Economic and Social Department

 global information and early warning system on food and agriculture

 food outlook
No. 1 Rome, April 2004

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Cereal Supply/Demand Roundup




World Cereal Utilization

Food Aid

Cereal Import Bill




FAO’s first forecast for world wheat production in 2004 is 596 million tonnes, 37 million tonnes more than in 2003. Compared with last year, output is expected to increase significantly in Europe and slightly in Asia, more than offsetting likely reductions in all other regions, the most noteworthy being in North America and in Oceania.

Wheat production

2004 cf
 (million tones)%
ASIA 244.9 251.6 2.8
China 1/86.083.1-3.4
Iran, Islamic Rep. of13.512.3-8.7
AFRICA 21.5 20.1 -6.6
North Africa 17.0 15.4 -9.9
Sub-Saharan Africa 4.4 4.7 6.1
Western Africa 0.1 0.1 -6.8
Eastern Africa 2.6 2.2 -15.2
Southern Africa 1.7 2.4 38.7
South Africa1.42.147.2
CENTRAL AMERICA 2.9 2.0 -30.6
SOUTH AMERICA 22.9 21.8 -4.8
NORTH AMERICA 87.1 81.5 -6.4
United States63.658.0-8.8
EUROPE 154.5 196.7 27.3
EU 91.5102.812.4
Russian Fed.34.043.427.6
OCEANIA 25.3 22.3 -11.9
WORLD 559.0 595.9 6.6
Developing countries266.3267.50.4
Developed countries292.7328.412.2
Source: FAO. Note: Totals computed from unrounded data.
1/ Including Taiwan Province.

In Far East Asia, harvesting of the 2004 wheat crop has just started. Aggregate output is forecast to increase, returning to about the average of the past five years after a relatively small crop in 2003. Production is anticipated to recover in India, reflecting increased plantings and favourable weather. A larger crop is also foreseen in Pakistan. These increases should more than offset a reduction in China’s output for the fifth year in succession, following a further decline in plantings.

In the Asian CIS countries, the area planted with winter wheat is estimated to have risen slightly to about 4.4 million hectares in response to good weather conditions and input availability at planting time. Weather since planting has also been favourable, with significant snow-cover protecting crops from winterkill and providing ample moisture for spring growth. Assuming favourable weather conditions prevail and based on the condition of the winter crop, which accounts for about one-quarter of the aggregate winter and spring wheat area, the aggregate wheat harvest in the subregion could be above average.

In the Near East, prospects for the 2004 wheat crop to be harvested from May are also generally good, reflecting favourable weather conditions. Production should remain close to last year’s average to above-average levels in Afghanistan, Syria and Turkey. By contrast, in Iraq production is likely to decline due to shortages of agricultural inputs.

In North Africa, the winter wheat crop (which accounts for three-quarters of the African region’s production on average), is about to be harvested. Reflecting above-average plantings and generally favourable weather for the season, the aggregate output of the three Maghreb countries - Algeria, Morocco and Tunisia – is forecast at the good level of 8.3 million tonnes, although 10 percent short of last year’s record. In Egypt, where the wheat crop is largely irrigated, the area sown is officially estimated to have increased somewhat from the already high level of 2003 and correspondingly output is forecast to increase slightly to 6.9 million tonnes.

In Eastern Africa the 2004/05 season is yet to begin, except in Sudan where a normal wheat crop is being harvested. After a bumper crop in the 2003/04 season in the subregion, the coming crop is assumed, at this stage, to decrease to the average level. The 2003/04 aggregate wheat output is estimated at nearly 2.6 million tonnes, about 35 percent above the previous year’s average level. Ethiopia accounted for over 70 percent of the total with an output estimated at 1.9 million tonnes.

In Southern Africa, the 2004 wheat crop, to be planted from May, is expected to recover from last year’s poor level of 1.7 million tonnes, some 30 percent below average. Production in 2003 was adversely affected by a sharp decline in planting and drought. In South Africa, the largest producer in the subregion, a survey of farmers’ 2004 planting intentions suggests that the area sown will recover to the average level.

In Central America and the Caribbean, harvesting of 2004 irrigated wheat crop in Mexico, virtually the sole producer in the subregion, has just started. The aggregate output is tentatively forecast at some 2 million tonnes, a sharp decline from last year and well below average. This mainly reflects reduced plantings in the north-west of the country because of water shortage.

