FAO/GIEWS - Food Outlook No.4 - October 2001 p. 8

World cereal stocks to fall sharply as global production contracts

Carryover Stocks

World cereal stocks to fall sharply as global production contracts

World cereal carryovers for crop years ending 2002 are forecast to fall to 562 million tonnes, 92 million tonnes, or 14 percent, below their already reduced opening levels, and 40 million tonnes less than was reported in June. Since the previous report, the forecast for cereal production in 2001 (including rice in milled terms) has been lowered by 36 million tonnes and this has given way to a further cut in the forecast for this season's ending stocks. Overall, this year's sharp decline in cereal stocks mostly stems from smaller crops in China as well as in a number of major cereal exporting countries. In China, cereal stocks are

likely to contract by as much as 51 million tonnes. Despite substantial reductions in recent years, cereal stocks in China remain bountiful, representing more than 50 percent of world total inventories. Large stocks in China have prompted the Government to pursue downsizing strategies in recent years and it is for this reason that despite lower output, procurement prices have been lowered, imports remain small and export sales continue.

World wheat stocks by the close of the seasons ending in 2002 are forecast to reach 207 million tonnes, down 14 million tonnes from the June forecast and 43 million tonnes, or 17 percent, below their opening levels. With this season's projected utilization again outstripping supplies, global wheat inventories would have to be drawn down further in order to meet the anticipated demand. Most of the decline is expected in China (down 12 million tonnes) and in major wheat exporting countries (down 15 million tonnes). Among the major exporters, smaller wheat crops in the EC, Canada and the United States could lead to a sharp stock draw-down to levels not seen

since 1998, although still well above the level of the mid-nineties. The decline in wheat inventories of the major exporters would also entail a drop in the ratio of their aggregate wheat stocks to their total disappearance (the sum of their domestic consumption and exports), which is currently envisaged to reach 17 percent, down considerably from 23 percent in 2000/01 and lowest in four years. In addition, the global share of total wheat stocks held by major exporters would also be smaller; around 19 percent as compared to 22 percent in the previous season.

Among other countries, higher wheat stocks are anticipated in several eastern European and CIS countries because of larger crops, but stocks in India, which at the start of the current season stood at a record level, are expected to decline; the extent of the decline would largely depend on whether the Government could achieve its ambitious export target of 5 million tonnes. The Government has also cut the price of wheat sold through the public distribution system in order to reduce surplus stocks. Elsewhere, wheat stocks are likely to be reduced in Turkey and the Islamic Republic of Iran because of lower production.

Global coarse grain inventories for crop years ending in 2002 are now put at 218 million tonnes, down 24 million tonnes from the June forecast and 31 million tonnes, or 12 percent down, from the previous year. As for wheat, the bulk of the decline is accounted for by China, where stocks are now forecast to fall by as much as 22 million tonnes. The forecast for ending stocks in major exporting countries has also been lowered significantly since the previous report. Most of the decline would be in the United States where, because of smaller production, ending stocks could fall to 39 million tonnes, 11 million tonnes smaller than was reported earlier and 14 million tonnes below last year.

At the current forecast levels, total coarse grain stocks held by major exporters would represent 29 percent of the world total, which is above the average of the past five years but lower than the 32 percent reached in the previous year. More significantly however, is the decline in the ratio of major exporters' stocks to their total disappearance, which is expected to drop to 14.4 percent, down from 18 percent in 2000/01 and smallest since the mid-1990s when grain prices surged in response to tight world supplies.

Among other countries, this year's bumper maize crop in Brazil is expected to boost that country's stockpile despite large exports. Higher stocks are also anticipated in Nigeria, mostly in anticipation of a record sorghum output. By contrast, reduced maize production in the Republic of South Africa is expected to lead to a decline in stocks in that country. Among the CIS and eastern European countries, the rise in this year's output would result in higher stocks in most countries, especially in Hungary, where this year's bumper maize crop could result in a significant increase in stocks despite a likely surge also in exports.

Since rice consumption is again expected to outpace production, world rice stocks at the close of the marketing seasons in 2002 are forecast to decline to 136.9 million tonnes, almost 18 million tonnes below their opening level and 3 million tonnes less than earlier anticipated. The latest downward revision is mainly on account of China where closing stocks have been reduced by 4 million tonnes from the previous forecast. In this country alone 12.5 million tonnes would have to be drawn down from inventories to meet the production shortfall and maintain a relatively small level of imports. Based on the latest forecasts, most rice exporters are anticipated to end the current season with smaller rice inventories, including China, India, Pakistan, Thailand and Viet Nam, but excluding Argentina, Australia and the United States. Several major importers are also likely to resort to a draw-down from stocks to cover their requirements, including Brazil, Indonesia, the Islamic Republic of Iran and Japan.

World Carryover Stocks of Cereals

Source: FAO