|No. 4||Rome, September 2003|
The FAO forecast for world cereal trade in 2003/04 has been lowered by 3.5 million tonnes to 227.5 million tonnes since the previous report in June. At the current forecast level, world cereal trade would be 11 million tonnes, or 5 percent, below the previous season and the smallest since 1998/99. Most of this month’s downward adjustments to world trade have been made to wheat, but trade forecasts for coarse grains have also been lowered considerably since the previous report.
World trade in wheat2/ is now forecast to drop to 97.5 million tonnes in 2003/04, down by more than 9 million tonnes from the previous season and the smallest since the early 1990s. Imports by the Islamic Republic of Iran, until recently one of the world’s leading wheat importers, are now forecast to drop to 1 million tonnes, down 56 percent from the previous season and the lowest since 1979/80, reflecting a bumper wheat crop and record procurements from farmers. Likewise in Brazil, this year’s production is expected to reach a 14-year high, which could lead to a 10 percent cut in imports since last season. Contrary to earlier expectations, wheat imports by China are now expected to remain at last year’s level and not increase in spite of a reduction in domestic output. In China, large supplies of old wheat entering the market, in part through government auctions, are expected to diminish the prospect for any significant rise in imports this season. Since the previous report, the forecast for imports by Pakistan has been cut by nearly 1 million tonnes to around 500 000 tonnes, in view of the increase in this year’s domestic wheat production and recent statements by government officials ruling out large imports this season. Nonetheless, given the strong growth in domestic consumption and large exports over the past two seasons, domestic supplies could prove to be smaller than what is currently being assumed, which could result in much larger quantities being imported later in the season. Elsewhere, the forecast for wheat imports by the Republic of Korea has been also been cut significantly below the previous season’s level, mostly because of the less competitive international feed-wheat prices in relation to maize.
Overview of World Cereal Imports
Source: FAO. 1/ Highly tentative.
The anticipated decline in world wheat trade this season also reflects smaller import demand among countries in North Africa, mostly because of the increase in their domestic production. Combined wheat imports by Algeria, Morocco and Tunisia are currently forecast to contract by 3.5 million tonnes, compared to the previous season. A significant drop in import demand is also forecast for the EU this year. In contrast to the previous two seasons, when imports by the EU surged to record levels, this year’s imports are forecast to reach only 5 million tonnes, compared to 12 million tonnes in 2002/03. In spite of lower wheat output, the EU is likely to import much less this season as a result of the imposition of import quotas and also a sharp reduction in wheat supplies in Ukraine and the Russian Federation, the EU’s main suppliers over the previous two seasons.
Few countries are expected to import more wheat this season. In Africa, the most significant rise is expected in Ethiopia, where imports must double in order to cover a domestic deficit. Large increases are also expected in several European countries outside the EU, where this year’s severe drought reduced crops and resulted in a surge in bread prices. Wheat imports by Romania could triple this season following the recent decision by the Government to remove duties on imports of milling wheat for up to 1 million tonnes. Among the CIS countries, Ukraine is expected to switch from major wheat exporter to an importer given the anticipated sharp decline in its harvest. Similarly, Moldova will again become a net importer to cover a domestic shortage as a result of a poor crop.
Wheat shipments by major exporters are likely to rebound this season after a sharp drop in 2002/03. With a strong recovery in production, Australia, Canada and United States are expected to boost their sales. Exports from Argentina are also forecast to increase, due in part to above-average carryovers from the previous season. By contrast, the drop in production in the EU is expected to result in a sharp decline in its exports in 2003/04. Among non-traditional exporting countries, the Russian Federation is likely to cut exports by around 12 million tonnes this season in the face of a large drop in output. Exports by Hungary and Bulgaria are also expected to fall sharply, while no exports are likely from the Czech Republic, Poland and Romania because of reduced production. It is improbable that any shipments can be expected from Pakistan since they hold much smaller domestic supplies compared to the previous season, while transport bottlenecks remain a major obstacle to wheat shipments from India.
