|food outlook||No.2, June 2005|
|global information and early warning system on food and agriculture(GIEWS)|
Basic food commodities
Table 3. Wheat production (million tonnes)
Note: Totals computed from unrounded data.
The forecast for global wheat output in 2005 has been lowered somewhat since the previous report to 612 million tonnes, some 2.5 percent less than the record crop of 2004 but still above the average of the past five years. The revision mainly reflects adverse dry weather for planting in Australia and for developing crops in Morocco and Spain, as well as yields lower than anticipated in China and India, which more than offset upward adjustments in the United States and countries of South America. At regional level, this year’s wheat production is expected to increase in Asia, following good weather and government support policies, and in Central America, but to decline in all other regions.
In Far East Asia, harvest of the 2005 winter wheat crop is well advanced in China (Mainland), prospects are generally good reflecting favourable weather in the major producing areas during the season. Output in China is tentatively forecast at 91.7 million tonnes, slightly up from last year and about the average of the past five years. A significant increase in area, following higher prices and government’s seed subsidies, is expected to more than offset some reduction in yields from last year’s record levels. In India, the 2005 harvest is virtually complete. Output is estimated to be less than earlier expectations at about 73 million tonnes because of un-seasonal rains and hailstorms during the flowering season in February and March. Nevertheless, the crop is still about 1 million tonnes more than in the previous year. In Pakistan, the wheat crop is expected to be record at nearly 21.5 million tonnes. The increase comes as a result of improved incentive to producers through increased government minimum support prices, favourable climatic conditions and adequate availability of fertilizers and loans.
In the Asian CIS subregion, spring wheat has been planted on more than 11 million hectares, some 2 million hectares up on last year. Favourable weather conditions, improved soil moisture and increased water-flow in the two main rivers feeding the extensive irrigation systems of the region, Syr and Amu Darya, following above average snowfall during winter, are the main factors contributing to higher planted areas. Aggregate wheat production (winter and spring) in the region is tentatively forecast at about 23 million tonnes, some 6 percent up on last year’s harvest. Kazakhstan accounts for about 50 percent of the total wheat production in the region.
In Near East Asia, the 2005 wheat harvests is underway in several areas. In Afghanistan, a good crop is in prospect following above-average precipitation during the winter and spring. A record wheat output is expected in the Islamic Republic of Iran, reflecting continued government support to the wheat sector in line with its wheat self-sufficiency policy. In Turkey, however, the outlook has deteriorated in view of continuing dry conditions in central and south-eastern areas of the country, where several months without significant rainfall has led to insufficient soil moisture reserves for crop development. Tentative forecasts point to a reduction in output of at least 1 million tonnes compared to last year.
In North Africa, the 2005 winter wheat crop has been harvested. Early forecasts point to a sharply reduced output in Morocco, principally as a result of reduced plantings and low yields – caused by a dry spell, which from March through May seriously affected crops in main producing areas. Prospects are more favourable elsewhere in the subregion despite adverse cold spring temperatures in parts. Above-average outputs are anticipated in Algeria ,Egypt and Tunisia. The subregion’s aggregate wheat output in 2005 is tentatively forecast at about 14.9 million tonnes, some 15 percent below last year’s record level, but still above the average of the past 5 years.
In Eastern Africa, harvesting of the 2005 wheat crop has recently been completed in Sudan. Tentative estimates indicate an output of 377 000 tonnes, about 20 percent below the previous year’s crop. Elsewhere in the subregion the main 2005 crops are just being planted. In Ethiopia, the largest producer of the subregion, beneficial rains in April and May have improved the outlook for planting of the main season crop. However, the output is preliminarily forecast to decline from last year’s exceptional high level.
In Southern Africa, planting of the 2005 winter wheat is underway as of May. In South Africa, which accounts for about 90 percent of the subregion’s production, farmers’ planting intentions point to a 6 percent decrease in area compared to last year. This reflects relatively low domestic prices and low soil moisture levels after a drier than usual main summer season. However, assuming normal weather for the remainder of the season, yields could recover from last year’s low level and output may increase from the poor harvest in 2004. The aggregate 2004 wheat output of the subregion is tentatively forecast close to 2.2 million tonnes, higher than in 2004 but still below the average of the past five years.
In Central America and the Caribbean, harvesting of the 2005 main irrigated wheat crop is well advanced in Mexico, virtually the only producer in the subregion. Latest forecasts point to an output of 3 million tonnes, a recovery from the reduced level of the past two years and about average. The higher production mainly reflects an increase of 17 percent in the area planted.
In South America, planting of the 2005 wheat crop is underway. Preliminary forecasts point to a slight decline in production from the good level of 2004 due to a smaller area planted. In Argentina, planting prospects are uncertain as a result of increased production costs and inadequate soil moisture in parts. Early official forecasts indicate a lower area planted. Plantings – and output – are also expected to decrease in Brazil and in Chile, where domestic prices are low. By contrast, in Uruguay, the wheat area could increase as a result of diversion of land from barley.
In North America, as of early June, prospects remained generally favourable for the wheat crops at different stages of growth throughout the region. In the United States, spring wheat planting was completed on an area estimated to be 4 percent up from last year and the crop is reported to be in mostly fair to good condition. The winter wheat harvest is already underway in the southern states while further to the north it is maturing. Winter wheat output is forecast at some 42 million tonnes, 5 percent up from last year as the area harvested should increase after much lower abandonment and in addition, higher yields are expected. Spring wheat output prospects are still uncertain but assuming trend yields and the recent average ratio of planted-to-harvested area, this year’s crop could be down somewhat from 2004 despite the larger area planted. The country’s aggregate wheat output in 2005 is forecast at 58.2 million tonnes, marginally up from 2004. In Canada, conditions for wheat planting this spring have been generally favourable. A slightly smaller planted area is estimated but expectations for less abandonment this year could result in little change in the final area harvested. However, a reduction in yields could result in a smaller wheat output, currently forecast at 23.5 million tonnes, 9 percent down from 2004.
In Europe, prospects for the 2005 wheat crops across the region are mostly favourable except in Portugal and southern Spain where drought persists. Output of the European Union is forecast at 125 million tonnes, about 9 percent down from last year’s record, reflecting an expected decline in yields after exceptional high levels last year. Nevertheless, apart from Spain and Portugal, yields and outputs are forecast to remain above the five-year average in most countries. In the Balkan subregion, latest indications continue to point to another good crop. Output in Romania may be as much as 3 percent up from last year at 8 million tonnes, as plantings increased and growing conditions have remained favourable throughout the season so far. In the European CIS countries, (the Russian Federation, Ukraine, Belarus and Moldova), spring wheat planting in the Russian Federation and Belarus is slightly delayed owing to bad weather conditions while planting in Ukraine and Moldova is complete. Heavy rains and cold weather in early spring prevented the Russian Federation and Belarus, and to a certain extent Ukraine, to fully take advantage of the highly favourable soil moisture as a result of heavy snowfall during last winter. Aggregate area planted with spring wheat is now estimated at about 13 million hectares, nearly 3 million hectares down on last year. Total wheat production in the subregion is forecast at some 63 million tonnes, about 1.4 million tonnes down on 2004. Much of the decline in spring wheat area and production is accounted for by the Russian Federation.
In Australia, prospects for the 2005 wheat crop are poor in eastern states because of persisting drought during what should have been the main planting period. Although winter wheat planting can still be carried out up until the end of June, and forecasts early in the month pointed to an increased likelihood that some significant planting showers might yet arrive, it is certain that the area sown in the eastern producing states will be considerably less than last year and yield prospects are not as good because of the limited soil moisture reserves for crop growth during the season. By contrast, prospects in Western Australia, which normally accounts for about 30 percent of production, are generally very favourable, reflecting timely planting rains and satisfactory precipitation for developing crops. Based on the good prospects in the west of the country and the renewed hopes in early June that some rainfall may arrive in time for planting in the east, FAO forecasts the country’s wheat output at 18 million tonnes, above an official early-June forecast (based on May conditions and assuming drought to continue throughout the rest of 2005) but down by about 12 percent from the previous year’s crop.
FAO's first forecast for wheat trade1/ in 2005/06 (July/June) stands at 103.5 million tonnes, down 3.4 million tonnes from the 2004/05 level which was revised up since April to reflect strong demand in the second half of the season. The bulk of the expected decline this year stems from an anticipated reduction of wheat purchases by China, which would more than offset possible increases in imports by Brazil and several countries in Europe and northern Africa. Although global wheat production is forecast to decline in 2005, the reduction is not expected to give rise to a larger volume of imports. This is because in several countries where production is expected to decline, carryover stocks are adequate to compensate for lower harvests.
