FAO/GIEWS - Food Outlook No.2 - April 2001 p. 7

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Cereal demand expected to stagnate in 2000/2001

Following a fairly robust 2 percent growth in 1999/00, total cereal utilization could stagnate in 2000/01 at 1,907 million tonnes. Nevertheless, total cereal utilization would still be above the average of the preceding three years. The volume of cereals used for food consumption is currently forecast to rise by 1.1 percent, primarily among the developing countries in Asia and in the CIS. On a per caput basis, however, this would not be sufficient to raise the average kilogram intake of cereals either at the world level or for the developing countries as a group. In spite of the concerns about the contamination of animal feed with BSE infected meat and bone meal and, more recently, the foot-and-mouth (FMD) disease, global feed usage is not likely to be significantly affected in the short-run from these animal diseases.

Cereal food consumption to be sufficient to maintain per caput intake

For 2000/01, the forecast of global consumption of cereals as food is put at 971 million tonnes, some 50 percent of total world utilization. The anticipated absolute increase is about 11 million tonnes over the estimate for 1999/00, three-quarters of which is likely to be accounted for by the developing countries. The Low-Income Food-Deficit Countries (LIFDC), considered by FAO to be the group of countries most vulnerable to food insecurity, are expected to consume about 641 million tonnes of cereals in 2000/01, an increase of 5.7 million tonnes from the previous year, or about 1 percent.

Per Caput Food Consumption of Cereals

  1998/99 1999/00 2000/01
  (. . . . . kg. per head . . . . .)
Developing countries 168 169 169
Developed countries 130 130 131
TOTAL 160 161 161
Low-Income Food-Deficit Countries 171 172 171
(excluding China and India) (156) (158) (158)
Wheat 70 71 70
Coarse grains 31 30 31
Rice (milled) 59 59 60

Globally, the growth in world food consumption is forecast to barely keep pace with the rise in population, resulting in per caput food consumption of cereals remaining unchanged at 161 kilograms in 2000/01. The developing countries, in total, could maintain average per caput food consumption at 168 kilograms, while the LIFDC sub-group could see a slight decline in per caput cereal consumption to 171 kilograms. The declines are mostly because of reduced supplies, especially among some developing countries in Africa due to a combination of poor weather and civil strife. Of particular concern in southern Africa is the prospect for very poor 2001 maize harvests which could threaten domestic availabilities in many countries in the subregion. Also in parts of Asia, smaller output in 2000 could slow the expansion of cereal food consumption, although bumper crops in India and Pakistan could give rise to some increase in food consumption in those countries, in particular for wheat. The food consumption of cereal is expected to increase about 2 percent in the Latin American and Caribbean region where crop conditions were generally favourable, including bumper maize crops in Brazil and Mexico in 2000 and an expected record output in Brazil in 2001.

Feed demand expands, but only slightly

The expansion of world feed utilization of cereals is forecast to slow in 2000/01 to 0.6 percent, compared to almost 1.3 percent in 1999/00. Global feed use is currently put at 686 million tonnes, largely due to anticipated higher usage in Asia, primarily in China (mainland). In spite of a smaller crop in 2000 and large exports during the first half of the season, it is estimated that domestic maize supplies are sufficient to allow the continued growth in China's feed grain sector during 2000/01. Last year's bumper cereal harvests in India could also encourage more feeding this season, although feed use in the country is well below the Asian average. Partially offsetting the increase feed use in Asia are expected reductions in the Republic of Korea and Saudi Arabia. In the former country, cattle inventories have been progressively cut back in anticipation of the opening of the domestic market to low priced imports as of January 2001. In Saudi Arabia, good pastures are likely to limit the demand for feed, in particular barley. In Latin America and the Caribbean, the growth in feed use could expand due mostly to bumper coarse crops in Mexico (2000) and those forecast for South America in 2001, especially in Brazil. In the case of Brazil, while some of the surplus from the record maize harvest is expected to be exported, a significant amount is likely to be diverted to domestic feed use to support a rapidly growing, and increasingly competitive, poultry industry, and whose export demand could also benefit from the BSE crisis in Europe.

World Cereal Utilization

  1998/99 1999/00 2000/01 f'cast
  (. . . . . . million tonnes . . . . . .)
Total utilization      
World 1 872 1 901 1 907
Developing countries 1 130 1 154 1 155
Developed countries 742 747 752
Food consumption1/      
World 942 960 971
Developing countries 773 791 800
Developed countries 169 169 172
Feed use      
World 673 682 686
Developing countries 241 247 249
Developed countries 432 435 437
Other uses 2/      
World 256 258 249
Developing countries 116 116 106
Developed countries 141 143 143

Among the major livestock producers, feed use in the United States is officially forecast to be down in 2000/01 (Sept/Aug) in response to lower pig inventories in 2000, slow growth in poultry output and weak demand in the cattle and dairy sectors. Within Europe, production shortfalls in some eastern and central European countries are likely to limit feed use this season. Although the Hungarian Government lifted the ban on maize imports in February 2001 and offered duty-free import quotas on barley and oats, feed use is

still expected to be reduced because of supply shortages and high domestic prices. The country most affected by the grain production shortage in the subregion, Romania, is forecast to reduce its feed use by up to 20 percent compared to the previous season.

The FAO forecast for feed use in the EC in 2000/01 is currently put at 114 million tonnes, some 4 percent above the previous season. Much of this is on account of the expected increase in the use of wheat for feed resulting from a relatively large supply of low quality wheat, especially in France, and a price advantage over non-grain feeds following the cut in intervention prices under the Agenda 2000 CAP reform which came into force in July 2000, and the weakness of the Euro relative to the US dollar which made non-grain feed imports more expensive. However, the impact of the BSE and FMD infections among EC livestock herds on feed use of cereals in 2000/01 poses a complex situation in which the reconciliation of countervailing forces is not easily quantifiable. The reported sharp reduction in consumer demand for beef and related products in response to the BSE crisis would tend to force producers to keep larger cattle inventories than normal and, thus, use more feed to maintain weights. In this case, the feed demand for cereal may actually increase, at least in the short-run. In addition, the willingness of consumers to shift preferences to other meats, primarily poultry and pigmeat, would also tend to increase the demand for livestock feed to support the expected increase in alternative meat production. However, feed demand outlook in the EC has been further complicated by the FMD. While emergency slaughtering to-date accounts for less than one percent of total inventories in the United Kingdom, it is unclear how long the problem will persist or how many animals will be involved. A large reduction in total animal numbers to control the disease will ultimately result in reduced feed demand. In the short-run, however, the available information suggests that feed use in the EC and, thus, at the global level, would not likely be significantly affected by the animal disease crisis as long as consumers continue to purchase by substituting between livestock products.

"Other uses" of cereals expected to be down

Aside from food and feed use as well as seed requirements, industrial use is another important category of overall cereal utilization. Demand for industrial products made from cereals in some developed countries is forecast to expand this season. In the United States, according to the official sources, industrial uses of maize in 2000/01 are forecast to rise in aggregate about 4 percent compared to the previous year, with ethanol production leading the increase (up 9 percent), followed by high fructose corn syrup (2 percent) and starch production (2 percent). One of the main factors likely giving rise to a more rapid increase in ethanol production is the surge in petroleum prices. The expansion in syrup production may be more modest given the sluggish prospects in the sugar markets.

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