Global trade in coarse grains in 2003/04 is currently forecast to reach 103 million tonnes, down 1 million tonnes from the previous season; this figure is 2 million tonnes lower than was reported in June. Overall, anticipated declines in maize and barley trade would account for most of the small drop in coarse grain trade, while trade in sorghum is forecast to rise slightly; trade in other major coarse grains (barley, oats and rye) could remain at roughly the same levels as in 2002/03.
Total coarse grain imports to countries in Asia could rise slightly compared to the previous season in spite of weaker import demand, the Syrian Arab Republic and Indonesia. Slightly higher maize imports are expected by the Republic of Korea, and barley imports by Saudi Arabia are also forecast to increase due to strong demand. In Africa, an expected rebound in barley production in Algeria, Morocco and Tunisia will probably cause much smaller barely imports into those countries. Sharp drops in maize imports are forecast for Malawi, Eritrea, Ethiopia, Zambia and Zimbabwe, mostly as a result of improved crops.
Among the Latin American and the Caribbean countries, Mexico is forecast to increase its purchases of maize and sorghum this season in response to its rapidly rising demand for feed. However, other traditional importers in the region are likely to maintain their imports at levels similar to the previous season. By contrast, imports by several countries in Europe are forecast to increase sharply, following the prolonged drought this summer. Significant increases in maize imports are forecast for Romania and the Russian Federation, and this season’s extremely tight feed grain situation in the EU could lead to larger imports of maize and sorghum.
Exportable maize supplies are likely to increase significantly this season because of a strong recovery in the United States. Larger availabilities are also expected in Brazil, following a record production this year. Maize exports from China are forecast to remain substantial, although smaller than in 2002/03, reflecting an anticipated decline in production and lower stocks. Exports of barley are also forecast to increase in 2003/04, mostly as a result of higher production in Canada and Australia. Large carryover stocks from the previous season would allow the EU, the world’s largest barley exporter, to keep sales at the previous year’s level. However, sharply lower barely exports are forecast for the Russian Federation, Ukraine and Bulgaria because of smaller outputs this year.
The latest FAO forecast for world trade in rice in 2003 has been raised since the last report by some 600 000 tonnes to 27.7 million tonnes (in milled equivalent), which is only 1.4 percent below the record volume exchanged in 2002. The forecast for higher imports has been inferred from the worsening production outlook in several countries, in particular Bangladesh and Brazil. Although export availabilities appear sufficient so far to meet the additional demand for imports, global market conditions are anticipated to tighten in the next few months, barring major changes in production prospects.
In Asia, the import forecast for Bangladesh in 2003 has been adjusted upward from 502 000 to 700 000 tonnes, in accordance with the official figures showing a decrease of output in 2002. At this level, imports would be about 30 percent above the official estimate of 544 000 tonnes in 2002. This increase over last year’s level should be facilitated by the reduction in import duties which went into effect last February.
Purchases by China also increased, following news of an official deal with the Government of Thailand, which could set the basis for larger shipments of Thai fragrant rice to China. Nevertheless, the country’s imports still remain relatively modest at 350 000 tonnes, which is 100 000 tonnes more than last year but still considerably short of the 4.7 million tonnes it committed to import this year at a preferential 1 percent duty under the WTO Agreement. As domestic rice prices have failed to rebound in spite of the sharp fall in output experienced in the past few years, imports remain of limited interest, except for the high-quality rice varieties.
Following forecasts for improved production this year, rice shipments to Indonesia have been lowered by 100 000 tonnes to 3.3 million tonnes, a 200 000 tonne decline from 2002. BULOG, the state food company, recently announced that it would cease importing rice until the end of the year and concentrate instead on domestic rice procurement. However, shipments by private traders are expected to continue.
The forecast for shipments into the Islamic Republic of Iran remains at 700 000 tonnes, well below the level of 1 million tonnes estimated for last year. The country was recently reported to have offered to serve as a platform for distributing rice from Thailand into the former USSR Republics, which would require establishing a warehouse at the port in Kirsch Island and developing transportation and distribution channels.
