Economic and Social Department

 global information and early warning system on food and agriculture

 food outlook
No. 2 Rome, June 2004

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Cereal Supply/Demand Roundup

Box on China Global Cereal Markets


Box on EU Enlargement and FAO Cereal Trade Estimates

Coarse Grains


Ocean Freight Rates


Meat and Meat Products

Milk and Milk Products

Oilseeds, Oils and Oilmeals





Wheat production

2004 cf
 (million tones)%
ASIA 245.1 249.1 1.6
CIS in Asia23.423.50.0
AFRICA 21.6 21.5 -0.1
North Africa17.016.9-0.6
Sub-Saharan Africa4.54.52.1
CENTRAL AMERICA 2.9 2.5 -15.7
SOUTH AMERICA 23.5 23.7 0.8
NORTH AMERICA 87.1 80.3 -7.9
EUROPE 154.4 195.7 26.8
CIS in Europe39.159.451.9
OCEANIA 25.3 22.3 -12.1
WORLD 560.0 595.1 6.3
Developing countries267.2270.11.1
Developed countries292.8325.011.0
Source: FAO. Note: Totals computed from unrounded data.

FAO’s forecast for world wheat production in 2004 remains virtually unchanged since the April report at 595 million tonnes, which would be 35 million tonnes more than in 2003. A sharp recovery in output in Europe, and a small increase in Asia, would more than offset the reduced crops expected in North America and in Oceania.

In Far East Asia, harvesting of the 2004 winter wheat crop is underway and planting of the spring crop is completed. The aggregate 2004 wheat output in China is forecast at some 85 million tonnes, 1 percent down from last year due to a reduction in the winter wheat area. In India, recent unseasonably high temperatures and scarce precipitation during the maturation stage have deteriorated the outlook for this year’s wheat crop but after larger plantings, production should nevertheless still be well above last year’s poor level and above average. Larger crops are also expected in Pakistan and the Islamic Republic of Iran reflecting good rainfall during the growing season.

In the Asian CIS subregion, the winter wheat area is estimated to be similar to last year’s and conditions so far suggest similar yields could be achieved, leading to a crop of about 23.5 million tonnes. Kazakhstan normally produces about 80 percent of the subregion’s total crop.

In the Near East, the 2004 wheat harvest is underway. Erratic spring precipitation and above-average temperatures may somewhat compromise the harvest in Afghanistan after a record crop in 2003. In Turkey and Syria, average to above-average crops are expected following adequate precipitation. In Jordan, however, dry weather has seriously affected crops.

In northern Africa, prospects for the winter wheat crop to be harvested from May/June remain satisfactory, reflecting generally favourable weather conditions and adequate availability of inputs. However, the threat of desert locust remains extremely serious in Algeria and Morocco in spite of intensive control operations. In Egypt, where the wheat crop is mainly irrigated, the 2004 output is expected to increase further from last year’s already above-average crop.

In eastern Africa, harvesting of the 2004 wheat crop is just completed in Sudan. Output is forecast at about 400 000 tonnes, some 20 percent above the previous year’s level. In Kenya, the crop has been planted and despite good rains early in the season, precipitation since then has been erratic and the outlook is uncertain. In Ethiopia, precipitation has also been erratic for land preparation in recent weeks, casting uncertainty over the outcome of the June wheat planting campaign.

In southern Africa, planting is underway in South Africa, by far the subregion’s largest producer. Planting intentions indicate an 18 percent increase to an about average area, from the drought-reduced level of 2003. If weather conditions are normal for the rest of the season, an average crop could be obtained. In Zimbabwe, wheat output is anticipated to remain depressed. FAO’s latest forecasts put the aggregate 2004 wheat production for the subregion at about 2.4 million tonnes.

In Central America and the Caribbean, harvesting of 2004 irrigated winter wheat crop in Mexico is underway. Output is forecast to be well down on last year and below average mainly because of reduced plantings in the north-west of the country due to inadequate water supplies at sowing.

In South America, planting of the 2004 wheat crop in Argentina, Chile, Paraguay and Uruguay is about to start, while in Brazil it is already well advanced. Planting intentions at subregional level indicate an increase of about 3 percent in area compared to previous year.

In North America, wheat production in the United States is set to fall sharply after a significant decline in winter plantings and the prospect of a reduced spring wheat area. In addition, weather conditions have been generally less favourable during the current season, especially in southern producing regions where dryness has prevailed. In Canada, as of mid-May, seeding of the wheat crop was progressing slightly ahead of normal. Despite a possible area reduction because of a shift of land to non-cereals, output of wheat is forecast to increase slightly because of high expected yields, especially for durum.

In Europe, prospects for the 2004 wheat crops remain generally favourable across the region. Output in the EU-25 is forecast to increase substantially from last year, with significant gains seen in both the EU-15 countries and in the 10 new member countries in central Europe. Planted areas have increased and better yields are expected reflecting generally adequate moisture availability so far. The planted area has increased to well above the average of the past five years and weather conditions have been better than last year’s and generally favourable so far, among both western European and central European countries. Larger crops are also forecast in the Balkan countries, for the same reasons.

In the European CIS subregion, frost in late April killed almost 2 million hectares of winter wheat, mainly in the Ukraine and the Russian Federation. However, as of mid-May, the spring wheat planting had been almost completed under favourable conditions, and the aggregate area planted with wheat (winter and spring) is now estimated to be nearly 5 million hectares up on last year. Assuming normal weather for the remainder of the season, wheat production in the subregion is thus expected to increase significantly from last year’s very poor harvest. However, it will likely remain below the bumper levels of the previous two years.

