|No. 5||Rome, November 2003|
Cereals: Trade 1/
After adjustments to trade forecasts for several countries since the previous report, the latest forecast for world trade in cereals in 2003/04 stands at 227 million tonnes, which is 10 million tonnes, or 4 percent, less than in 2002/03 and the lowest level in six years. Most of this large decline is being driven by wheat and, to a lesser extent rice. Trade in coarse grains is expected to increase slightly.
The main emerging feature this season in global cereal markets is a sharp drop in world wheat trade2/, currently forecast to drop to 96.5 million tonnes in 2003/04, down 1 million tonnes from the forecast in September and 9 million tonnes below the previous season’s level. The decrease in this month’s forecast is mostly the reflection of smaller anticipated purchases by the United States, the EU and Iraq, which would more than offset the latest upward adjustments to the import forecast for Ukraine. Two other important developments are behind this season’s anticipated drop in wheat trade: one is higher (or record) harvests in several major wheat-importing countries, including Afghanistan, Brazil, the Islamic Republic of Iran and most of the countries in northern Africa; another is a sharp decline in purchases by the EU in spite of drought-reduced production this year, after record imports for the past two seasons.
Overview of World Cereal Imports
Source: FAO. 1/ Highly tentative.
Aggregate wheat imports into Africa are forecast at nearly 23 million tonnes, more than 3 million tonnes less than last season. This decline reflects reduced imports by Morocco and Tunisia because of their near-record domestic production. On the other hand, driven by rising demand, imports by Egypt are expected to match last year’s volume of some 6.4 million tonnes, in spite of even higher domestic production this season. At this level Egypt would regain its position as the world’s largest wheat importer. Total wheat imports by countries in sub-Saharan Africa are likely to remain unchanged from the previous season as reduced imports by Ethiopia, Mozambique, Namibia and Tanzania would mostly offset the anticipated increases by Kenya, Sudan and Zimbabwe.
Total imports into Asia in 2003/04 are forecast at roughly 39 million tonnes, down 2.2 million tonnes from last season. The largest decline is forecast for the Islamic Republic of Iran, where imports are likely to plunge to roughly 1 million tonnes for the first time in over two decades because of this year’s record harvest. Record wheat production this year in neighbouring Afghanistan would also mean smaller import demand, although with access to domestic production still a major hurdle, some imports would be required. Total wheat purchases by the Republic of Korea could also decline significantly this season. However, wheat imports for human food consumption are likely to remain at last year’s level and the anticipated overall decline in wheat imports would mostly reflect reduced feed wheat imports, because of its less competitive prices relative to maize.
Imports by Latin America and the Caribbean countries are likely to remain close to the previous season’s level with very little year-to-year variations across most countries. However, imports by Brazil are likely to drop from the previous season to 6 million tonnes due to a significant increase in domestic production, up more than 2 million tonnes from 2002. In North America, wheat imports by the United States are officially put at 2 million tonnes; this decline from the previous forecast comes mostly in response to recently imposed duties on spring wheat imports from Canada, the main US supplier.
Wheat imports into Europe are expected to decline this season in spite of a surge in wheat purchases by several CIS countries, most notably Ukraine and to some extent the Russian Federation and Moldova as well because of drought-reduced crops. By contrast, in the EU wheat imports are forecast to decline by as much as 8 million tonnes, or almost 70 percent. While the imposition of import quotas coupled with the absence of exportable supplies from Ukraine and the Russian Federation (the EU’s main suppliers since 2001/02) are the main reasons for this decline, all of this year’s anticipated decrease would affect feed wheat, imports of which rose drastically over the past two seasons as a result of their more favourable prices.