Across regions, total wheat imports in Asia are expected to decline most significantly. Imports by China (Mainland) are forecast to drop sharply, by 2.5 million tonnes, to 5 million tonnes. While wheat production in China is likely to remain close to the previous year’s level, the anticipated slight increase in total domestic utilization is more likely to be met by drawing on stocks than by higher purchases from world markets. Afghanistan and Pakistan, two traditional importing countries, may import much less wheat this season because of improved production prospects. Imports by most other countries in Asia are unlikely to change much from 2004/05.
Wheat imports in Africa are seen to increase but most of the anticipated rise is likely to concentrate in northern Africa where production is expected to decline after 2 years of above-average harvests. In Morocco, where prolonged dry conditions are likely to reduce production sharply this year, imports could increase by 800 000 tonnes to 3 million tonnes, the highest level since 2000/01. Imports by most countries in Sub-Saharan Africa are forecast to remain unchanged or rise only slightly, except in Ethiopia, where growing demand and lower domestic supplies could boost imports this season.
Imports in Latin America are expected to be similar to 2004/05 as a small decrease in deliveries to Mexico could offset higher purchases by Brazil. Total wheat imports in Europe are forecast to decline in 2005/06 with imports by the EU sliding by 600 000 tonnes to 6 million tonnes. Large carryovers, particularly of intervention stocks, are forecast to make up for this year’s production shortfalls in the EU drought-hit regions of Spain and Portugal. Smaller imports are also forecast for Romania where a bumper crop is expected to result in higher stocks and exports instead.
Regarding exports, the new season’s prospects seem less favourable for most exporters in view of a likely decline in commercial imports. Among the five major wheat exporters, shipments from the United States are forecast to decline the most, by 2.5 million tonnes. Smaller sales are also expected from Argentina and Australia but larger exports are forecast for Canada and the EU, both of which are likely to begin the new season with ample carryover stocks. Among other exporters, good crop prospects are likely to boost exports from Romania and several CIS countries, especially Kazakhstan.
FAO’s first forecast for wheat utilization in 2005/06, at 618 million tonnes, is similar to the current season’s estimated utilization. At that level, total use would still be slightly below the 10-year trend. The slow growth currently anticipated for the new season mainly concerns feed and other uses than food, which are expected to contract after rising sharply in 2004/05. However, wheat destined for direct human consumption is likely to continue to grow at about the same rate as population, hence resulting in rather stable intakes on per caput basis, which at the global level is forecast at around 68 kg, same as in 2004/05.
World wheat inventories for crop years ending in 2006 are currently forecast at 160 million tonnes, down 8 million tonnes from their revised opening levels. The forecast for wheat stocks for crop years ending in 2005 has been revised upwards by 4 million tonnes to nearly 168 million tonnes, to reflect adjustments in several countries in Asia as well as in the EU, where lower domestic utilization and a slight upward revision of production would result in bigger carryovers than estimated previously. The anticipated small decline in stocks by the closing of the seasons in 2006 would mostly result from further reductions in stocks held in China and India more than offsetting a relatively large increase in stocks held by the United States where, in spite of a small forecast drop in wheat production, stocks could increase in view of lower anticipated exports for 2005/06. Inventories could rise also in the EU where, despite an anticipated decline in production, total supplies still seem to exceed the projected domestic use and exports. Overall, aggregate wheat stocks held by major exporters are expected to approach 50 million tonnes, representing nearly 31 percent of the world total and up slightly from this year.
International wheat prices remained well below the previous year’s levels for the seventh consecutive month, pressured by large exportable supplies. In May, the U.S. wheat No. 2 (HRW, f.o.b.) averaged US$151 per tonne, down US$6 per tonne since March and US$16 per tonne less than in the corresponding month last year. Argentine prices also remained below the previous year’s level although they moved up in recent weeks when export commitments started to approach the total availability. In the EU, large supplies of old crops and storage problems prompted larger exports through subsidies. By early June, the September wheat futures for soft red winter wheat at the Chicago Board of Trade (CBOT) were quoted at US$121 per tonne, down US$16 per tonne from the previous year. With harvests soon getting underway in most wheat producing countries in the northern hemisphere, seasonal factors and weather conditions will begin to influence prices in the coming weeks. However, in view of a generally weaker world demand outlook and a remaining large carryover stocks, wheat prices are likely to remain under downward pressure also during the new marketing season. The recent decline of the Euro against the US Dollar is expected to support wheat sales from the EU which may also add to downward pressure on prices.
Table 4. Coarse grains production (million tonnes)
Note: Totals computed from unrounded data.
With planting of the 2005 coarse grains complete in the main producing countries, the forecast for global output has been revised up by 23.8 millions since April to some 969 million tonnes. The increase is mostly on account of very favourable planting conditions in the United States, the world’s largest producer, which largely offset downward revisions in other countries, mainly Brazil. At the current forecast level, world production is 5 percent below last year’s record but above the average level. Output is anticipated to decline in North America and Europe, because of lower yields expected after the very high levels in 2004, and in Oceania due to dry weather in Australia. In other regions, production is unlikely to change much from last year, except in Central America where a significant increase in expected.
In Far East Asia, planting of 2005 coarse grain crop (mainly maize), is complete in the major producing regions in China and the area is estimated slightly higher than the previous year’s reflecting continuing government support policies. However, despite the larger area, output may decline slightly as yields are expected to be lower than last year’s exceptionally good levels when growing conditions were almost perfect. In India, assuming normal rainfall during the Kharif season, the output of coarse grains is expected to increase by 1 million tonnes, reflecting larger plantings and yields in response to strong feed demand, higher maize prices and increased use of hybrid seeds. In the Philippines, despite a cut in the 2005 first quarter production due to drought and typhoons in the latter part of 2004, the country still expects a good aggregate maize output of about 5.5 million tonnes, assuming normal weather for the remainder of the crops during the year.
Spring coarse grains (mainly barley and maize) in the Asian CIS countries have been planted on about 2.5 million hectares, slightly up on last year. Aggregate output of coarse grains (winter and spring) is tentatively forecast at 4.6 million tonnes, up by about 7 percent on last year, and this would include 2.6 million tonnes of barley and 1.5 million tonnes of maize. Kazakhstan produces nearly 60 percent of the subregion’s aggregate coarse grains.
In North Africa, harvesting of the coarse grain crops, mainly barley and maize, is due to start from June. The aggregate output is forecast to decline sharply from last year’s level. In Egypt, the subregion’s largest producer, the maize crop is expected to be 6.6 million tonnes, similar to last year’s about-average level. Elsewhere, however, output is expected to be down significantly from 2004 due to dry weather, especially in worst affected Morocco.
In Western Africa, the rainy season started in May in the south of the Sahel countries, allowing land preparation and planting of coarse grains. Desert locusts remain a serious threat in the subregion, although FAO is not expecting a large scale invasion this year. In the coastal countries along the Gulf of Guinea, the first rains were received in March in southern parts and permitted planting of the first maize crop. In the north, recently planted coarse grains are emerging. Crop production should increase further in Sierra Leone and Liberia reflecting an improved security situation. The subregion 2005 aggregate coarse grain output is tentatively forecast slightly up from the good level of 2004.
In Central Africa, the rainy season started on time in the south of Cameroon, allowing land preparation and sowing of the first 2005 maize crop, due for harvest from July. However, swarms of desert locusts were reported in the extreme north, raising concerns over the outlook for the important food crops in this part of the country.
In Eastern Africa, planting of the 2005 main season coarse grains is underway in several countries while maturing and nearing harvest in others. Early prospects are mixed. In Ethiopia, the outlook for the secondary crops and plantings of the main season has improved with abundant rains in the past two months. In Kenya, recent good rains also improved prospects for crops of the main “long-rains” season. In Uganda and Tanzania, prospects for the 2005 main season coarse grains are generally favourable despite localized dry conditions. In Somalia, prospects for the main season crops in major crop producing areas are unfavourable due to below-normal rains, in spite of severe flooding in northern pastoral areas and the riverine areas in the South. In Sudan and Eritrea, the planting of 2005 main season crops is expected to start towards the end of June.
