No.1††June†2006††
 Food Outlook
  Global Market Analysis

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MARKET SUMMARIES

WHEAT

COARSE GRAINS

RICE

CASSAVA

OILSEEDS, OILS AND OILMEALS

SUGAR

MEAT AND MEAT PRODUCTS

MILK AND MILK PRODUCTS

SHORT-TERM FORECASTS FOR COMMODITY MARKETS: LINKING MARKET DEVELOPMENTS

THE RISE IN CRUDE OIL PRICES STIMULATES ETHANOL-RELATED DEMAND FOR AGRICULTURAL COMMODITIES

MEDIUM-TERM PERSPECTIVE: AFRICA TO IMPORT MORE FOOD

FERTILIZERS

OCEAN FREIGHT RATES

Statistical appendix

Market indicators and food import bills

Announcement

CASSAVA

PRICES

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International quotations retreat from 2005 historic highs

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The strength in international prices of cassava products throughout much of 2005 did not continue in the first four months of 2006. Prices of cassava flour and starch (f.o.b. Bangkok) dropped by approximately 9†percent compared with the corresponding period in 2005, while prices of cassava chips (destined for China) fell by 12 percent. However, 2005 was an exceptional year for cassava prices, as quotations of both flour and chips reached historic highs. Accordingly, 2006 price developments should be viewed against this perspective. Quotations for pellets destined for Europe (f.o.b. Rotterdam) have been publicly unavailable since July 2005, signalling the lack of interest in the EU market for cassava feedstuffs.

The outlook for cassava prices in the remainder of 2006 will largely hinge on countries in Asia, especially China and Japan, maintaining large international purchases.

food outlook

PRODUCTION

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Favourable production outlook for 2006

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Prospects for global cassava production in 2006, while still subject to a large degree of uncertainty, are generally favourable and output could approach last yearís record of 208 million tonnes. In Africa, the major producing region, where the crop continues to play a critical role for food security, primarily because of its resistance to drought, preliminary crop estimates from some of the larger producing countries point to generally satisfactory production, close to the 2005 record level of 115 million tonnes. Government support for the commercialization of the crop, particularly in Ghana and Nigeria, as well as national and international agency initiatives conducive to enhance food security via the diffusion of high yielding and disease-resistant planting material, are by and large behind the regionís encouraging outlook.

Cassava production is expected to rebound in Asia, in anticipation of a return to normal climatic conditions, especially following the annual planting survey in Thailand which pointed to a 12 percent rise in production in 2006. This recovery is also likely to be underpinned by attractive domestic prices in Thailand and rising demand for ethanol and starch in the region. The latter factor is also expected to boost output in the current year in Indonesia and Viet Nam, the regionís other major producers.

The 2006 production outlook for Latin America and the Caribbean also bodes well, reflecting good prospects in Brazil. The continuation of strong government support for the countryís cassava sector could see Brazilís output surpass last yearís bumper crop of 27 million tonnes. As for Colombia and Paraguay, the regionís other large cassava producing countries, little is known about the current situation, but both countries have experienced firm growth in cassava production in recent years.

TRADE

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World cassava trade forecast to expand in 2006

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Global trade in cassava products in 2006 is likely to exceed the 2005 level of 6.2 million tonnes (pellet equivalent). The forecast is based on an expected recovery in exportable supplies in Thailand, the worldís leading exporter, and is in line with a stronger pace of shipments by the country to date. In the first four months of the year, Thai exports of pellets and chips increased by more than 25 percent over the same period last year, while shipments of flour were up by over 40 percent over the corresponding period in 2005. Overall, the country is anticipated to ship 6.9 million tonnes of cassava chips, pellets and starch in 2006, up 11 percent from 2005.

Countries in Asia are once again anticipated to be the major destination of international trade in cassava. Recently, China has emerged as the leading cassava importer. The implementation of a free-trade area between China and Thailand, with the abolition of a 6 percent tariff on Thai cassava products has provided a boost to cassava trade between the two countries. In 2005 China accounted for 53 percent of the global market and is expected to remain the major destination of trade in cassava starch and cassava feed ingredients in 2006. Despite ample domestic supplies of grain feedstuffs, China is reported to be prepared to procure large quantities of cassava chips for domestic use in order to sustain its maize exports.

By contrast, import demand for cassava feedstuffs in other Asian markets remains subdued, reflecting several government initiatives, especially in the Republic of Korea and Japan, to curb cereal inventories by substituting rice for imported feedstuffs such as cassava. However, demand for cassava starch and flour in Japan, as well as in China, Indonesia and Malaysia, is expected to remain buoyant

The retreat from the import market of the EU, once the major destination of international cassava shipments, shows little sign of abating. Despite a low tariff rate preferential import quota of over 6 million tonnes with Indonesia and Thailand, from January to the first week in May 2006, the EU has released import certificates for approximately 56†000 tonnes of cassava pellets, less than half the amount for the corresponding period in 2005. The downturn in the EUís import prospects continues to reflect the reduced price competitiveness of cassava feedstuffs vis-ŗ-vis domestically produced feed grains.

Table 5. Thai Trade in Cassava 1

2004 2005 2006 Preliminary
thousand tonnes
Total †8†112 †6†244 †6†900
Flour and starch
Total †3†533 †3†216 †3†500
Japan †727 †622 †700
China †1 083 †1 027 †1 150
of which Taiwan Province †604 †502 †550
Indonesia †229 †349 †350
Malaysia †193 †229 †200
Others †1†300 †989 †1†100
Chips and Pellets
Total †4†579 †3†028 †3†400
China †2†557 †2†766 †3†250
EU 25 †1†861 †246 †150
Others †160 †16 †25
Source: TTTA, FAO
1 In product weight of chips and pellets

 

UTILIZATION

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Global cassava utilization set to increase

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Utilization growth is very much in line with production, given that proper cassava stocks are held only in relatively modest quantities and in dried form, since the commodity is mostly kept under the ground in the form of roots until needed and harvested.

Global cassava utilization as food, the bulk of which is consumed in sub-Saharan Africa in the form of fresh roots and processed products, is anticipated to reach 115 million tonnes in 2006, approximately 1†million tonnes more than in 2005. Overall production gains in sub-Saharan Africa are expected to outpace growth in population, bringing about a moderate increase in per caput food availability. Following a similar measure by Brazil, authorities in Nigeria announced a policy, effective 1 July 2006, which entails the 10 percent mandatory inclusion of cassava flour in the production of bread. The initiative seeks to reduce the countryís dependency on wheat imports and provide a market outlet to cassava producers.

Utilization of cassava as animal feed, in the form of dried chips and pellets, is mostly concentrated in Brazil and Colombia in Latin America and the Caribbean, Nigeria in Africa, China in Asia and the Netherlands and Spain in Europe. Current forecasts see global feed usage at some 59 million tonnes, fractionally higher than the previous year. The increase would reflect steadfast demand in Asia for non-grain feed ingredients, which is foreseen to offset a continued slump in cassava usage as livestock feed in the EU.

Industrial applications of cassava are anticipated to increase markedly in 2006, particularly in Asia, where rapid economic growth is stimulating demand for starch and ethanol. For example, in Thailand, a leading petroleum refinery is reported to be developing a large scale cassava-based ethanol plant, to produce up to 2 million litres of biofuel per day.

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