In South America, land is being prepared in Argentina, Chile, Paraguay and Uruguay for planting of the 2004 wheat crop from May/June, while planting has just started in Brazil. At this very early stage, output in the subregion is expected to remain above the average of the past five years but somewhat down from the 2003 bumper crop.

In the United States, a decline in wheat output is in prospect: the total area sown to winter wheat decreased by 3 percent and the rate of abandonment could be above average because of limited snow cover during the winter. Assuming an about-average spring crop, which is still to be sown, the aggregate wheat output in 2004 is forecast at 58 million tonnes (2003: 63.6). In Canada, the wheat crop is mostly spring sown in May/June. Early tentative forecasts point to a virtually unchanged wheat crop of about 23.5 million tonnes.

In Europe, a strong recovery in wheat production is expected in the EU after drought sharply reduced output last year. The winter wheat area is estimated to have increased largely in response to improved price prospects for the 2004/05 marketing season and coming out of the winter the crops are reported to be in generally good condition, with limited frost damage reported so far. Aggregate output of the EU is forecast at 102.8 million tonnes (2003: 91.5) Among the major producing member states, output is forecast to increase by 23 percent in France, and about 11 percent in both Germany and the United Kingdom. By contrast, output may decrease slightly in Spain because of delayed planting reducing yield potential.

Among the central and eastern European countries (CEECs), prospects for the winter cereal crops are also generally favourable and planted areas are reported to have increased throughout the region, reflecting favourable autumn weather and the incentive of good price prospects. Furthermore, winter weather conditions have been favourable, with ample snowcover protecting plants from winterkill and providing ample moisture for spring development. In the three major producing CEECs - Hungary, Poland and Romania – aggregate wheat output is forecast to increase by about 6 million tonnes, to over 19 million tonnes, representing a 45 percent increase from last year’s poor crops.

In the European CIS subregion, the area planted with winter wheat rose from the previous year’s poor level to an estimated 14.5 million hectares. After last year’s reduced crops the governments in the region had planned to cultivate a larger area but plantings were hampered by inadequate access to seeds and other inputs. However, prospects for the harvest remain much better than last year as weather conditions have been generally favourable since planting with adequate snow-cover pointing to a lower-than-normal level of winterkill and providing good moisture for spring development. Based on the condition of the winter crops, which account for about 50 percent of the aggregate (winter and spring) output, and assuming normal conditions for the spring crops, the aggregate wheat output in the region is forecast to more than double from the reduced 2003 level to some 61 million tonnes but would remain below the bumper crops recorded in 2001 and 2002. The Russian Federation and Ukraine account for the bulk of the total.

Planting for the 2004 wheat crop in Australia will begin in April/May so the outlook, at this stage, is very tentative. An early official forecast puts output at about 22 million tonnes, 3 million tonnes down from last year’s record level but much will depend on weather conditions and market prospects come planting time.

Global wheat trade will drop sharply this season

The FAO forecast for world trade in wheat1/ in the season ending 2003/04 (July/June) has been raised by 3 million tonnes since November to 99.5 million tonnes. The revision mainly reflects higher forecasts for wheat imports by China, the EU, Romania, and Ukraine, which more than offset lower forecasts for imports by Algeria, Brazil, Ethiopia, the Islamic Republic of Iran (IRI), and Nigeria. Nonetheless, the FAO forecast for trade in 2003/04 still points to a substantial decline of about 6.2 million tonnes from 2002/03. While a sharp drop in imports by the EU would be responsible for most of the decrease in world trade this season, above-average and record wheat harvests would also reduce import demand by several traditional wheat importing countries, mostly in Afghanistan, Algeria, Brazil, the Islamic Republic of Iran and Tunisia.

On a regional basis, imports in Africa are forecast to decline by 4.8 million tonnes to 22 million tonnes as a result of a strong rebound in wheat production in Ethiopia and several countries in northern Africa. However, wheat purchases by the region’s largest wheat importer, Egypt, are expected to remain steady at around 6.4 million tonnes in spite of the rise in its domestic production in 2003. The main reason is the Government’s recent decision to increase wheat imports for subsidized domestic pasta production, in view of rising domestic prices and reductions in private sector wheat imports due to lack of hard currency.

