No.4††November†2006††
†† Crop Prospects and Food Situation

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Highlights

Food Emergencies Update

Global cereal supply and demand brief

Low-Income Food
-Deficit Country food situation overview

Regional reviews

Special features

Statistical Appendix

Terminology and Notes

Low-Income Food-Deficit Country food
situation overview

Bumper 2006 cereal crops gathered in most LIFDCís

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While the world cereal production is set to decline in 2006, in the group of 82 LIFDCís, output is expected to rise. With harvesting of the main 2006 cereal crops completed, or close to completion, in most regions of the world, FAOís forecast of the LIFDCís aggregate cereal production has been revised up slightly since the last report to 875.4 million tonnes, which is 2.1 percent above the good level of 2005. When the largest cereal producing countries of China and India are excluded, the increase in this yearís production is more pronounced reaching 3.5 percent.

Bumper cereal crops have been obtained in most parts of Africa, including the Sahel, Far East Asia and CIS Asia. However, outputs were reduced by dry spells during the growing seasons in Afghanistan, Armenia, Georgia, Honduras and Nicaragua.

As a result of the improved harvests, and consequently supplies, per capita cereal food consumption is expected to rise in LIFDCs. The increase is expected to be most notable in Africa.

Higher prices drive up cereal import bills but also export earnings

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Should the current FAO forecasts for cereal trade, prices and food aid for 2006/07 (July/June) materialize, the more economically vulnerable and food deficit regions could face more elevated cereal import bills this season than in 2005/06. The developing countries are likely to spend a record US$41 billion on imports of cereals in 2006/07, up 18 percent from 2005/06. The total cereal import bill of the Low Income Food Deficit Countries (LIFDCs) is also forecast to hit an all time high of US$21 billion, up roughly 15 percent from the 2005/06 estimated level. These increases are primarily price driven; given the strong rise in world grain prices during the course of this marketing season while import volumes (on an aggregated basis) are forecast to remain close to, or even decline from, the previous seasonís estimated levels.
The average price increase in 2006/07 is projected at 35 percent for maize and 25 percent for wheat. As a result, the estimated per unit cereal import cost for most developing regions would be rising again this season considering also the fact that food aid shipments (in terms of cereals), which had already declined significantly in 2005/06, are assumed to be unchanged in 2006/07. At the current forecast levels, the developing countries would face a rise of around US$35 per tonne in their per unit cereal import cost while the rise would be US$32 per tonne for the LIFDCs, as a group.


Table 4. Trends in Cereal Import Bills (July/June)1/

2001/02 2002/03 2003/04 2004/05 2005/06 2006/07
estimatef'cast
Import Bill (US $ million)
Developing countries25 82529 00231 61734 20635 12241 331
LIFDC12 44514 11415 91419 02818 28821 018
LDC2 3932 8962 5192 1502 1452 556
NFIDC6 0485 6654 9454 2274 6784 882
Total volume imported (000 tonnes)
Developing countries177 642172 248167 665183 619183 920183 133
LIFDC82 86481 94180 86296 09689 25188 823
LDC17 32121 25418 60121 86219 61419 129
NFIDC34 59732 19131 78836 82736 88834 205
Commercial imports (000 tonnes)
Developing countries170 691164 837161 022178 119179 986179 003
LIFDC76 22375 11774 50790 81885 47884 854
LDC13 31418 32014 66318 22516 45216 607
NFIDC33 39931 24231 16436 42036 44033 888
Per unit import cost (US $/tonne) 2/
Developing countries145.4168.4188.6186.3191.0225.7
LIFDC150.2172.3196.8198.0204.9236.6
LDC138.2136.2135.498.4109.4133.6
NFIDC174.8176.0155.5114.8126.8142.7

1 Same countries may appear in more than one special country group.
2Based on the per unit cost of total imports
Source: FAO

In general, wheat accounts for the largest portion of the cereal import bill for most developing countries, which tends to exceed by a large margin the imports of all other major cereals.
The overall value of wheat imports by the LIFDCs in 2006/07 is forecast at US$12.6 billion, up US$2 billion from 2005/06, mostly reflecting this seasonís higher prices.
However, this bill appears significantly lower when India is excluded.

