FAO global cereal supply and demand indicators

As evidence of some improvement in the current 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 significantly to 22.0 percent. Among the major cereals, the ratio for wheat is expected to increase the most, rising to 28.8 percent from the low 23.2 percent of the previous year, following a significant increase in global production in 2008. For rice, the ratio is also expected to increase quite significantly, to reach 26.3 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 16.2 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 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 from the relatively low levels of the preceding two years to reach 124 percent.

The ratio of the major exporters' ending cereal stocks to their total disappearance in 2008/09 is forecast to increase slightly from last season’s 30-year low, to reach 15.6 percent. For wheat, the ratio is expected to recover sharply to 16.6 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 18.7 percent. However, for coarse grains, the ratio is forecast to decrease further from the previous year's already low level to 11.5 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 5.4 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 2008/09 season (July/June). However, with the first three indicators remaining relatively low, albeit slightly improved from the previous season, another good cereal harvest will be needed again in 2009 or global supplies could be quickly eroded to, or below, the reduced levels witnessed in 2006/07 and 2007/08.

While cereal production of the LIFDCs is forecast to increase further in 2008, the rate of growth, at just 2.0 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 group’s aggregate cereal output, production in the rest of the LIFDCs is estimated to increase this year by 3.3 percent, this improvement is a positive feature after last year’s decline and reflects government support to improve farmers’ access to agricultural inputs and overall favourable weather conditions..

With cereal production forecast to exceed the expected utilization in 2008/09, for the first time in four years, and stocks likely to increase, prices of most cereals have started to come down in 2008. With wheat prices sharply below their level of a year ago, the wheat price index in the new season so far (July to November 2008) is 9 percent lower than that of 2007/08. Although maize prices have also been on the decline since June, given the huge increase in their prices during the first half of the year, the index for the current marketing season so far is still 36.2 percent up from 2007/08. For rice, with international prices still remaining well above their levels a year earlier, despite significant declines since March, the rice index in the 2008 marketing season so far (January-November) is estimated to be up by almost 90 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 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 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.