Despite the expected production setback, purchases by Japan this year are anticipated to remain at the WTO minimum access level of 650 000 tonnes, as the impact of the shortfall on trade would be delayed to 2004. Such impact is unlikely to be as strong as in 1994, when the country’s imports soared to an all-time high of 2.5 million tonnes in reaction to a 26 percent contraction in production in the preceding year.
Imports by the Philippines are set to fall to some 1.1 million tonnes. This figure has not changed since the last report, but nonetheless remains 14 percent below FAO’s estimate for 2002. This year, the government has authorized imports by farmers, subject to a 50 percent ad-valorem duty and to a ceiling per importer of 10 000 tonnes per year, thereby abolishing the import monopoly which the National Food Authority (NFA) has held since 1993. In addition, in an attempt to reduce illegal imports of rice, the government has issued a list of eight ports to handle the bulk of rice deliveries to the country.
Import forecasts for the rest of Asia as well have remained unchanged since the last report. Compared with last year, they show a contraction in Iraq and Sri Lanka, where the government recently announced a rise in the import tariff from rupee 7 to rupee 9 per kilo (US$93 per tonne). By contrast, an increase in the Republic of Korea, Jordan, Turkey and Saudi Arabia is still anticipated.
Overall, rice imports into Africa are forecast to hover around 8 million tonnes, some 400 000 tonnes short of last year’s record. If confirmed, this would be the first decline in imports in this region since 1996. Among the largest importers in the region, the forecast for shipments to the Côte d’Ivoire has been raised by 200 000 tonnes to 1.1 million tonnes, as China and Thailand reported a surge in deliveries to the country so far this year, despite the security problems prevailing there. Similarly, rice sales to Benin by Thailand were reported to have already reached 150 000 tonnes between January and June reflecting to some extent a diversion of part of the rice normally flowing to Nigeria and Côte d’Ivoire to neighbouring countries. As a result, Benin’s import forecast has been raised to 200 000 tonnes, up from a previous forecast of 90 000 tonnes.
By contrast, partner-trade data indicated a drop in rice exports to Nigeria over the first 6 months of the year, consistent with the ongoing attempts of the Nigerian Government to reduce rice inflows with the aim of achieving rice self-sufficiency by 2006. Consequently FAO has lowered its forecast of Nigeria’s imports by 200 000 tonnes to 1.5 million tonnes, down from 1.8 million tonnes last year.
Throughout the rest of Africa, import forecasts remain identical to those in the last report, with a contraction foreseen for Cameroon, Ghana, Guinea and Senegal in comparison with last year, while an increase is anticipated in the Libyan Arab Jamahiriya and the Comoros.
In Latin America and the Caribbean, the outlook for rice imports has also been raised by some 200 000 tonnes since the last issue of the report, to some 3.5 million tonnes, or 28 percent more than last year. The revision reflects larger shipments to Brazil, prompted by the deterioration of the production outlook this season. It is now anticipated that the country will purchase 1.15 million tonnes, twice as much as last year. Rice imports to Colombia, Cuba, Mexico and Venezuela are also expected to rise.
Elsewhere, imports by the Russian Federation are set to fall following the introduction (as of August and for a period of nine months) of a minimum duty of € 0.3 per kilo (about US$33 per tonne), should the application of the 10 percent tariff result in an inferior value.
Australia, on the other hand, may be forced to import much larger quantities than usual, possibly of the order of 100 000 tonnes, to maintain a minimum level of shipments in its traditional export markets while ensuring sufficient supplies at home.
The FAO forecast for global paddy exports in 2003 has been revised upward, as several exporters are expected to respond to strengthening import demand foreseen during the last quarter of the year, by releasing greater than originally anticipated supplies. Export forecasts were raised for China, the Republic of Korea, the United States and Viet Nam, while they were reduced for India, Myanmar and Pakistan.
