Outlook and Policy Reports
Latest market assessments and short-term forecasts for wheat and coarse grains are available in FAO's bi-annual Food Outlook and bi-monthly Crop Prospects and Food Situation. The OECD-FAO Agricultural Outlook includes the medium-term projections for grains, and Basic Policies for Food Commodities reports on the main policy developments that have taken place during the periods under review.
July 2008 Crop Prospects and Food Situation
World cereal production in 2008 is forecast to increase 2.8 percent to a record 2 180 million tonnes. Most of the increase is in wheat following significant expansion in plantings in all regions. Coarse grains output is expected around the bumper level of last year but lower than earlier anticipated due to severe floods in the United States, the world’s largest producer and exporter. Rice is tentatively forecast to increase slightly from last year’s good level.
June 2008 Food Outlook
Wheat
Huge increases in plantings driven by high prices are expected to lead to record wheat production in 2008. Most of the increase reflects a significant rebound in major exporting countries, which is expected to boost world export supplies in the new season, a prospect that has already resulted in a sharp fall in wheat prices in recent weeks. Improved wheat supplies may foster a substitution of wheat for less abundant coarse grains, which by raising wheat utilization, may prevent wheat stocks, now at critically low levels, from recovering to adequate levels. Therefore, while present indications suggest that wheat markets are likely to return closer into balance in the new season, any unexpected decline in production may quickly bring the market back to a precarious situation.
Coarse grains
World production is forecast to increase slightly in 2008 compared with the record in 2007. However, total utilization is anticipated to outstrip production in 2008/09 mainly on higher biofuel usage. As a result, stocks next season are likely to fall and this prospect is supportive to prices which are already at very high levels. World trade is forecast to contract sharply in 2008/09 after peaking to a record volume in 2007/08. This decline would be mostly driven by lower imports of maize and sorghum because of much larger domestic supplies of substitute feed wheat in major markets.
Wheat and Coarse Grains Policies: 2003-2004
Conclusions
The review demonstrates that, in most countries, grains policies have remained geared towards reducing government interventions and promoting a more market-oriented environment. However, international price developments and production shortfalls, mostly driven by unfavourable weather conditions, encouraged some countries to resume market intervention which, in several cases, also implied reverting to more protectionist trade and price measures.
With respect to production policies, the use of producer support prices generally declined, in line with the trend towards domestic market liberalization and less price-distorting policy stances. Nevertheless, several countries, especially from the developing world, continued to rely on guaranteed prices to sustain production, reflecting the importance of grains in national food security and also their lack of budgetary resources. In developed countries, on the other hand, governments relied increasingly on income support measures, particularly those categorized as "non-, or minimally distorting" policies in the WTO agreements, thus exempt from reduction commitments. In a number of countries, direct assistance to grain farmers was provided in the form of input subsidies and credit at preferential terms. Similarly, several governments pursued their efforts to increase grain production by bringing additional land into cultivation or promoting a wider use of high-yielding hybrid varieties.
With regard to consumption, marketing and stocks policies, most countries aimed at keeping their involvement to a minimum, so as not to interfere with market forces. Many countries continued with their efforts to enhance their grain marketing systems, by investing more in infrastructure, like storage facilities and ports, and by letting the private sector to expand its role in the supply chain. However, unfavourable weather conditions caused supply problems and forced many governments to intervene to contain price rises. This was especially the case in Europe where a sharp decline in production resulted in several countries releasing grains from state reserves to protect consumers from price escalations.
As for trade policy developments, in most cases, interventions by governments represented temporary adjustments within the same policy framework - mainly to stabilize domestic markets. While some countries also continued with their reforms in preparation of their WTO accession, in many cases, these policy directions were disrupted by internal market fundamentals. In fact, inadequate grain supplies prompted several countries to resort to different types of border measures (such as lowering import duties, administering import quotas, introducing export restrictions) in order to improve availabilities and control prices. In the meantime, with stalled multilateral trade negotiations under the WTO umbrella, the review period also witnessed a continued proliferation of bilateral and regional trade agreements, with many of them involving grains.
