CEREALS

Poorer crop prospects and tight supplies keep prices at high levels

FAO's latest forecast for world cereal production in 2007 stands at 2 109 million tonnes (including rice in milled terms), considerably less than was forecast earlier in June but still about 5 percent up from the previous year's harvest. The downward revision since June mostly concerns wheat, as some of the world's main crops have been severely compromised by drought conditions, especially in eastern Europe and Oceania. While prospects for coarse grain crops in these drought-affected areas also deteriorated, upward revisions elsewhere, particularly for maize in the United States, have raised the forecast for world coarse grain output to a slightly higher level than was expected in June. The expectation that the bulk of the increase in the aggregate 2007 cereal crop would come from just one commodity, namely maize, is also confirmed. World cereal utilization in 2007/08 is forecast to expand to 2 105 million tonnes, or over 2 percent above the previous season. Based on the latest forecasts for world production and utilization, global cereal stocks by the close of the seasons ending in 2008 are expected to remain at 427 million tonnes, unchanged from their reduced opening level and still the lowest since 1983. At the current forecast levels, the ratio of world cereal stocks to utilization is put at about 20 percent, also virtually unchanged from the previous season's low ratio and the smallest since the mid-1990s. World cereal trade in 2007/08 is currently forecast at around 252 million tonnes. At this level, world trade would be some 4 million tonnes, or 1.5 percent, below the volume in 2006/07. In spite of this anticipated decline, world cereal trade in 2007/08 would still be the second highest after last season's record. International prices for all major cereals remain high and some registered considerable gains from the previous season. Tight supply amid strong demand is the underlying factor for the continuing strength in prices of most cereals. This is particularly the case for wheat, the price of which soared to a record in late September and remained high and volatile in October.

Table 1. World cereal market at a glance