|Global Market Analysis|
Cereal supplies rise, international prices fall
FAO’s forecast for world cereal production in 2008 now stands at 2 242 million tonnes (including rice in milled terms), 5.3 percent more than in 2007 and a new record. Among the major cereals, the most significant production expansion is forecast for wheat, up 11 percent from last year, but production of coarse grains is also forecast to surpass last year’s record by at least 3 percent, while rice production is anticipated to exceed the already excellent results achieved in 2007 by more than 2 percent. A combination of exceptionally high prices, which encouraged plantings, and generally favourable weather conditions contributed to the boost in world cereal production this year.
World cereal utilization is anticipated to grow by 3.3 percent from 2007/08, to 2 197 million tonnes in 2008/09, reflecting higher all round use: food, feed and industrial utilization. Food use, which represents nearly one-half of total cereal utilization, is forecast to reach 1 023 million tonnes in 2008/09, up 1.3 percent from the previous season. This would allow average per caput consumption to remain steady at around 153 kg. Feed utilization is forecast at 766 million tonnes, some 2 percent above the previous season. Most of the expansion in feed use is expected in the European Union and several CIS countries which would more than offset the anticipated decline in the United States, where production is forecast to be lower than last year and demand for feed could well be depressed by the reported contraction in the domestic livestock sector. Cereals are also used as raw material for production of ethanol, starch and sweeteners. In recent years, fuel ethanol has emerged as one of the most significant industrial products derived from cereals, in particular maize, in the United States. In 2008/09, ethanol production will account for the largest expansion in total cereal utilization in the United States and for nearly one-half of the total gain in world cereal utilization.
For the first time in four years, world cereal production is likely to prove more than sufficient to meet anticipated utilization, paving the way for a significant recovery in global stocks. World end-of-season cereal stocks for crop years closing in 2009 are forecast at 474 million tonnes, up 41 million tonnes, or 9 percent, from their exceptionally low opening level and the highest volume since 2002/03. As a result, the cereal stock-to-use ratio is forecast to rise to 22.0 percent from a 19.7 percent low in 2007/08. Higher wheat and rice inventories account for most of the anticipated recovery in world cereal stocks. As further evidence of a relatively strong improvement in the global supply situation, the ratio of the major exporters' ending cereal stocks to their total disappearance (defined as domestic utilization plus exports) is also forecast to recover from a 30-year low of 13.5 percent in 2007/08 to 15.4 percent in 2008/09.
World trade in cereals in 2008/09 may fall to 264 million tonnes, 10 million tonnes, or 4 percent, below the record in 2007/08. Reduced trade in coarse grains is the main reason for the world cereal trade decline, although a small contraction in global rice transactions is also anticipated. By contrast, international trade in wheat is forecast to expand significantly. As a result of the improved supply situation and the decline in international prices, many of the more restrictive export measures put in place during the course of the 2007/08 marketing season have already been lifted, especially with respect to wheat and coarse grains. In recent months, more favourable supply prospects have exerted downward pressure on international prices of most cereals. More recently, the plunge in global financial markets, the impending economic slowdown and the fall in crude oil prices have exasperated the downward trend further.
Table 1. World cereal market at a glance 1
* Jan-Sept 2008
1 Rice in milled equivalent
|GIEWS||global information and early warning system on food and agriculture|