In Southern Africa, harvesting of 2005 coarse grain crops is completed. Latest production estimates point to an aggregate subregional output of some 18.6 million tonnes, almost 10 percent above the average of the past five years, reflecting a favourable rainfall pattern particularly in the northern areas of the subregion and in the maize triangle of South Africa. South Africa, the region’s largest producer is expecting a record harvest of maize at 11.8 million tonnes, which will result in large exportable surplus during 2005/06 marketing year (May/April). However, the outcome is mixed in other countries of the subregion. A series of FAO/WFP Crop and Food Supply Assessment Missions to countries of Southern Africa estimated that in Zambia and Malawi the 2005 production of maize, the main staple food, was sharply reduced by dry spells during the growing season. Outputs were estimated 28 percent and 26 percent respectively below last year’s levels. By contrast, another good maize crop, although lower than last year, was obtained in Mozambique, despite reduced harvest in southern parts. In Lesotho and Swaziland, maize production recovered from the drought-affected levels of the previous season but remain below average. In Zimbabwe, tentative estimates point to a reduction in maize production from last year’s already low level, due to dry weather and shortages of inputs.
In Central America and the Caribbean, planting of the 2005 main crop is underway. Early prospects are favourable reflecting satisfactory weather conditions so far in most countries of the subregion. The aggregate output is tentatively forecast to increase from the good level of 2004. This mainly reflects another good crop in Mexico, where larger plantings are anticipated, and a recovery from the drought-affected harvest of last year in other countries of the subregion.
In South America, harvesting of the 2005 coarse grains is well advanced. FAO’s forecast of the aggregate output has been revised downwards to some 73 million tonnes. At this level the output is somewhat below last year’s good level. In Brazil, the largest producer of the subregion, harvesting of the main season crop is underway in southern parts, while the secondary crop is about to be harvested in central and northern states. Latest official forecast of the 2005 aggregate maize crop have been cut down to 36.2 million tonnes, 13 percent lower than last year and below average. This mainly reflects lower yields than earlier anticipated of the second season crop following a delayed in planting due to dry weather. By contrast, in Argentina where harvesting is almost completed, estimates of the maize production have been increased to a record level of 19.5 million tonnes as a result of favourable rains, particularly for the late planted crops. Production forecast of sorghum have also been increased and the 2005 aggregate coarse grains output is expected to increase by 28 percent to some 24 million tonnes. In Chile, maize production is also anticipated to be record following higher plantings, in response to high prices at sowing, and yields. However, production of oats is forecast down due to a reduction in the area planted.
In North America, the bulk of the main coarse grain crop in the United States was sown by late May, somewhat ahead of the average date after a very favourable planting season. However, despite the good start to the season and early indications that the area for harvest will be virtually unchanged this year, production of coarse grains is forecast to decrease somewhat because of lower yields expected after very high levels in 2004. Nevertheless, yields could still be above the average of the past five years. As of May, the aggregate output of coarse grains was forecast at 296.6 million tonnes, about 3 percent down from the previous year. Of the total, maize is expected to account for 279 million tonnes. The planting season has also been favourable in Canada and coarse grains output is forecast virtually unchanged from last year at 26.5 million tonnes.
In Europe, the aggregate 2005 coarse grain crop is forecast to decline significantly by 12 percent from last year’s bumper output. In the European Union conditions for crops are mostly favourable, except in drought-struck Spain and Portugal. The area of coarse grains for the 2005 harvest is forecast to fall below the average of the past five year’s while yields are expected to return to about average after record highs in 2004. In Spain, reduced area and below-average yields could result in the smallest crop since the severe drought year of 2001. In the Balkan countries, prospects for Romania’s coarse grain crop are good reflecting mostly favourable weather: output is likely to be above the average of the past five years although it could be about 18 percent down from the bumper 2004 crop. In the European CIS countries, area planted with spring coarse grains is slightly down on last year following heavy rains and a cold snap during early spring in the Russian Federation, Belarus and parts of Ukraine. The main coarse grain crops are barley and maize, spring area planted with both crops has steadily increased over the past decade. Aggregate coarse grain production this year (both winter and spring) is forecast at about 52 million tonnes, over 3 million tonnes down on last year. This total includes some 27 million tonnes of barley and 9.6 million tonnes of maize.
In Australia, prospects for the main winter coarse grain crop in the east of the country are poor, reflecting persisting drought throughout the main planting period. Although there is still some hope of planting crops (mostly barley) up until the end of June, sharp area and yield reductions are now inevitable.
Preliminary indications suggest that global trade in 2005/06 (July/June) would remain at 101.5 million tonnes, virtually the same level than the revised estimate for 2004/05. This reflects higher maize purchases from international markets, whereas, for most other coarse grains, imports are likely to decline or remain unchanged. Nonetheless, the current forecasts are extremely preliminary in view of uncertainties about the final outcome of this year’s production, the eventual size of feed wheat supplies, and developments in livestock markets, especially those in Asia and North America.
At the current forecast levels, total imports by countries in Asia are put at around 58 million tonnes, also unchanged from the 2004/05 estimated level. Somewhat higher maize purchases by the Republic of Korea are likely to be offset by smaller barley and maize imports by Japan and the Syrian Arab Republic, while little year-on-year variations are expected in imports by other countries.
In Africa, total imports are forecast at about 15.6 million tonnes, close to the 2004/05 high. Imports by several northern African countries are seen to increase because of the expected decline in output. In Morocco, the Government recently suspended import duty and value added tax on barley purchases. However, imports are forecast to remain the same or even decline slightly in most sub-Saharan countries. The largest decrease over the 2004/05 level is expected in South Africa and Kenya due to an anticipated improvement in domestic supplies. In Zimbabwe, however, despite smaller domestic production, imports may be smaller because of foreign exchange difficulties.
In Europe, imports are likely to remain largely unchanged from 2004/05. The largest importer is expected to be the EU where imports of coarse grains are expected to remain at 3.2 million tonnes.
In Latin America and the Caribbean, Brazil is expected to emerge as a net maize importer for the first time since 2000/01 as a result of the anticipated decline in production resulting from dry weather in some major producing regions. However, predicting the eventual size of imports by Brazil in the new season is proving exceptionally difficult. In March, the Government reauthorized imports of genetically modified maize (GMO) from Argentina (banned since 2000) and this raised expectations for large imports but, more recently, the decision to import GMO maize was again overruled. By contrast, a small decline in imports by Mexico is likely, given this year’s anticipated bumper maize crop.
Regarding exports, prospects for major exporters are more favourable in 2005/06 as compared to 2004/05. Lower exportable supplies among smaller exporting countries could result in much larger sales by the five major exporters. Larger exports are forecast especially from Argentina, where a bumper maize crop is expected, and from the United States where, in spite of a likely decline in production, exportable supplies are large. The expected increase in maize exports by Argentina and the United States would largely make up for the anticipated reductions in sales by Brazil, China and Romania. Among other countries, a sharp rebound in maize exports is expected also in South Africa as a result of higher production, large stocks and strong import demand from the nearby countries.
In spite of the anticipated decline in world coarse grains production in 2005 and slack demand in regions fighting animal diseases, world coarse grains utilization in 2005/06 could still rise somewhat in 2005/06, to 977 million tonnes. At this level, world coarse grains utilization would remain above the 10-year trend for the third consecutive season. Total feed use is forecast at 624 million tonnes, up only 3 million tonnes from the estimated level for 2004/05. Reduced supplies of feed wheat in the new season are expected to boost demand for maize and other coarse grains but this expansion in feed usage is likely to be contained by cattle inventory reductions in the United States and animal disease problems in several countries. Industrial use of coarse grains is also forecast to rise in 2005/06, although the growth would be smaller than in the recent past.
Assuming current indications of a 5 percent reduction in the world coarse grains crops in 2005 materialize, stocks may decline from this year’s relatively large buildup. World coarse grains stocks at the end of countries' marketing seasons in 2006 are tentatively put at 189 million tonnes, which would represent a reduction of around 9 million tonnes compared to their upward revised opening levels of 198 million tonnes. Most of the decrease is expected in China and Brazil where maize inventories are forecast to decline by 2 million tonnes and 3.7 million tonnes respectively with production declining in both countries. Similarly, because of less favourable production prospects, barley inventories are forecast down in several countries in North Africa, especially in Morocco, while maize and sorghum carryovers are likely to decline in Ethiopia from last year’s high levels. However, aggregate coarse grains inventories in major exporters could rise to 93 million tonnes, up 3 million tonnes from 2005. The increase is expected mostly in the United States, where maize inventories are forecast to rise. By contrast, maize and barley stocks may decline sharply in the EU in view of a sharp anticipated fall in production from last year’s high level and strong demand for maize, in particular from drought-hit Spain. At the current forecast levels, major exporters are expected to increase their global share of coarse grains inventories to almost one-half of the world total, up slightly from this year and significantly above the past 15 years when the ratio rarely exceeded 35 percent.