Shipments from China are now put at 2.6 million tonnes, compared with less than 2 million tonnes last year; this figure is 600 000 tonnes higher than the previous forecast. The adjustment was prompted by a reported 79 percent increase of shipments in the January July period as compared with the same period last year. Moreover, based on the prevailing domestic prices, China continues to be a competitive source of rice, which should foster an increase in its deliveries.
The bumper crops harvested early this year should allow Sri Lanka to export about 100 000 tonnes, making it the first time that sizeable sales of rice have been made by this country since 1995.
Shipments from the Republic of Korea to the Democratic People’s Republic of Korea, all in the form of food aid, are now estimated to reach 150 000 tonnes, a part of the 400 000 tonne deal clinched between the two countries last May, the shipment of which started in July. Last year the Republic of Korea had shipped 400 000 tonnes to its neighbour country in the form of food aid as well.
The forecast for Viet Nam has also been raised from 3.9 to 4 million tonnes, substantially higher than the volume of 3.2 million tonnes shipped in 2002. By the end of July, the country had already increased its deliveries by 50 percent compared with the first seven months in 2002.
Strong demand from Latin American countries has boosted the United States’ expectations concerning rice exports, now estimated to reach an all-time high of 3.7 million tonnes, 150 000 tonnes more than the previous forecast and an increase of 400 000 tonnes over last year.
The export forecast for Thailand remains at 7.5 million tonnes, a mere 2 percent higher than last year. Shipments from the country by 14 August had reached 4.3 million tonnes, a 3 percent increase over last year. Thailand appears to be well positioned to take advantage of potential opportunities arising from a scarcity of supply in other major exporting countries, as it holds substantial reserves of rice in stocks.
By contrast, a large drop in rice inventories has warranted a 10 percent increase in rice prices for export by the Government of India over the third quarter of the year, from Rupees 6 610 to Rupees 7 300 (US$159) per tonne for raw rice, and from Rupees 6 915 to Rupees 7 500 (US$164) per tonne for parboiled rice. The measure has depressed export prospects for the country from 4 million to 3.8 million tonnes, a pronounced drop compared to the outstanding 6.6 million tonne performance of last year. The downward revision also reflects the temporary suspension, as of August and for an undetermined period, of rice allocations by the Food Corporation of India to exporters, in reaction to low inventories and to a backlog in grain deliveries caused by shortages of train wagons for inland transportation. Concerning national policy, the country removed a ban on paddy (unhusked rice) exports last March, and at the same time lifted the licensing requirements for the export of Basmati rice. These moves coincided with a change in EU policies which might result in the elimination of an import duty waiver of € 250 per tonne on imports of unhusked basmati rice from India and Pakistan. The removal of this waiver is among the policy measures that the EU Commission plans to negotiate with its trading partners under the framework of Article 28 of WTO.
In Pakistan, the crop losses in the Sindh region this season will probably mainly affect the country’s exports in 2004, since rice from the new harvest will start reaching the market in September. However, given a currently reported scarcity of rice, this year’s shortfall might also seriously constrain availabilities for export in the last quarter of the year. Low stocks have already prompted a strengthening of prices of Pakistani rice, compared with similar products from India and Viet Nam. In addition, a reported rise in freight costs might further erode a part of the country’s competitive edge. Consequently, the forecast of exports by Pakistan has been reduced by 100 000 tonnes to 1.8 million tonnes, which would still imply a recovery from the poor performance of 2002.
The volume of shipments from Myanmar also fell in the first few months of this year; therefore forecasts for exports in 2003 have been lowered by 200 000 tonnes from the last report to 900 000 tonnes, which means that quantities are almost the same as last year. Rice trading activities this year will be carried out by the private sector, since the reform of the rice national policy announced in June abolished the government trade monopoly in rice.
1. World trade (exports) in wheat and coarse grains is based on a July/June marketing season, while trade in rice is based on January/December (calendar).
2. Including wheat flour in grain equivalent.