports of lighter flood damage than originally anticipated in some importing countries, which would imply lower purchasing requirements during 2001. In addition, after the dramatic low prices facing farmers last year, several major importing countries are currently considering raising tariff protection. This is the case of Indonesia whose forecast purchases have been scaled down by 0.6 million tonnes to 1.8 million tonnes, the lowest volume since 1997. Similarly, forecast imports into Bangladesh were reduced by 100 000 tonnes to some 500 000 tonnes, about the same level as last year, following declarations that the country would not need to resort to external purchases to offset the recent flood-induced rice losses. Import forecasts were also cut for China and the United States by 200 000 tonnes and 100 000 tonnes respectively, but were raised for Brazil and the EC by some 100 000 tonnes each.
On the export side, the forecast for China's expected sales in 2001 has been trimmed by 200 000 tonnes from the previous report to 3.6 million tonnes, but would still be larger than the volume in the previous year by 0.5 million tonnes. In fact, although the country's production fell substantially last season, the high opening rice inventories should enable it to remain a major international rice supplier also in 2001. The forecast for shipments by Thailand, the world leading rice exporter, has also been lowered by 200 000 tonnes from the previous forecast to 6 million tonnes, the recently announced official export target. Export forecasts for Argentina, Uruguay and the United States were also reduced somewhat. Based on the revised trade estimates, commercial rice imports by the developing countries dropped by 10 percent, in calendar year 2000, as most of them harvested satisfactory crops over the last two seasons. For the LIFDC's as a group the decline was more significant at 20 percent. The reduced volume of imports, combined with the low international prices that have prevailed in the course of 2000, resulted in an estimated 29 percent drop to US$3 billion in the import bill of the developing countries last year. The fall was even more pronounced for the LIFDC's, at 36 percent, to US$1.7 billion. Expectations for 2001 suggest a 7 percent increase in the rice import bill for the developing countries while that for the LIFDC's may increase by 4 percent, mainly reflecting a modest price recovery anticipated during the year.