No.4††October†2008††
†† Crop Prospects and Food Situation

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Highlights

Countries in crisis requiring external assistance (total: 36 countries)

Food Emergencies Update

Global cereal supply and demand brief

FAO global cereal supply and demand indicators

Regional reviews

Statistical appendix

Note

FAO global cereal supply and demand indicators

As evidence of some improvement in the new season (2008/09), from the particularly tight market situation in 2007/08, the ratio of world cereal ending stocks in 2008/09 to the trend world cereal utilization in the following season is expected to increase slightly to 21.6 percent. Among the major cereals, the ratio for wheat is expected to increase the most, rebounding by 5 percent, to 29 percent. The expected increase in world wheat production in 2008 is forecast to result in a substantial replenishment of stocks and improvements in supply. For rice, the ratio is also expected to increase, to reach 25.9 percent, the highest level of the past few years. Market conditions for coarse grains (maize in particular) are expected to remain the tightest. With the anticipated total utilization remaining close to world production, the stock-to-use ratio for coarse grains is forecast to increase only fractionally, to 15.6 percent, remaining close to the low level of the past two years.

Given the outlook for a relatively strong recovery in grain production in 2008 in those major exporting countries, which suffered production cutbacks in 2007, the ratio of their aggregate grain supplies compared to normal market requirements in 2008/09 is estimated to increase somewhat from the relatively low levels of the preceding two years to reach 123 percent.

The ratio of the major exporters' ending cereal stocks to their total disappearance in 2008/09 is forecast to increase slightly from last seasonís 30-year low, to reach 15 percent. For wheat, the ratio is expected to recover sharply to 15.8 percent, reflecting substantial production increases in all the major wheat exporting countries with the exception of Argentina. The ratio for rice is now also expected to increase slightly, to 18.5 percent. However, for coarse grains, the ratio is expected to decrease further from the previous year's already low level to 10.8 percent. The anticipated drop in 2008 maize production in the United States against a rising use of maize for biofuels is the main factor behind this drop in the ratio.

World cereal production is estimated to be up 4.9 percent in 2008, which would represent another relatively strong increase for the second year in succession, and is a welcome development in the face of the particularly tight global supply/demand situation at the outset of the season. However, with the coarse grain harvests still not complete in some major producing countries, those for wheat still to begin in some southern hemisphere countries, and the main rice seasons at an early stage in Asia, this forecast remains subject to revision should weather conditions deviate significantly from the norm for any of these 2008 crop seasons still to be completed in the coming months.

While cereal production of the LIFDCs is forecast to increase further in 2008, the rate of growth, at just 1.7 percent, would represent a decline for the third consecutive year. However, contrary to 2007, excluding China (Mainland) and India, which account for some two-thirds of the groupís aggregate cereal output, production in the rest of LIFDCs is estimated to increase this year by 2.0 percent, this improvement is a positive feature after last yearís decline. However, the limited growth in these countriesí production this year, after the decline in the previous season, means they will continue to rely heavily on imports to cover their consumption needs in 2008/09, at a time when international cereal prices remain at relatively high levels.

With cereal production forecast to exceed the expected utilization in 2008/09, for the first time since in 4 years, and stocks likely to increase, prices of most cereals have started to come down in 2008. With some wheat prices already dropping below their level of a year ago, the rate of growth in the wheat price index in the new season so far (July to September 2008) is sharply lower than that of 2007/08. The maize index increased by 35 percent in 2007/08 marketing season (July/June) and with maize prices in the first months of the 2008/09 season well above the previous yearís levels, the index for the current marketing season so far stands at 60 percent. Given the huge increase in rice prices from January to March 2008, even with the considerable decline since then, the rice index in the 2008 marketing season so far (January-September) is estimated to be up by almost 100 percent compared to the previous year.

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 2009/10 is a trend value based on extrapolation from the 1998/99-2007/08 period.

2†The second indicator is the ratio of the exportersí 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 exportersí 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 FAOís fifth indicator measures the variation in production of the LIFDCs. The sixth indicator shows the annual production change in the LIFDCs excluding China Mainland and India, the two largest producers in the group

7†The seventh indicator demonstrates cereal price developments in world markets based on changes observed in selected cereal price indices.

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