The wheat import bill of the LIFDCs without India is estimated at US$10.8 billion, which would be US$600†000 above 2005/06 in spite of most other LIFDCs countries reducing their imports due to improved domestic supply conditions.
The LIFDCs are also expected to spend at least US$4.4 billion on rice imports, which would represent an increase of some US$ 200 million over 2006, driven by slightly larger imports and higher international prices. Similarly the import cost for purchasing coarse grains by the LIFDCs in 2006/07 is put at nearly US$4 billion in 2006/07, up US$700 million from the previous seasonís estimated level. However, imports by China alone account for almost 30 percent of total volume of coarse grains imports by LIFDCs.
Therefore, deducting China from the total, the coarse grain imports bill of the LIFDCs comes to US$2.7 billion, US$500†000 below the previous seasonís level due to sharp declines in imports by most other countries.

Table 5. Cereal Import Bill in LIFDCs by Region
and Type (July/June)

2001/02 2002/03 2003/04 2004/05 2005/06 2006/07
estimatef'cast
(................US $ million...........................)
LIFDC 12 445 14 114 15 914 19 028 18 288 21 018
Africa5 5196 4417 0858 4668 5228 607
Asia6 5067 1558 1669 8599 00611 525
Latin America and Cariibbean 263 317 389 422 470 557
Oceania 55 69 76 79 82 91
Europe 102 133 198 201 209 238
Wheat6 5507 8238 90610 93210 75412 616
Coarse grains2 6983 2453 3123 4083 2373 984
Rice3 1963 0463 6954 6884 2974 418

Source: FAO

While the increase in international cereal prices this season is largely regarded as a burden for those low-income countries which rely on world markets for their imports, a few among them also export cereals and therefore, for them, the higher prices are largely a positive development. It is important to underline that total export earnings of the LIFDCs from cereals is relatively small, accounting for no more than 10 percent of the world total for most recent years. In 2006/07, the total export earnings of the LIFDCs are forecast to approach US$4 billion, which would be around US$500 million more than in 2005/06.
However, only a few LIFDCs are exporters, among which the combined exports by China and India account for nearly 40 percent of the total export earnings from cereals.
The other significant LIFDC exporters are Egypt and Pakistan followed by several smaller exporting countries, mostly in Africa.

Table 6. LIFDC: Export Earnings of Cereals (July/June)

2001/02 2002/03 2003/04 2004/05 2005/06 2006/07
estimatef'cast
(....................................US $ million...................................)
LIFDC 3 280 4 841 4 821 3 831 3 544 4 004
China1 0502 1791 865 763 954 971
Pakistan 418 567 464 777 771 880
India1 4441 5311 6281 365 907 812
Egypt 72 90 174 243 215 242
Syria 111 128 211 102 133 212
Cambodia 9 15 25 22 65 132
Uzbekistan 0 0 72 77 35 110
Morocco 19 24 24 31 35 88
Tanzania 8 9 16 28 40 61
Uganda 27 38 44 34 26 49

Source: FAO

Cereal import bill forecasts for LDCs and NFIDCs

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The combined cereal import bill of the Least-Developed Countries (LDC) and the Net-Food Importing Developing Countries (NFIDC), which include a list of nations agreed by the World Trade Organization (WTO) to qualify as beneficiaries under the Marrakech Decision on the Possible Negative Effects of the Reform Programme, is expected to reach US$7.4 billion in 2006/07, up 9 percent from 2005/06.
All of this increase would again reflect higher international prices and landed costs (i.e. freights, insurance and handlings) while their combined cereal imports would be down almost 3 million tonnes compared to the previous season.


At the current forecast levels, the per unit import cost for the LDCs is likely to reach US$134 per tonne while for the NFIDC category, which includes much smaller food aid recipient countries in its composition, the per unit import cost could rise to US$143 per tonne in 2006/07, up US$16 per tonne from the previous season. Nevertheless, in all cases, the per unit import cost estimates continue to remain well below the peaks observed during the cereal price hike periods of the mid-1990s.

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GIEWS ††global information and early warning system on food and agriculture