Coarse grains export prices made small gains in recent weeks but remained generally weak. The U.S. No. 2 maize (f.o.b.) stood at around US$98 per tonne in early June, well below the corresponding period last year. Current large supplies of feed wheat combined with generally good crop prospects kept maize prices well below last year’s values. Maize and sorghum prices moved up since the second half of May mainly on weather concerns. A faster pace in import purchases in recent weeks, especially from Argentina and the United States, and stronger demand than earlier anticipated, particularly from Brazil, have also provided some support to prices. Also in South Africa, white and yellow maize prices increased in recent weeks on strong demand from nearby countries. In the first week of June, the Chicago September maize futures rose to US$90, up US$6 since early May, but sharply (US$36) below the level of the previous year. However, over the coming months several factors may provide further support to prices: world production is forecast to decline from last year’s record level, exports are likely to be down from China and Brazil, and feed wheat supplies are expected to be lower than in the current season.
Table 5. Rice production (million tonnes)
Note: Totals computed from unrounded data.
In the northern hemisphere, where the bulk of the world’s rice is produced, the 2005 season is just starting in most major producing countries, while in the southern hemisphere and along the equatorial belt the main crop has already been harvested in some countries or the season is well advanced in others. At this early stage, based on planting intentions for the crops still to be sown and the results of the crops already gathered, FAO forecasts global paddy production could reach a high level of 621 million tonnes in 2005. If realized, this would be 2.7 percent above the latest estimate of 2004’s output, which has been revised downward slightly since April with firmer results available from the last of the 2004 secondary crop season harvests in the northern hemisphere.
In Asia, the preliminary outlook for the 2005 season is generally favourable. Production in the region is forecast to rise by almost 15 million tonnes from 2004, to nearly 562 million tonnes. About 40 percent of this increase is expected to be accounted for by China (Mainland), where rainfall in April broke the drought and favoured the early rice crop, the area of which is reported to have increased significantly, while also ensuring improved moisture supply for the on-going planting of the intermediate/single crop. With the arrival of the monsoon rains in India, planting of the main crop is just starting. Assuming a normal monsoon, the aggregate 2005 output is forecast to increase from last year’s depressed level. Also in Bangladesh, aggregate production for the year is expected to recover from the 2004’s setback. Based on a preliminary government forecast, paddy output in Pakistan is set to rise this season by 5 percent to a new high. Production in Thailand is anticipated to recover in 2005, after reaching last year the lowest level since 1998. The Government has launched the second round of intervention purchases, covering rice from the 2004 secondary dry paddy season. This is helping to keep domestic prices high and could act as an incentive for the main-crop planting underway from June. In Viet Nam, rice production is expected to remain virtually unchanged from the record level in 2004. Production last year was boosted by wider use of certified seeds and this is expected to continue in the current year. By contrast, output of rice in Indonesia is forecast to fall slightly in 2005, as a result of flooding during the planting and early growing period of the main crop. Nevertheless, the country’s aggregate output in 2005 could still be the second highest on record, reflecting the increased use of high-yielding hybrid rice, already introduced in some parts as part of the Government’s drive towards rice self-sufficiency.
In Africa, the paddy production is forecast to reach 19.4 million tonnes in 2005, 1 million tonnes up from the previous year. With the arrival of the rains in April/May, the paddy season is just commencing in Egypt and in Western African countries, while harvesting is almost complete in Southern Africa. In Egypt, the sector is foreseen to keep responding positively to high prices, although any increase in output would have to come mostly from higher yields, given existing restrictions on area. In Nigeria, output is tentatively forecast to increase 14 percent from last year, as strong government support, especially through the distribution of subsidized fertilizers and seeds is expected to have a positive effect on production. In southern Africa, the season has already finished and a bumper crop was harvested in Madagascar. In Mozambique, by contrast, production of paddy declined by 2 percent, reflecting dry weather in the southern growing areas.
The rainy season just started in large parts of Central America and the Caribbean, so countries are now planting their main paddy crop. Aggregate production in the subregion is forecast to rise by 7 percent to 2.5 million tonnes, recovering from the 2004 drought-reduced output. However, among the most affected countries, Cuba is anticipated to see only a partial recovery in production as precipitation continued to be sparse in the major rice producing areas. By contrast, abundant rainfall was reported in April in the Dominican Republic, where a sharp improvement of yields is anticipated to lift production by 10 percent. Prospects are also positive for the irrigated rice crop in Mexico.
The 2005 season is already well advanced in South America and output is forecast at 23.9 million tonnes, which would be more than 4 percent above last year. In Brazil, where the harvest is almost complete, a 6 percent increase in plantings is estimated to have led to a record output, notwithstanding less water for irrigation was made available to the crop. Production in Peru is anticipated to recover from the reduced crop in the previous year. Also in Ecuador, although flooding problems were reported in May, output in 2005 is forecast to recover somewhat from the reduced crop last year. In Argentina, output is estimated at about the same level as last year. In Uruguay, the latest official forecast only indicates a marginal contraction in production compared with last year, despite earlier reports of reduced availability of irrigation water.
Elsewhere, in North America, output in the United States is forecast to fall back somewhat from last year’s record with yields returning closer to average after the exceptional levels in 2004. In Oceania, Australia’s rice crop, which is harvested in April-May, has been severely cut by the drought affecting the main producing area in the past few months.
Based on actual trade reported in the first months of the year but also on account of firmer 2004 production estimates, the forecast of trade in 2005 has been revised downward slightly since April and stands at 25.5 million tonnes. This would be 2.7 percent less than in 2004 and the third consecutive decline from the 28 million tonnes record volume traded in 2002.
The anticipated contraction in global rice trade this year mostly reflects expectation of a significant reduction in shipments from Thailand, the world’s largest exporter, reflecting reduced supplies from the 2004 drought-affected production. In addition, the Government has been procuring significant amounts of domestic rice in recent months, which has kept domestic prices high, reducing the competitiveness of Thai rice on international markets. In the light of the positive 2004 crop performance sales by Viet Nam are foreseen by FAO to remain of the order of 4.1 million tonnes in 2005, which would exceed the Government initial target of 3.8 million tonnes. Contrary to earlier expectations, shipments from China (Mainland), which remain under the sole authority of the Government, are also now expected to fall in 2005, to the lowest level since 1996, despite increased production in 2004.
By contrast, larger shipments are expected this year in most of the other significant rice exporting countries. Recently revised estimates for India put their sales in 2004 at 3.2 million tonnes considerably higher than earlier reported, and a further increase to 3.4 million tonnes is expected in 2005. Despite the cancellation of subsidized rice sales for export since mid-2003, Indian traders have successfully competed on the parboiled rice markets, assisted by the rise in international prices. Pakistan is also expected to increase its exports in 2005 following the bumper 2004 paddy season. In Myanmar, although sales through the Government agency remained limited, it is reported that private entrepreneurs are being permitted to export their own-grown rice. This development may boost shipments somewhat above the low level of 2004 when exports were restricted to prevent domestic prices from soaring. Exports from the United States are also forecast to increase more than anticipated earlier, with latest forecasts indicating a 15 percent rise to a near-record 3.6 million tonnes. The prospect of more export sales largely reflects low domestic prices as well as the opening of the Iraq market. Larger sales are also expected from Egypt where exports in the first quarter of 2005 were some 60 percent above the corresponding period last year, and from the main rice producers in South America following good crops in 2004.