Among the major exporters, only the EU is forecast to lower its shipments as a result of reduced production. In the EU, the grain management committee decided on July 31 to suspend its weekly wheat export tenders because of this year’s sharply reduced crop, but exporters can still obtain daily export licences. However, by late October the number of export licenses granted since the start of the season had fallen behind by at least 2 million compared to the same period last season. Making up for the decline in sales from the EU, much larger shipments are anticipated from all other major exporters following a strong rebound in their production this year. As for non-traditional wheat exporters, because of reduced output, sales by the Russian Federation are expected to drop significantly while Ukraine is turning into a net importer after exporting more than 6 million tonnes (a record) in the previous season. Similarly, none of the smaller exporting countries in eastern and central Europe are likely to be able to make any sales this season except for Bulgaria and Hungary, where some exports are expected, albeit much below their previous year’s levels. Smaller exports are also expected by India, while Pakistan will probably withdraw from the export market this year because of a tighter domestic situation.
Global trade in coarse grain in 2003/04 is currently forecast at 104.5 million tonnes, 1.5 million tonnes more than was forecast earlier and 1 million tonnes above the previous season; upward adjustments to maize imports by the EU and Japan are among the main reasons behind this increase. Based on the current forecasts, world trade in maize is expected to reach 76 million tonnes, 2 million tonnes lower than last season. However, trade in barley is forecast to approach 18 million tonnes, over 2 million tonnes more than in the previous season, and trade in oats is forecast to reach close to 3 million tonnes, almost 1 million tonnes more than in 2002/03. Trade in other coarse grains is likely to remain unchanged from the previous season.
Total coarse grain imports into Africa in 2003/04 are put at 15 million tonnes, some 1.8 million tonnes less than last season. Most of the decline would be on account of anticipated smaller imports by Malawi and Zambia (mostly from higher domestic maize production), as well as Morocco and Tunisia, which both had much larger barley crops this year. Imports by Kenya are forecast to increase mainly because of continuing high domestic prices. In Asia, imports are currently forecast at roughly 58 million tonnes, down slightly from the previous season. Most countries in Asia are forecast to import as much as they did last year. However, imports by the Syrian Arab Republic are expected to fall significantly mostly as a result of large domestic supplies, and fewer imports are also anticipated for Indonesia because of higher maize production this year. Imports by most countries in Latin America and the Caribbean are likely to remain close to same levels as in the previous season. However, in Mexico, as the result of a continuing expansion in feed demand, maize and sorghum purchases are likely to increase in spite of rising domestic production.
In Europe, total imports are forecast at around 9 million tonnes, more than 2 million tonnes above the previous year’s level. As a result of severe drought and consequently smaller production across many countries in Europe, import demand for feed grains is higher nearly everywhere. In the EU, where maize production is forecast to decline by 10 million tonnes, coarse grain imports are likely to reach 5 million tonnes, or 1 million tonnes more than last season. This forecast includes at least 500 000 tonnes of sorghum, reflecting large purchases from the United States so far this season. Higher coarse grain imports are also expected by Poland, Romania and Hungary, while imports by most CIS countries are also anticipated to rise because of tighter domestic supplies.
In spite of this year’s limited expansion in world trade, prospects for market opportunities have greatly improved for some of the more traditional exporting countries. The main reasons for this improvement are the drop in exportable supplies among a number of exporters in the CIS and a sharp anticipated cut in this year’s maize sales by China. On the other hand, Brazil is likely to export more maize this season as the result of a record harvest, while sales by South Africa could also increase slightly. Among major exporters, in contrast, Australia and Canada are forecast to export more barley, thus rebounding after last year’s sharp decline in view of a strong recovery in their domestic production. In addition, larger maize and sorghum exports are anticipated from the United States.
With the end of the year approaching, there is growing evidence that the volume of rice trade in 2003 (January-December) might come close to the record achieved in 2002. According to the latest FAO estimate, trade in rice could reach some 27.9 million tonnes, only 200 000 tonnes smaller than last year and the second-largest volume on record.