In Australia, after a satisfactory start to the winter crop planting season, a return to drier conditions in late April and early May, especially in the eastern regions, dampened hopes of a bumper output this year. Farmers in southeastern Australia are delaying planting, hoping that more rain will arrive before the end of June. Latest indications point to a wheat output of about 22 million tonnes.

FAO expects a sharp decline in world wheat trade in 2004/05


FAO’s first forecast for world trade in wheat1/ in 2004/05 (July/June) stands at 98 million tonnes, down considerably from 2003/04. The bulk of the expected decline is due to much smaller import requirements in Europe, given the anticipated strong recovery in the region’s production. However, a change in the basis for calculating world trade caused by the enlargement of the EU from 15 to 25 Member States also contributes in part to the smaller world trade figure in the new marketing season.

For the developed countries as a whole, wheat imports are forecast at only 19 million tonnes in 2004/05, down 10 million tonnes, or 35 percent, from 2003/04. By contrast, total wheat imports by the developing countries are currently put at around 79 million tonnes, up 7 million tonnes, or 10 percent, from 2003/04. The largest increase is expected in China (Mainland), where another decline in wheat production is expected to lead to a notable increase in imports, from 2.8 million tonnes in 2003/04 to 7 million tonnes in 2004/05. Increased wheat imports are also anticipated in Mexico following a decline in its production this year. Wheat imports by most countries in North Africa are also anticipated to rise in 2004/05, but would still remain mostly below average in view of good crop prospects. Based on continued strong domestic demand, Egypt recently entered into an agreement with Australia for long-term purchases of Australian wheat. However, another record crop in the Islamic Republic of Iran is forecast to cut imports by this traditional large wheat importer to only 200 000 tonnes. This will be below the 2003/04 reduced level, and the lowest level since the mid 1970’s.

food outlook

In spite of the forecast contraction in world trade in 2004/05, wheat shipments from most major exporters are forecast to increase in 2004/05. The biggest rise is expected in the EU, following the anticipated strong recovery in production across nearly all countries, including its new Member States. Higher exports are also anticipated by Argentina and Australia, both of which are expected to have relatively large carryover stocks already at the start of the new season. By contrast, exports from the United States are forecast to fall sharply, mainly in response to lower production and reduced supplies. Among other exporters, good crop prospects are likely to boost exports from the CIS countries, especially from Ukraine, which is forecast to return to the export market. By contrast, exports from India are likely to decline sharply now that its large stocks are reduced. China is also likely to cut its exports this season given its tight domestic market. Wheat exports from the Syrian Arab Republic and Turkey are anticipated to decline as a result of smaller carryovers in both countries.

Wheat Utilization to rebound in 2004/05


World wheat utilization in 2004/05 is set to reach 609 million tonnes, up 1.7 percent from 2003/04 but still slightly below the 10-year trend. A rise in feed use is expected to account for most of the forecast increase. The anticipated production recovery in Europe and prospects for larger feed wheat supplies in international markets are likely to push feed wheat prices below those of maize and encourage higher wheat utilization for feed in several markets. In the United States, a tight maize situation, despite a larger crop expected this year, is seen to boost feed wheat use for the second consecutive season. World wheat use for human consumption is forecast to increase slightly, to 431 million tonnes. At this level, the global per caput food consumption of wheat would be slightly down from 2003/04. The decrease is mostly driven by changing consumption patterns in China, where wheat food consumption, on per caput terms, has been on a declining trend in recent years.

Wheat stocks to decline again in 2005


Global wheat stocks for crop years ending in 2005 are forecast at 140 million tonnes, down 10 percent from their revised opening levels. FAO has made further revisions to its historical estimates for stocks in China and following those revisions, the forecast for world wheat stocks ending in 2004 has been raised.

food outlook

By the closing of seasons in 2005, total wheat stocks in major exporting countries are forecast to reach 41 million tonnes, up only 1.5 million tonnes from their reduced opening levels. The ratio of major exporters’ wheat carryover stocks to their total disappearance (the sum of their domestic consumption and exports) is likely to approach 17 percent, indicating a slight decline from 2003/04. Wheat inventories are anticipated to increase in the CIS because of an expected rebound in production. However, in China, where wheat production is forecast to decline again in 2004, stocks are likely to be cut for the fifth consecutive season, falling to 39 million tonnes, down 15 million tonnes from their reduced opening levels. In India, where production is forecast to increase, total wheat inventories are likely to stabilize at around 15 million tonnes.

Wheat Prices are under pressure and could decline further


The decline in wheat production in 2003 and a sharp reduction in world wheat stocks provided support to wheat prices during most of the 2003/04 marketing season. However, in recent weeks, good crop prospects and the slow pace of exports started to put downward pressure on prices. Despite occasional price swings, mostly in response to weather news and rumoured purchases by China, the US wheat No. 2 (HRW, fob) averaged US$167 per tonne in May, down US$4 since March but still US$20 per tonne, or 14 percent, above the corresponding period last year.

Generally favourable weather conditions and expectations of a strong rebound in world wheat production in 2004 kept wheat futures under pressure. A sharp drop in the US maize and soybean futures in recent weeks also influenced the wheat futures markets. By late May, the September wheat futures contracts at the Chicago Board of Trade (CBOT) were quoted at US$141 per tonne, almost US$10 per tonne lower than in April. As harvests get underway soon in most wheat producing countries in the northern hemisphere, seasonal factors are also expected to put further downward pressure on prices. Early indications point to weaker wheat prices in 2004/05 in view of improved supply situation and weaker import demand.


1.  Including wheat flour in grain equivalent

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