Smaller rice shipments are expected in 2005 to several main importers in Asia, Africa and South America
At the aggregate level, imports of rice by Asian countries are expected to amount to some 11.6 million tonnes, virtually unchanged from last year. However, at the country level, several major importing countries have increased purchases while others have reduced theirs. Bangladesh is expected to take delivery of 1 million tonnes in 2005, 200 000 tonnes more than the previous year, in an attempt to keep domestic prices from rising. Latest information for the Philippines now puts their expected imports up by 500 000 tonnes to 1.6 million tonnes, the highest level since 1998. Following drought problems, which affected production in the first half of the year, the National Food Agency, the trading agency responsible for rice trade, has already contracted large purchases. Rice purchases by the Republic of Korea and Turkey are also expected to increase somewhat. Elsewhere in the region, imports are expected to be cut. This would be particularly the case of China (Mainland), which already recorded a 29 percent contraction in deliveries between January and May this year compared to the corresponding period in 2004. Imports by the Islamic Republic of Iran, the Democratic Republic of Korea, Saudi Arabia and Sri Lanka are also foreseen to decrease. Pending the lifting by 30 June of a prevailing ban on rice imports, shipments to Indonesia are forecast at 0.7 million tonnes, unchanged from last year but less than previously anticipated. Should the prohibition be extended, they could still be lower.
Aggregate imports by African countries are now expected at 7.9 million tonnes, 700 000 tonnes less than last year. The contraction reflects an anticipated cut in imports by Nigeria, consistent with the expansionary production policy promoted by the Government, which has targeted 2006 to achieve rice self-sufficiency. However, should the Government confirm plans to ban imports next year, imports might surge towards the end of the year, if traders attempt to pre-empt the move by hoarding rice. Deliveries to Benin, Kenya, Madagascar and South Africa are also foreseen to decrease this year.
Smaller imports are also expected into South America, largely reflecting the good crop in Brazil, the regions largest producer but also importer of rice. By contrast, in Central America and the Caribbean, continued drought problems in Cuba are expected to sustain increased rice flows there this year. Elsewhere, the United States is expected to purchase less, while the implementation of the new tariff structure by the EU might boost imports there to a record 900 000 tonnes.
Largely reflecting the latest upward revision to the estimate of global production in 2004, the forecast of global rice inventories by the close of the seasons ending in 2005 has been raised slightly to 97.1 million tonnes from 96.7 million tonnes. This would be almost 8 million tonnes down from their opening level and the lowest level of the past decade. About half of the expected reduction would be on account of a further drawdown in China, which, nevertheless, still holds more than half of the world rice reserves. However, rice stocks are also expected to be depleted in India and Indonesia, as well as in Thailand and Nigeria. By contrast, a few countries are expected to raise theirs, in particular Brazil, the Philippines and the United States.
Rice stocks at the close of the seasons ending in 2006 may be further reduced, as rice production is still gauged as insufficient to cover effective consumption at the global level. As a result, stocks may again end lower at 95 million tonnes, some 2 million tonnes below their opening level. However, with crops in some of the major paddy producers still at the planting stage, this figure is very much tentative.
With growing supplies from the secondary rice crops becoming available in several of the major producing countries, international rice prices have come under some downward pressure since March, with the FAO all Rice Indexfalling from 107 in February to 106 in March and April, then subsequently to 103 in May. However, the sharper fall in May was partly due to the re-introduction in the computation of the quotation for Indian IRRI rice, 25 percent broken, after having been unavailable for some time – otherwise, the index would have average 105 in May. The incorporation of the Indian rice quotation also depressed the low quality rice price sub-index, which had been showing particular strength since the beginning of the year.
Prices of rice from the United States generally remain under downward pressure, reflecting large supplies still available from the 2004 crop. Sizeable sales to Central America and the Caribbean and to Africa slightly lifted the US long grain milled rice No.2, 4 percent broken quotation to US$318 per tonne in May. This was US$12 and US$6 per tonne respectively below the January and February levels and US$103 per tonne lower than a year earlier. Thai export prices weakened slightly in May, with the Thai 100 B price falling by US$2 per tonne between April and May to US$298 per tonne, reflecting limited purchasing interest, as Thai prices exceeded those prevailing in competing markets, but also the weakening of the local currency against the US dollar. However, the downward movement was limited as a new phase of Government procurement of rice from the secondary season crop and indications that public stocks would not be released onto the market in the short-term continue to sustain prices.
International prices of lower quality rice have generally weakened in recent weeks, especially in May, reflecting reduced demand by African countries and renewed competition from Indian rice. Low quality Indica rice was mostly quoted lower in May at all origins, including Pakistan, Thailand and Viet Nam. On the Japonica rice market, short export availabilities reinforced Australian Calrose prices, while US medium rice prices remain weak. Prices of Aromatic varieties also weakened.
Despite the recent price weakness, market fundamentals still point to a relative tight supply and demand situation, especially in the light of reduced export supplies in Thailand, China and Australia. By contrast, large crops in key importing markets in South East Asia and South America will have a negative bearing on rice quotations in the coming months. In particular, an extension of the import ban by Indonesia and a weakening of demand by African countries are weighting negatively on the market. Against this backdrop, prices are expected to be particularly sensitive to developments regarding crops, in particular in connection with the monsoon in south Asia or drought conditions in the Pacific, as well as to changes in policies in major importing or exporting countries.
The FAO international dairy product price index (1990-92=100) has dropped slightly in the past few months, after reaching a 15 year peak in January. The index was 160 in April, two points lower than in January but 18 percent above the level 12 months earlier. Regarding the major milk products individually, export prices from Oceania for butter are up 26 percent from a year ago, milk powder prices are up 19 percent and cheese (Cheddar) is up 11 percent.
The European Union responded to the international price strength by cutting export refunds further in recent months. Despite the reduction, the subsidies remain high, at US$844 per tonne for whole milk powder, US$1 654 per tonne for butter and US$635 per tonne for Gouda cheese, at the end of April. With the next intervention price cut in July, export subsidies, which are close to the WTO limit, may be further reduced, although much will depend on exchange rate movements. EU intervention stocks are now at their lowest level since the autumn of 2002.
Although still subject to much uncertainty, international dairy prices may regain momentum in the short term, especially if the lower export supplies from Oceania and the EU are not fully compensated by increasing supplies from the United States and South American exporters.
Table 6. Indicative dairy export prices (US$/tonne, f.o.b.)
Source: Mid-point of ranges reported by USDA.
Global milk output is forecast to rise by about 2.8 percent in 2005, with the bulk of the growth expected among developing countries, particularly in Asia and South America, whose global share of production is increasing. In the developed countries, milk output is anticipated to remain stable in 2005.
In Oceania, New Zealand’s production for the 2004/05 dairy year (ending in May) is anticipated to be 3-4 percent lower than last year due to unfavourable weather conditions in the first half of the year. Also in the case of Australia, output is expected to be 1 percent below last year’s level. Milk production in the United States is increasing after two years of stable output, as dairy farmers respond to the second consecutive year of high domestic milk prices. In the first quarter of 2005, milk production was about 2 percent higher compared to the same period last year.
In a number of developed countries, milk production is subject to policies that restrict output according to demand. In the EU, milk output is expected to remain similar to the 2004 level. In Canada, production is estimated to fall by 1.4 percent this year, in response to decreased demand while in Japan output may fall marginally.
In the transition countries, milk production in 2005 is anticipated to remain stable. Production in the Russian Federation is forecast to recover marginally after a decline in 2004. Production in Ukraine may remain stable in 2005 with higher yields offsetting a further reduction in cow herds over the past months.
Among the developing countries, India’s output continues to grow by about 5 percent annually. It accounts for half of the total milk output of Asia, and is confirming its position as the world’s largest single milk producing country. However, the country with the highest production growth in recent years is China, which has almost doubled its milk output since 2001. In Pakistan, the world’s fifth largest milk producing country, output rose 4 percent in 2004, and may increase at its recent trend rate of 3 percent in 2005.
Table 7. Milk production of major producing countries (million tonnes)
1 Production figures for 2003 adjusted to EU-25 area.
2 Dairy years ending March of the year shown.
3 Dairy years ending May of the year shown.
4 Dairy years ending June of the year shown.
For Latin America and the Caribbean, overall milk output is expected to grow by 4-5 percent in 2005, as low-cost milk producers respond to the high international prices of the past two years. In Argentina, output is expected to expand substantially, although recent heavy rainfalls may lower milk yields and reduce earlier forecasts of a 10 percent increase in production for 2005. Brazil’s dairy production may expand another 3 percent on the record output of last year. Elsewhere in the region, early forecasts for 2005 are positive as well. Chile has had a very good start in the first 2 months of 2005 with output almost 6 percent ahead compared to the same period of last year. Peru’s milk production is growing at an annual rate of 3-4 percent while in Mexico it is forecast to increase only by about 1 percent compared to 2004.