The new 2003 trade forecast is some 200 000 tonnes higher than that in the previous Food Outlook. Much of the difference reflects the raising of imports by Bangladesh, which more than offset some downward revisions for the Islamic Republic of Iran and Iraq. As for exports, the upward adjustment comes as the result of larger shipments from the Republic of Korea, following the announcement that the full rice-aid deliveries promised to the Democratic Republic of Korea would be completed within the current year.
According to the latest FAO forecasts, imports by Asian countries could fall by 4 percent to 13.5 million tonnes, with most of the yearly decline concentrated in Indonesia, Iraq, the Islamic Republic of Iran and the Philippines.
Following the upward revisions to production in the 2002 and current seasons, forecast purchases by the Islamic Republic of Iran have been reduced from 700 000 to 500 000 tonnes, which would stand as the lowest level in the decade. Likewise, imports by Iraq are now anticipated at some 700 000 tonnes, 400 000 tonnes less than in 2002 and down from a previous forecast of 1 million tonnes. The revision reflects mainly a significant decrease in rice shipments from Viet Nam to Iraq this year, which does not appear to have been offset by other exporters.
Imports by Indonesia continue to be forecast at 3.3 million tonnes, which is still relatively high, although 6 percent less than in 2002. The government is considering proposals for additional tariff and non-tariff protection as of January next year. In the past two years, non-tariff measures on rice have already been tightened, with the introduction of stiffer inspection requirements in 2001 and a ban on imports to Java in 2002.
Despite the relaxation of the import monopoly by the Philippine National Food Authority (NFA) early this year, imports by the Philippines are expected to fall by 14 percent to 1.1 million tonnes. The right to import rice was extended only to producer cooperatives, which, although entitled to 300 000 tonnes, imported only 200 000 tonnes. Thus, the bulk of the rice trade continues to be conducted under the authority of the NFA.
Bangladesh – unlike the countries mentioned above – will likely step imports up this year to at least 1.2 million tonnes, twice as much as in 2002 and 500 000 tonnes more than what was anticipated in the last report. The revision follows the release of statistics that indicated that about 1 million tonnes entered the country between January and June. However, given the excellent 2002 season, the expected bumper harvest in 2003 and ongoing export restraints from neighbouring India, the pace of Bangladesh’s imports has likely slowed down considerably in recent months. Official sources also pointed to an annual increase in shipments to Jordan, Oman, Saudi Arabia, Syria and Turkey.
African countries are forecast to cut their rice imports to an aggregate 8.0 million tonnes, down from 8.5 million tonnes in 2002, which if confirmed would interrupt five years of steady increases. Most of the decline this year is due to smaller deliveries to Nigeria, consistent with the current policy stance of the country, but also to Cameroon, Ghana and Guinea. A drop in imports by Senegal is also anticipated, based on shipments reported between January and August. On the other hand, the flow of supply to the Côte d’Ivoire is anticipated to remain at about 1.1 million tonnes, close to the level of the past two years in spite of the troubled political situation in the country. Rice shipments to Benin and Libya are anticipated to rise substantially.
While imports by Asian and African countries are forecast to drop, they are expected to surge by 30 percent in Latin America and the Caribbean, underpinned by larger purchases from Colombia and especially Brazil, whose imports are anticipated to double to 1.2 million tonnes, the highest level since 1998 and a response to the 2003 production shortfall. Moreover, to relieve pressure on domestic prices, the government recently announced that it would reduce the tariffs on imports from non-Mercosur suppliers from 11.5 percent to 4.0 percent over the last quarter. Deliveries to Mexico are also expected to rise, despite the imposition early this year of anti-dumping duties on rice exported by a number of US firms.
Prospects for global rice exports in 2003 have been raised by about 200 000 tonnes since the last report on account of larger expected deliveries by the Republic of Korea. Few changes have been made to the other countries’ export outlook.
