FAO/GIEWS - Food Outlook No.3 - June 2001 p. 3

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Supply/Demand Roundup

Latest indications continue to point to an increase in global cereal production in 2001. Despite this, a tightening of the overall cereal supply/demand situation is in prospect for the forthcoming 2001/2002 marketing season. Based on the condition of crops already in the ground and assuming normal weather for the remainder of the 2001 cropping seasons, world cereal output this year is forecast at 1 878 million tonnes (including rice in milled terms), 27 million tonnes or 1.3 percent more than output in 2000. However, as growth in cereal usage is anticipated to continue in the coming 2001/02 season, output at this level would be insufficient to meet global utilization for the third year in succession, leading to a further significant reduction in world cereal stocks. Considering that the forthcoming season is set to begin with opening stocks at their lowest level since 1997, another sharp decrease by the end of the 2001/02 seasons could lead to tighter supply situation in 2002/03, especially in terms of exportable supplies as stocks are also likely to fall in some of the major exporting countries.

The forecast for world wheat production in 2001 has been reduced since the previous report in April, by 8 million tonnes, to 577 million tonnes. This would be almost 1.6 percent below last year, well below the average of the past five years and the smallest crop since 1995. The bulk of the decline compared to the previous year is due to smaller crops in the major producing countries in Asia and, following this month's sharp downward revisions, also in the EC and the United States. In the latter two cases, yield prospects have deteriorated due to less than optimum weather over the past two months. Partially offsetting these downward revisions, production forecasts have been adjusted upward this month for Africa where a satisfactory crop is now being harvested in North Africa, and in Australia and South America where planting prospects for the crops to be harvested later in the year are favourable and suggest larger outputs than earlier anticipated.

The forecast for global coarse grains output in 2001 remains virtually unchanged since the last report at 905 million tonnes, 4 percent up from 2000 and above the average of the past five years. The year-to-year increase reflects an expansion confined to relatively few large producing countries, namely Canada, China, Mexico, Brazil, and some of the central and eastern European countries. On the other hand, a decline is forecast in southern Africa where smaller crops are being gathered as a result of drought, and in the United States after last year's bumper crop. Elsewhere, the coarse grain crops are expected to remain virtually unchanged.

In the southern hemisphere and around the equatorial belt, the 2001 main paddy season is nearing completion, while in the northern hemisphere, the bulk of the crop is yet to be planted pending the arrival of Monsoon rains in Asia. Contrasting trends are emerging in global rice cultivation this season. In the pursuance of self-sufficiency, some countries, particularly major importers, are expanding rice area, while others are cutting areas in response to government policies and/or depressed prices relative to alternative crops. Based on the harvest results in the southern hemisphere so far, and the early indications of planting intentions among the northern hemisphere producers, overall global rice output in 2001 is tentatively forecast at 396 million tonnes (592 million tonnes in paddy terms), slightly below the previous year's level. However, this figure is still subject to considerable uncertainty since the final outcome will depend largely on the timing, extent and distribution of the Asian monsoon rainfall, which is an overriding factor for rice production in many Asian countries.

FAO's first forecast of world cereal trade in 2001/02 is 229 million tonnes, about 4 million tonnes below the estimated volume in 2000/01. Global wheat trade is forecast to decline for the second consecutive year, by 1 million tonnes, to 104.5 million tonnes. Most of the reduction in world imports would reflect smaller deliveries to Europe and South America on account of improved production prospects in several countries. Coarse grains trade is also expected to decline somewhat, by about 3.5 million tonnes, to 102 million tonnes. However, this forecast is still highly tentative as many key coarse grain crops in the northern hemisphere are still in the early stages of development and the final outcome will depend on weather conditions for the remainder of the season. Regarding 2000/2001, forecasts for wheat and coarse grains are now firmer as the season is drawing to a close. Latest information continues to confirm a decrease in the volume of global wheat shipments, while those of coarse grains increased. For rice, it is still too early to make a forecast for the calendar year 2002. However, early indications suggest that, at the global level, rice shipments could increase marginally from the current year's level, now forecast at 22.3 million tonnes, which is virtually unchanged from the estimated level in 2000.

The forecast for world cereal utilization in 2000/01 remains unchanged from the April report, at 1 906 million tonnes. At this level, world cereal utilization would be 11 million tonnes, or 0.6 percent, above 1999/2000, but roughly 8 million tonnes below the 10-year trend. Among the major cereals, only rice utilization is expected to rise above its trend, albeit slightly, and this due to rising demand for food consumption. Total utilization will also be higher for wheat and coarse grains, but not sufficient for their total use to rise above their respective long-term trends. Looking into the 2001/02 season, a similar picture emerges, although, at this time the outlook for next season remains extremely tentative at best for most cereals. Overall, total cereal utilization might only grow moderately, to about 1 919 million tonnes. The growth is likely to be strongest for coarse grains, especially for maize, as continuing low maize prices could boost feed demand. The growth in wheat utilization might prove even slower than in the current season, particularly if there is a further increase in prices.

The latest forecast of global cereal stocks by the close of the current seasons ending in 2001 has been raised slightly, by 2 million tonnes, since April, to 647 million tonnes, but remains some 51 million tonnes, or over 7 percent, below their already reduced opening levels. However, turning to the next (2001/02) season, even if current forecasts for increased cereal production in 2001 materialize, a further significant drawdown of cereal stocks would be required to meet expected global utilization in 2001/02. By the end of countries' crop years ending in 2002, aggregate cereal stocks are tentatively forecast to fall by 44 million tonnes, or nearly 7 percent, to 603 million tonnes.

World Cereal Production, Supplies, Trade and Stocks

(. . . . . . million tonnes . . . . . .)
Production 1/
1 888
1 853
1 878
Coarse grains
Rice (milled)
Supply 2/
2 589
2 551
2 525
1 895
1 906
1 919
Trade 3/
Ending Stocks 4/
Source: FAO
1/ Data refer to calendar year of the first year shown. Rice in milled equivalent.
2/ Production plus opening stocks.
3/ July/June basis for wheat and coarse grains and calendar year (second year shown) for rice.
4/ May not equal the difference between supply and utilization due to differences in individual country marketing years.

In the international cereal markets, wheat prices made further gains in April and May, rising significantly above the levels of the corresponding period of the previous season. By contrast, coarse grain and rice prices have fallen below the levels prevailing at the same time last year. The wheat market was mainly supported by concerns over growing conditions for the winter wheat crop in the United States and a pick-up in the United States exports pace over the past two months. In May, the U.S. wheat No. 2 (HRW, fob) averaged US$136 per tonne, some US$3 per tonne higher than in March and US$25 per tonne, or 23 percent, above the corresponding period in the previous year. International maize prices remain under pressure reflecting large exportable availabilities in the United States coupled with reduced sales prospects, which have led to a lower export forecast and the expectation of larger end-year stocks. In May, the U.S. maize export prices (U.S. No.2 Yellow, fob) fell to US$84 per tonne, down US$8 per tonne from March and US$11 per tonne from a year earlier. During April, international rice prices tumbled to levels rarely witnessed over the past two decades, continuing to reflect a weak global import demand relative to export supplies. Although rice prices made a slight recovery in May compared to April, the FAO Export Price Index for Rice (1982-84=100) at 89 points in May, was overall 3 points down from the March level.

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