In Africa, Egypt’s milk production is forecast to decline again in 2005 after decreasing already over the past two years because of restrictions on imports of cattle. Kenya’s milk production in 2005 should increase in response to improved prices expected for domestic producers, since the government imposed a 7 percent duty on all imported milk. In South Africa, production is also expected to grow in the current 2004/05 year, by 3 percent, after an increase of over 6 percent already in the 2003/04 marketing year.
In Oceania, exports of milk products from the world’s leading exporter, New Zealand, are expected to decline in the current marketing season ending in May 2005, given its recent milk production shortfall. Australia’s exports of dairy products are expected to recover marginally, after declining last year. Both countries are changing their export pattern, moving away from skimmed milk powder and butter, towards whole milk powder and cheese.
In the EU, smaller shipments of most product categories are expected in 2005 after an increase in 2004. Shipments of butter and skimmed milk powder are expected to decline by about 30 percent, while, by contrast, exports of cheese should continue to grow at a robust pace, reflecting lively foreign demand for these premium products.
In response to high international prices, and a weak US dollar, dairy product exports from the United States are set to increase further after reaching record levels in 2004. The highest growth in exports is expected for its key export product, skimmed milk powder, which more than doubled in 2004. For some South American countries, exports of dairy products are also forecast to maintain their momentum in 2005, after record growth last year. Argentina, for example, increased its overall dairy exports by almost 80 percent in 2004; the biggest increases were for whole milk powder (65 percent) and cheese (22 percent). Also Chile and Colombia are increasing exports in response to record milk output. The level of Brazil’s export in 2005 is uncertain. The country, once a large importer, was a net exporter of milk products in 2004 for the first time.
The international demand for dairy products continues to grow, particularly in Asia, North Africa, the Near East, Central America and the Russian Federation in Europe. Income growth is a key factor, and the recent surge in demand in some regions is associated with high oil export revenues. This has been one of the main reasons for the persistent increases in prices over the past two years.
Whole and skimmed milk powders now account for about half of total dairy trade, and are almost exclusively imported by the developing and transition countries. The highest growth in milk powder imports in recent years has been registered in South East Asia. In China, despite growth in domestic milk production, imports of milk powders have kept rising each year to meet domestic consumption, which has been rising by some 14 percent annually in the past few years. The Philippines, one of the world’s major milk powder importers, continues to increase imports by some 10 percent each year.
In Central America, Mexico has long imported large volumes of skimmed milk powder through its parastatal company LICONSA, to be distributed largely to its low income population. These imports are projected to increase again in 2005. Other significant importers of milk powder are found in North Africa (Algeria, Morocco) where income growth over the past few years has contributed to a higher demand.
The Russian Federation remains a key market for imports of butter and cheese. These increased by 5 and 8 percent respectively in 2004, driven largely by the drop in national milk output last year. For 2005, imports of both products are forecast to rise further as strong increases in demand, stemming from vigorous income growth, will outpace the expected production gains. However, the Russian Federation is now considering restricting imports of cheese to protect domestic producers from subsidized products, which mainly come from the EU. Other key importers of butter are countries in the Near East and North Africa. Japan, the world’s leading cheese importer, increased its imports by about 10 percent in 2004. In 2005, the country may record a further 2 percent growth of imports, driven by an expanding demand from the food service industry.
The likely record global oilseed production during the current 2004/05 season4/ has led to downward pressure on prices for oilseeds, meals and cakes, particularly with respect to soybean, the oilcrop with the highest meal content. The marked fall in prices started in April-May 2004 due to the prospects of ample (soybean) harvests in the northern hemisphere, and continued until the beginning of the current year. Since then a partial recovery in seed and meal prices has been observed, which, however, is not expected to last because it only represents a temporary reaction of markets to the sudden deterioration of production prospects in South America. Instead, overall market fundamentals - i.e. an excess of supplies over demand as firm oil prices continue to drive the crushing of oilseeds - suggest that prices should not strengthen during the remainder of the season. Also recent reports about a possible slow-down in global oilseed production in the forthcoming 2005/06 season should not alter this picture markedly, because inventories accumulated this season should be sufficient to compensate for possible production falls. However, over the coming months, price volatility may increase as markets react to weather scares affecting the development of the new crops in northern hemisphere countries.
Prices for edible/soap oils and fats have been relatively firm over the last one and a half years. After reaching a peak in early 2004, they have stabilized at a level above that prevailing prior to the recent surge. During the second half of the current season the relative firmness of oil and fats prices is expected to persist as the observed above-average rise in the demand for vegetable oils - for food as well as non-food uses - is expected to absorb the bulk of this season’s increase in oil output. Any remaining excess supplies will be small and should only allow a partial recovery in global oil inventories. The resulting, persistently below-average stocks-to-utilization ratio translates into an upward pressure on prices.
Crop output in the southern hemisphere, where harvesting is about to be completed, is estimated to be considerably lower than originally expected. In South America, where close to one-third of the world’s oilseeds are produced, production has fallen short of expectations due to unfavourable weather conditions. Notwithstanding, global oilseed production for the entire 2004/05 season is estimated to increase by 12 percent. The bulk of this increase is expected to come from soybeans. Out of the world’s four leading soybean producers, record crops are reported from the United States, Argentina and China, primarily reflecting good or record yield levels. Only in Brazil, where the expansion in cultivated area has continued, yields have fallen well below the average of recent years, causing production to drop for the second consecutive season. Marked increases in output are also reported for rape and cottonseed, reflecting both good yields and expansion in area in all major producing countries. The only crop experiencing a marked decline is sunflowerseed, mainly a result of Ukraine’s reduced harvest following poor weather conditions.
Table 8. World production of major oilseeds (million tonnes)
Note: The split years bring together northern hemisphere annual crops harvested in the latter part of the first year shown, with southern hemisphere annual crops harvested in the early part of the second year shown. For tree crop, which are produced throughout the year, calendar year production for the second year shown is used.
Based on latest estimates, after last season’s drop, global output of oilmeals/cakes is forecast to increase sharply in 2004/05, i.e. 13 percent compared to an average of 3 percent during the past four seasons. As in most past years, this mainly reflects the sharp rise in world soybean production. The latter, together with the estimated rise in rape and cottonseed meal output, will easily offset the expected fall in sunflower meal production. A new record is expected for global oilmeal supplies (i.e. 2003/04 ending stocks plus 2004/05 production), which are estimated to increase about 10 percent this season, somewhat less than production because of last season’s exceptionally low level of carry-out stocks.
Regarding oil/fats, global output is anticipated to grow by 6 percent, reaching a new record; the rate of expansion exceeds that of the three preceding seasons but remains well below the growth expected in oilseed production because the latter is mainly due to low oil-yielding soybeans. The main drivers behind the estimated increase in production are soybean and rapeseed oil. By contrast, global palm oil output, although increasing further, is anticipated to grow at a below average rate mainly reflecting yield reductions and reduced availability of labour force on plantations in Malaysia. In volume terms, soybean oil is expected to resume the lead in global oil production, a position it had lost to palm oil for the first time last season. With regard to global supplies, the increase over last season is estimated not to exceed 5 percent as a result of this season’s low level of carry-in stocks.
In 2004/05, growth in global consumption of oils/fats is forecast to exceed 4 percent, compared to less than 3 percent in the last two seasons. Utilization of palm oil is anticipated to increase the most, closely followed by soybean and rapeseed oil, and the estimate for global palm oil utilization is now very close to that for soybean oil, the traditional leader among the oils. Several factors contribute to the expansion in global consumption. While the slight easing of prices relative to last year has stimulated demand, the main motor continues to be sustained income increase in China, India and other countries in South and Southeast Asia. In addition, this season is characterized by an exceptional rise in the share of non-food uses in total demand. With vegetable oils being attractively priced compared to fossil oils, the production of oilcrop-based biodiesel is expanding worldwide. Several countries, including the EU and the United States, contributed to this development by implementing policies that stimulate production and consumption of biofuel. According to private sector estimates, in the EU, the biodiesel industry will absorb more than one-third of the Community’s 2004/05 rapeseed oil output or up to 15 percent of total vegetable oil production.