Based on current expectations, a decline in sales by India is the major factor underlying the expected decline in global rice exports. The country is forecast to ship 3.8 million tonnes in 2003, down from 6.6 million tonnes last year. Faced with shorter supplies from the 2002 poor harvest and dwindling rice inventories, prices had been raised and restrictions on sales of rice for export introduced by mid-year, thus considerably slowing the pace of shipments.
Reduced supplies also constrained exports in Argentina and Uruguay as well as in Australia, where they are forecast to tumble to a 25-year low. In Australia, the local government of New South Wales, where most of the country’s rice is grown, decided this year to extend until 2009 the monopoly on rice exports held by the Rice Marketing Board on behalf of the rice grower’s cooperatives. This “single desk” trading arrangement has been associated in past years with a lack of transparency, with little information released on real rice transactions or destinations; it was one of the themes included for consideration on the agenda for the Doha negotiations.
Exports by Myanmar, on the other hand, are set to remain around 900 000 tonnes, about unchanged from last year, with much uncertainty arising from the reform implemented last summer, which abolished the government trade monopoly and put rice trade in the hand of private firms.
All other major exporters are predicted to gain a wider share of the international market, as for example Thailand, whose exports are currently forecast to come close to the record it achieved in 2001 in spite of a strengthening of the local currency. Especially noteworthy in 2003 is the emphasis on quality rice exports, as reflected in a two-fold increase in the sales of Hom Mali jasmine fragrant rice in January-September. Likewise, Viet Nam is expected to deliver 23 percent more rice this year, with exports set at 4.0 million tonnes. If realized, these imports would reposition Viet Nam as the second largest rice exporting country worldwide, the status it lost to India in 2002. In spite of falling production over the past three years, China is expected to ship 30 percent more rice than last year, with a substantial share to African countries. Sales by Pakistan are also set to rise, although they are likely to remain short of the performance before drought affected the sector in 2001 and 2002. Exports from Egypt have been lowered somewhat from the previous outlook on the base of reported shipments in the first half of the year. However, at 650 000 tonnes, shipments would still be 40 percent more than last year’s. Finally, exports by the United States are poised to hit a new record at 3.7 million tonnes, with much of growth driven by the buoyant demand in Latin America and the Caribbean.
FAO’s first forecast concerning the global rice trade in 2004 points to a contraction of close to 6 percent, to 26.3 million tonnes. However, this quantity is highly tentative as much of the trade in 2004 will be influenced by the outcome of the 2003 paddy crops in Asia, which are about to be harvested.
The anticipated decline reflects mainly smaller deliveries to major importers, some of which are expected to gather good crops in the current season, including Bangladesh and the Philippines. In addition, imports could be cut substantially in Indonesia if the country manages to achieve the production target of 53 million tonnes next year, which it could not accomplish in 2003 largely because of El Niño-related drought problems. Likewise, as plantings in Brazil has been recently forecast to surge in 2004 to close to record levels, the country may cut purchases significantly next year. By contrast, African countries are anticipated to keep overall imports at around 8 million tonnes, little changed from the level expected in 2003, since a prospected 100 000 tonne drop in rice shipments to Nigeria can probably be compensated by small and widespread increases in the rest of the region. Few changes are currently foreseen.
As for exports, Thailand is anticipated to ship a volume close to this year’s high level, given the bumper crop which the country expects to harvest in 2003. By contrast, exports from Viet Nam are forecast to fall in view of the expected weakening of import demand in two of its traditional markets, namely Indonesia and Iraq. Reduced import requirements in South America would also have a depressing effect on sales from the United States. On the hand, the tightening of stocks might constrain export availabilities in China and India, both of which are currently foreseen to cut their shipments abroad. Likewise, the 2003 production shortfall will limit Japan and the Republic of Korea’s ability to maintain their food-aid shipments at this year’s high levels.
By contrast, Argentina, Myanmar and Uruguay could witness increased sales as production in these countries recovers. An increase could also apply to Australia, although exports by the country are still likely to remain substantially below pre-drought levels.
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.