In Asia, wheat imports are forecast at 41 million tonnes, similar to the previous season, even though wheat purchases by several countries are forecast to decrease significantly. The largest decline is forecast for the IRI, a leading wheat importer until a few years ago. After two consecutive years of bumper crops, wheat purchases by the IRI are expected to be halved this season to only 1 million tonnes, the smallest volume in more than two decades. By contrast, China has been increasing its wheat purchases steadily since December in response to smaller domestic production and declining stocks. Based on recent agreements to import large quantities of wheat from Australia, Canada and the United States, the FAO forecast for wheat imports by China (Mainland) has been raised to 2.5 million tonnes, up sharply from about 400 000 tonnes in 2002/03 and the highest since 1996/97.

In Europe, aggregate wheat imports are put at 16.4 million tonnes, the same as the previous season’s peak even though purchases by the EU alone are forecast to fall by 7 million tonnes as a result of such reduced seed wheat supplies from the Black Sea. Higher wheat requirements are expected in most CEECs as well as the Russian Federation and Ukraine, all because of drought-reduced production in 2003. Among countries in Latin America and the Caribbean, Brazil, the region’s largest importer is forecast to cut its imports by almost 20 percent this season, following a doubling of its production. By contrast, wheat purchases by Mexico are expected to increase by 6 percent as a result of a drop in domestic production and strong demand.

food outlook

Turning to exports, the fundamental picture is that of major exporters regaining their market share after two consecutive seasons of declining sales. All major wheat exporters, with exception of the EU, are likely to increase sharply their exports this season. In the EU, exports could be halved as a result of smaller production coupled with high internal prices and a strong Euro. By contrast, larger exports are expected from Argentina, Australia, Canada and the United States, driven by a rebound in their production and much smaller sales by the EU, India, and nearly all emerging wheat-exporting countries in the CIS, as shown in the chart.

Wheat Utilization to fall below trend

Global wheat utilization is forecast to drop to 606 million tonnes in 2003/04, down 8 million tonnes from the previous year and 2 percent below the long-term trend. This decline is driven by sharp reductions in wheat use for animal feed, principally in the EU and several countries in the CIS. By contrast, in the United States, a recovery in domestic wheat production and high maize prices are expected to result in a rebound in wheat feed use to levels approaching the more normal pre-2002/03 levels. Global usage of wheat for human consumption is forecast at 439 million tonnes, pointing to an increase in line with world population growth. As a result, per caput food consumptions of wheat for the world as a whole and the LIFDCs, as a group, are expected to remain steady at around 70 kg and 62 kg, respectively in 2003/04.

Stocks down sharply

World wheat stocks for crop years ending in 2004 are put at 139 million tonnes, down 48 million tonnes, or 25 percent, from the previous season. The biggest decline is expected once again in China, but wheat stocks in India are also forecast to drop sharply this season after a reduction in production and three consecutives seasons of exceptionally large exports. Much smaller carryovers are also anticipated in the EU, evidenced by a much tighter situation compared to the previous season due to a combined impact of lower production and smaller imports. Significant draw-downs are also forecast for the Russian Federation and Ukraine as a result of exceptionally poor harvests in 2003.

Prices strengthen further

International wheat prices rose during the first half of the 2003/04 marketing season, supported by reductions in exportable supplies in the EU and in a number of CEECs and the CIS. The price of US wheat No. 2 HRW surged to US$180 per tonne during the fourth week in March, raising the average price for the month to US$168 per tonne, up US$18 per tonne from October and US$22 per tonne, or 15 percent, more than in the corresponding month last year. In Chicago, wheat futures also extended their gains, underpinned by brisk export activities as well as strength in maize and soybean futures. By late March, the CBOT US Wheat futures price for July 2004 delivery was quoted at US$153 per tonne, up US$49 per tonne, or 47 percent, from the corresponding period last year. However, favourable planting conditions and forecasts for a rebound in world wheat production in 2004, coupled with generally weaker import demand prospects, are expected to restrain price increases in the coming months. While demand for US wheat continues to remain strong, rising competition mostly from Australia, which this season has large exportable supplies and enjoys transportation advantage in some important Asian markets, could also put some downward pressure on US prices.

food outlook
food outlook

1.  Including wheat flour in grain equivalent.

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