Global consumption of oilmeals/cakes is anticipated to rise 6 percent in 2004/05, exceeding the growth pace of the last two seasons. The increase in demand is mainly driven by higher growth rates in global livestock production and by price developments. International meal prices are expected to be depressed in 2004/05 because, in order to satisfy the rapidly growing demand for oils/fats and in view of the limited supplies of sunflower, groundnut and palm oil, the industry is crushing soybeans and other high meal-yielding oilcrops, which is leading to a surplus of meal supplies over demand. Country-wise, consumption growth is expected to concentrate in the EU, the United States and China, the world’s leading consumers of meals. In China, strong and sustained economic growth is driving demand for livestock and aquaculture products, and hence also for feeds such as oilmeals. The EU is raising in particular its consumption of rapeseed meal, supplies of which are abundant as the surge in demand for rapeseed oil has stimulated crushing. Global consumption levels in 2004/05 remain, however, subject to uncertainty as the animal disease status of many countries and related food safety concerns continue to influence the market, and new disease outbreaks could curb demand for feedstuffs.
The role of China in global consumption of both oils and meals is particularly noteworthy: in 2004/05, the country’s share in global demand of both oils as well as meals is estimated to climb further to 19 percent (from about 10 percent ten years ago).
The level of 2004/05 global opening stocks of both oils/fats and oilmeals/cakes (including the oil and meal contained in seeds stored) was well below the average of the last five seasons. During the course of this season, inventories are expected to recover. Especially oilmeal stocks are anticipated to experience a sharp increase (notably in the United States) due to the substantial rise in global soybean production, combined with a possible excess of supplies over demand in particular in Europe and some Southeast Asian countries. A replenishment of global stocks is also foreseen for oils and fats, though at a more moderate rate. The comparison with anticipated consumption levels suggests that the stock-to-utilization ratio is bound to rise substantially for oilmeals. Although an improvement is foreseen also for oils/fats, that ratio is expected to recover less strongly, thus remaining below historic levels. As a result, international prices for oils/fats should remain relatively firm during 2004/05, whereas quotations for meals are expected to remain under downward pressure.
Table 9. Oilseeds and products: Global supplies, trade and utilization (million tonnes)
1 Includes oils and fats of vegetable and animal origin.
2 Production plus opening stocks.
3 Residual of the balance.
4 Trade data refer to exports based on a common October/September marketing season.
5 All meal figures are expressed in protein equivalent. Meals include all meals and cakes derived from oilcrops as well as fish meal.
Note: Refer to footnote 1 in the text for further explanations regarding definitions and coverage.
After stagnating last season, international trade in oils/fats (including the oil contained in seeds traded) is anticipated to resume its growth in 2004/05. The anticipated 5 percent expansion is expected to be largely in shipments of soybean and palm oil, while those of sunflower seed oil are expected to fall. The share of palm oil in total oil shipments is estimated to climb further, reaching 38 percent. The world’s six leading exporters of oils and fats, Malaysia, Indonesia, the United States, Brazil, Argentina and Canada are anticipated to satisfy almost 80 percent of global import requirements, which further raises the level of concentration in the export market. In Malaysia and Indonesia, export volumes are expected to climb to record levels, whereas shipments by the United States, although recovering from last season, shall remain below past records. Asia is expected to remain the main import market, followed, at considerable distance, by the EU. With imports estimated at a record 11.6 million tonnes, China’s share in global imports is expected to rise further, approaching 20 percent. With the addition of new crushing capacity in the country, the proportion of oil imported in the form of to-be-crushed seeds is increasing further. Foreign purchases are also estimated to rise in the EU, where import demand for cooking oil has grown following the unprecedented intake of domestic rapeseed oil by the biodiesel industry. In India, where imports dropped considerably during 2003/04, foreign purchases are anticipated to rise again as domestic oil production may fail to increase this season.
After last season’s zero growth, expansion in global trade of oilmeals/cakes (including the meal contained in oilseeds traded) is expected to resume in 2004/05. The estimated 7 percent increase takes into account the depressed level of international prices for meals which should stimulate import demand. Once again, Asian countries are expected to account for most of the expansion in global imports, chief amongst them China, where imports are estimated to reach a record 19 million tonnes. By contrast, the EU’s import demand for meals remains unchanged due to increased supplies of rapeseed meal from domestic origin and the availability of competitively priced feed grains. Regarding exports, the United States and Argentina are expected to satisfy most of the anticipated increase in global demand.
FAO’s preliminary forecast for 2005 global pulse production stands at 60.7 million tonnes, somewhat lower than last year, but still 4 percent above the average of the last three years. Compared with 2004, output in the developing countries is forecast to contract by 2 percent, more than offsetting a marginal expansion foreseen in the developed countries.
Table 10. World production of pulses (million tonnes)
In Asia, total pulse production in 2005 is forecast to drop by 3 percent from last year to 28.9 million tonnes, mostly reflecting an expected decline in India, the world’s leading producer. Total pulse output in this country is anticipated to decrease by 8 percent (1.3 million tonnes) to just below 14 million tonnes, reflecting smaller plantings and unfavourable weather during the recently-completed “Rabi” season. All pulse types are likely to register some output reduction, with the exception of chickpeas, production of which is expected to increase to almost 6 million tonnes. In China and Myanmar, production is anticipated to rise slightly, to roughly 6 million tonnes and 3 million tonnes, respectively, due to increased areas. The expansion of pulse production in both countries continues to be driven by the strong export market. By contrast, Thailand’s pulse production, consisting mostly of dry beans, could fall, in view of a smaller area and also lower yield prospects due to drought. Elsewhere, Pakistan’s pulse output is expected to increase, especially for chickpeas, while in Turkey and Syria, good crop prospects point to an increase in both chickpea and lentil outputs.
In Africa, aggregate pulse production is forecast to contract slightly in 2005 to 9.5 million tonnes. In Ethiopia, output is anticipated to be about the same as in 2004, based on favourable rainfall so far this year. In Mozambique, the recently-harvested bean crop is provisionally estimated 4 percent higher than 2004’s, reflecting the generally satisfactory growth conditions in the north and centre regions. By contrast, in Burundi and Rwanda, two countries with high per caput pulse consumption, production of dry beans is likely to be reduced by adverse weather conditions in both the first season, harvested early in the year and the main season still in the ground. In North Africa, current pulse crop prospects are uncertain following a recent dry spell, particularly in Morocco.
In the Latin America and Caribbean region, total pulse production in 2005 is forecast to fall to 6.2 million tonnes, 5 percent below last year’s level. Output is expected to rise in both Argentina and Mexico, as a result of increased areas planted, but not enough to offset decreases in some other countries. In particular, Brazil’s production of dry beans is forecast to decline by 10 percent, due to a reduction in plantings. In countries of Central America, where beans are an important food staple in local diets, planting of the 2005 first crop season is underway under favourable conditions. The 2004 output was reduced in several countries of the subregion reflecting lower plantings and yields. In Nicaragua, the 2004 bean production (first, second and third seasons) was estimated at 175 000 tonnes, a drop of 22 percent or 50 000 tonnes from the previous year’s record crop. Production was also reduced in Honduras.
Among the developed countries, early indications for Australia pointed to a significant expansion in pulse production in 2005, to about 1.8 million tonnes, reflecting favourable price prospects compared to competing crops. However, planting in eastern producing areas has been hampered by lack of rainfall, which will have an impact on the choice of crops grown and on yields also. Thus, as of early June, the final outcome is still very uncertain and will absolutely depend on rain. In North America, while Canada’s total pulse output could drop by 10 percent to 4.1 million tonnes, production in the United States is anticipated to increase by 30 percent to over 2 million tonnes. Relatively high dry bean prices are forecast to boost area by about 25 percent, while in the case of dry peas and lentils, the support provided by the marketing loan programme is expected to sustain the cultivation of these crops beyond the traditional growing regions. In Europe, pulse production in the EU is forecast at 5 million tonnes, down slightly from last year, as an anticipated fall in dry pea output is expected to more than offset an increase in broad beans. In Ukraine, dry pea output is forecast unchanged from last year, as an expansion in area in response to strong export prices could be offset by lower yields. In the Russian Federation, production could decline as a result of land diversion to grains following high prices in 2004. In South Africa, the estimate for the 2005 bean output is down by nearly 15 percent, as lower prices in the 2004 marketing season caused seeded area to contract. In Japan, the 2005 bean output is forecast at some 7 percent lower than last year.
