FAO global cereal supply and demand indicators

The ratio of world cereal ending stocks in 2007/08 to the trend world cereal utilization in the following season is forecast to fall to 19.9 percent, the lowest level of the past five years. Surging utilization is likely to absorb most of the anticipated gain in world 2007 cereal production, hence keeping world ending stocks at very low levels. The ratio for wheat is forecast to plummet further to 22.3 percent, well under 34 percent observed during the first half of the decade. However, for coarse grains, the ratio is expected to register a small recovery from 2006/07, which was one of the lowest levels since the early 80s, to 16.4 percent. The ratio for rice should remain virtually unchanged.

Based on the latest production estimates, and assuming no further significant revisions for important southern hemisphere harvests still to be completed, aggregate supplies of the major grain exporters in 2007/08 are expected to exceed their normal market requirements by just 18 percent, marginally up from the previous season, but still a relatively low level, considering the figure was over 30 percent in the mid-2000s. This indicates only a small improvement in the ability of these exporters to meet the global demand for wheat and coarse grains imports and points to a likely continuation of a tight market situation in the new season.

The ratio of the major exporters' ending wheat stocks to their total disappearance is forecast precariously low at just 10 percent at the end of the 2007/08 seasons. High wheat prices on international markets are already leading to increased import bills for the low-income food-deficit countries and should production not increase significantly in 2008 there could be major implications for the supply/demand outlook. For coarse grains, the ratio is expected to increase from the previous year's low. The fast growing demand for biofuels is expected to keep maize exportable supplies at exceptionally tight levels even with a record harvest. The ratio for rice is expected to change relatively little remaining at just over 16 percent.

World cereal production is forecast to increase 4.6 percent in 2007, which would represent a relatively strong rebound after two consecutive years of contraction. However, in view of the tightly balanced situation demonstrated by the first 3 indicators, another good year is needed in 2008, especially for wheat.

Following four years of sustained growth, the cereal production of LIFDCs in 2007 is forecast to increase only marginally from 2006, which means a less comfortable supply situation in the new 2007/08 season. Excluding China and India, which account for some two-thirds of the aggregate cereal output, production in the rest of LIFDCs would decline by nearly 3 percent after two consecutive years of substantial increases. This, coupled with population increases, is likely to result in several LIFDCs having to resort to larger imports to cover their consumption needs, which, at a time when international cereal prices are at very high levels, will put a heavy burden on the financial resources of these countries.

The tightening of the global cereal balance in 2007/08 has pushed up prices of all cereals. The most significant increase has been for wheat, for which the price index during the first 5 months of the current marketing year (July 2007 to November 2007), has averaged 63 percent above the average for 2006/07. For maize, the price surge has been less significant, with the index rising by nearly 27 percent, but this follows an increase of nearly 45 percent also in the previous year. For rice, a modest 16.4 percent increase has been registered in 2007 so far. These increases are contributing to a significant rise in the cereal import bill of the LIFDCs in 2007/08, which is forecast to jump 27 percent to reach some US$31 billion. Following a sharply increased cereal import bill also in the previous year, makes the current situation all the more burdensome for the LIFDCs, especially for those countries needing larger imports to cover domestic production shortfalls.

1 The first indicator is the ratio of world cereal ending stocks in any given season to world cereal utilization in the following season. Utilization in 2008/09 is a trend value based on extrapolation from the 1997/98-2006/07 period.

2 The second indicator is the ratio of the exporters’ grain (wheat and coarse grains) supplies (i.e. a sum of production, opening stocks, and imports) to their normal market requirements (defined as domestic utilization plus exports of the three preceding years). The major grain exporters are Argentina, Australia, Canada, the EU and the United States.

3 The third indicator is the ratio of the major exporters’ ending stocks, by cereal type, to their total disappearance (i.e. domestic consumption plus exports). The major wheat and coarse grain exporters are Argentina, Australia, Canada, the EU and the United States. The major rice exporters are India, Pakistan, Thailand, the United States, and Vietnam.

4 The fourth indicator shows the aggregate cereal production variation from one year to the next at the global level.

5&6 In view of the fact that the Low-Income Food-Deficit Countries (LIFDCs) are most vulnerable to changes in their own production and therefore supplies, the FAO’s fifth indicator measures the variation in production of the LIFDCs. The sixth indicator shows the annual production change in the LIFDCs excluding China and India, the two largest producers in the group