World trade in pulses is forecast to approach 10 million tonnes in 2005, up some 5 percent from the previous year because of the anticipated decline in production in several importing countries and prospects of larger crops in a number of exporting countries.
India is forecast to increase its pulse purchases to about 2 million tonnes in 2005, to compensate for the domestic production shortfall. China’s imports of dry peas are also expected to rise to meet the growing local demand. In Thailand, dry bean inflows are surging in anticipation of a drop in domestic output. Pulse imports by countries in the Near East and North Africa might grow in 2005, especially if the dry weather persists in North African countries, sustained by a dynamic demand for chickpeas, lentils and broad beans for human consumption. In South Africa, the fall in domestic dry bean production should result in increased purchases this year, mostly of Chinese origin beans. Within the Latin America and Caribbean region, dry bean imports are likely to rise in Brazil, to cover for the decreased local production, but they are forecast to decline in Mexico, given positive crop prospects.
Regarding exporters, in Australia, the strong rebound in production should lead to increased pulse sales; in particular, lentil and broad bean exports are forecast to expand, mostly to the Middle East and South Asia. In the EU, dry pea exports are likely to decline, whereas those of dry broad beans are seen increasing on account of larger production. In the United States, exports are anticipated to increase for all pulse types. In Canada, dry bean and lentil exports are forecast to grow whereas sales of dry peas could drop and those of chickpeas likely to remain stable, in line with domestic supplies.
Myanmar’s dry bean sales could expand considering the positive production outlook and the strong expected demand by India, its main export market. China’s dry bean and broad bean exports are also anticipated to register some growth. Other countries where gains in pulse production are anticipated to boost shipments this year include Pakistan (chickpeas), Turkey and Syria (chickpeas and lentils) and Argentina (dry beans).
In recent months, pulse prices moved in different directions depending on type and origin. In the United States, dry bean prices have trended upward since last July, while prices of dry peas have remained stagnant and those of lentils have continued to slide since September. In Canada, prices of the Kabuli type chickpeas have strengthened, but those of the desi type have weakened.
Based on current crop conditions and assuming normal weather throughout the rest of the growing seasons, dry bean prices are expected to stay strong at least for a few months. Indeed, export availabilities in some major exporting countries, in particular the United States and Canada, appear limited, which, in the face of poor crop prospects in several major importing countries, like Brazil and India, will tend to underpin world quotations. However, this situation may be reversed toward the end of the year with the arrival of new crops in North America. Chickpea prices are likely to come under some downward pressure due to increased production in Australia, India, Mexico, Pakistan, Turkey and Syria. Similarly, larger crop forecasts in the United States and Australia, along with ample carryover stocks in Canada, should also keep the pressure on lentils prices. By contrast, prices of dry peas could recover in view of the anticipated fall in global output, especially if import demand proves to be strong during the remainder of the year.
FAO forecasts world sugar production in 2004/05 (October/September) at 144.8 million tonnes (raw sugar equivalent), some 2 percent up from the previous year. Two-thirds of the growth will be accounted for by developing countries, where aggregated production is forecast at 101.6 million tonnes. This is mainly due to an increase of 3.8 million tonnes in Latin America and the Caribbean, mostly in Brazil, which would more than offset a decline of 6 percent in the Far East, reflecting a substantial decrease in production in Thailand. Aggregate production of the developed countries is now forecast at 43.2 million tonnes, about 3 percent up from 2003/04 due to increased production in Europe and Australia.
Among the Latin American and Caribbean countries, a record production of 30.5 million tonnes is forecast for Brazil, more than 12 percent higher than 2003/04. Although the crushing season was delayed by rains, prevailing high prices for both alcohol and sugar, combined with larger areas and improved crop management techniques, is expected to result in a cane harvest of more than 380 million tonnes, when provisional figures are confirmed. Higher output is also expected in Mexico, following favourable weather conditions, and despite disruption to the sector because of delays in the privatization of sugar mills and the implementation of a new legal framework to regulate the relationships between cane producers and the milling industry. By contrast, a continued decline in sugarcane area, drought conditions and reduced milling capacity have led to a further reduction in Cuba’s output. Production there is expected to reach 1.4 million tonnes, a contraction of almost 40 percent compared to 2003/04 and the lowest output since the early 1900s.
Sugar production in Africa is forecast to expand by 4.6 percent in 2004/05 to reach 5.3 million tonnes. Tanzania is rapidly approaching an annual production level of about 300 000 tonnes, as a result of capital investments in the rehabilitation of sugar factories, while output in Swaziland, Mauritius and Kenya are forecast to remain relatively unchanged.
Table 11. World production and consumption of sugar (million tonnes, raw value)
Production in the Far East is now forecast at 39.1 million tonnes, substantially below earlier expectations and 6 percent below the 2003/04 level. The latest downward revision mostly reflects the severe impact of drought in Thailand, which could reduce the country’s output by up to 20 percent this year to 5.6 million tonnes. The 2004/05 production in India is forecast to remain at 13 million tonnes, despite higher sugar prices. However, early indications for the 2005/06 season indicate a substantial increase in plantings is planned in response to improved prices, which could result in output growing by more than 4 million tonnes in the current season. In China, the effect of drought in the Guangxi region should be offset by improved milling recovery rates, resulting in an outturn of 11 million tonnes.
The annual growth rate of sugar production in the developed countries is forecast at about 2.8 percent, resulting in an overall expansion of 1.2 million tonnes. A closer look at the regional figures highlights the substantial contribution of the CIS countries in Europe, where production increased by almost 800 000 tonnes, reaching a total output of 4.9 million tonnes. Output in the largest producing countries, the Russian Federation and Ukraine, expanded by more than 300 000 tonnes each. Higher yields and improved processing efficiency, as well as the implementation of safeguard measures to tighten control on imports were contributing factors. Favourable weather and higher sugar content underpinned the expansion in the EU where output increased to 21.2 million tonnes, despite a 3 percent reduction in area.
Global sugar consumption in 2005 is forecast to reach 145.1 million tonnes, 1.8 percent up from 2004, mainly due to expected growth in consumption in major developing countries in the Far East and Latin America. Globally, utilization in developing countries is now estimated to reach 97.4 million tonnes, driven by GDP and population growth. Among the developed countries, where previously demand has been relatively stable, the growth, of about 500 000 tonnes, is mainly attributed to the transition countries.
In India, the largest consuming country in the world, consumption is expected to remain substantially unchanged at 19.5 million tonnes. Two consecutive years of reduced production resulted in higher domestic prices and depressed demand, which eventually led to increased diversion of sugarcane for the production of gur and khandsari. Sugar consumption in China is forecast to increase by 4 percent to reach 12.4 million tonnes, following increased use in processed foods and soft dinks, combined with declining production of artificial sweeteners. Growing availability in Latin America and the Caribbean should result in consumption reaching 26.5 million tonnes, mostly occurring in Brazil and Mexico where utilization is estimated at 10.9 million tonnes and 5.3 million tonnes, respectively.
The strengthening in world sugar prices in 2004 continued until February 2005, when the International Sugar Agreement (ISA) daily price averaged US cents 9.10 per lb., an increase of more than 50 percent over the monthly average of US cents 5.84 per lb. in February 2004. Prices have declined since March 2005, to an average of US cents 8.59 per lb. at the end of April. However, given the substantial shortfall in production, prices are expected to continue to fluctuate around current levels for the next few months, until firmer crop forecasts for 2005/06 are known.
1. Including wheat flour in grain equivalent.
2. Almost the entire volume of oilcrops harvested world-wide is crushed in order to obtain oils and fats for human nutrition or industrial purposes and cakes and meals used as feed ingredients. Therefore, rather than referring to oilseeds, the analysis of the market situation is mainly undertaken in terms of oils/fats and cakes/meals. Hence, production data for oils (cakes) derived from oilseeds refer to the oil (cake) equivalent of the current production of the relevant oilseeds, while the data on trade in and stocks of oils (cakes) refer to the sum of trade in and stocks of oils and cakes plus the oil (cake) equivalent of oilseed trade and stocks.
3. For full detail on price indices and prices see annex table A9.
4. The market season referred to is October to September.
5. This section discusses expected developments in the production of oils and meals from all origins, which – in addition to products derived from the oil crops discussed in the previous section – include palm oil, marine oils and meals as well as animal fats.
6. Pulses include dry beans, dry peas, chickpeas, dry broad beans, lentils, pigeon peas, cowpeas, lupins, vetches and other minor pulses.