FAO Cereal Supply and Demand Brief
The Cereal Supply and Demand Brief provides an up-to-date perspective of the world cereal market. The monthly brief is supplemented by a detailed assessment of cereal production as well as supply and demand conditions by country/region in the quarterly Crop Prospects and Food Situation. More in-depth analyses of world markets for cereals, as well as other major food commodities, are published biannually in Food Outlook.
Monthly release dates for 2016: 04 February, 03 March, 07 April, 05 May, 02 June, 07 July, 08 September, 06 October, 10 November, 08 December.
FAO’s first forecasts for cereals in 2016/17 point to large supplies, lackluster trade and subdued markets
Release date: 07/04/2016
Early indications suggest a generally comfortable balance between global supply and demand of cereals in the new marketing season (2016/17). FAO puts its first forecast for world cereal production in 2016 at around 2 521million tonnes, which although falling short of last year’s level by 0.2 percent (4 million tonnes) would still represent the third highest performance on record. Most of the decline stems from expectations of a lower world wheat production, which has been revised downward by almost 10 million tonnes since last month to 712.7 million tonnes. At this level, it would be 2.8 percent or 20 million tonnes less than in 2015. The year-on-year decrease is mainly the result of expected declines in the Russian Federation and Ukraine, where plantings were trimmed because of dry weather. Production is also forecast lower in the drought-stricken Morocco and in the EU, where yields are set to decline to near-average levels from last year’s highs. Offsetting part of these declines, China is anticipated to harvest a slightly larger crop in 2016, sustained by higher yields, while India may see output recover from last year’s drought-reduced level, despite recent negative revisions from earlier expectations.
FAO’s first forecast for world coarse grains production in 2016 stands at around 1 313 million tonnes, 0.8 percent (11 million tonnes) above 2015, mostly reflecting projected increase in global maize output, which more than compensate for anticipated declines in barley and sorghum. Maize production, which accounts for nearly three-quarters of the coarse grains output, is forecast to rise by 1.1 percent (11.5 million tonnes) to nearly 1 014 million tonnes in 2016. Most of the increase reflects expectations of gains in the EU, mainly based on an anticipated recovery in yields, and the United States, where plantings are projected to expand reflecting expected higher returns compared with other crops. By contrast, production is seen falling in the Southern Africa sub-region and in Brazil, under prospects of a continuing El Niño-related drought.
World rice production is currently predicted to recover by 1.0 percent (4.9 million tonnes) in 2016 to 495 million tonnes. The forecast assumes a return to normal weather patterns in time for main-crop plantings in northern hemisphere Asia, following two consecutive seasons of erratic rains affecting planting activities. This anticipated world production level would imply a third successive season of below-trend growth, reflecting the continuing negative influence of the El Niño weather anomaly in the southern hemisphere, where the season is more advanced, but also unattractive world rice prices.
While still very preliminary, global cereal utilization in 2016/17 is projected to increase modestly for the second consecutive season. At around 2 547 million tonnes, total utilization in 2016/17 would be 1 percent (26 million tonnes) above the current season’s level and below its 10-year trend for the second consecutive season. The weak growth is mostly a reflection of sluggish feed demand prospects. Total intake of cereals by the livestock sector is seen growing by only 0.8 percent, even slower than in 2015/16, as difficult and unstable economic conditions have dampened growth in feed demand in recent years. Global wheat utilization in 2016/17 is projected to remain nearly unchanged, at around 723 million tonnes, as a slight increase in total food consumption is anticipated to offset a decline in feed and other uses of wheat. Total utilization of coarse grains is projected at 1 321 million tonnes, up 1.5 percent (20 million tonnes) from 2015/16, sustained by a modest increase in feed use, to 750 million tonnes. Cheaper and more abundant availabilities are likely to increase maize attractiveness in feed rations, at the expense of wheat and other coarse grains. Total feed use of maize is put at just over 583 million tonnes in 2016/17, up 2.5 percent (14.2 million tonnes) from 2015/16, with a 9 million tonne surge expected in China alone. World rice consumption is forecast to rise by 1.4 percent to 503 million tonnes in 2016/2017, of which 405 million tonnes anticipated to be consumed as food, sufficient to keep global per capita annual intake steady at 54.6 kilos per person.
At nearly 611 million tonnes, FAO’s first forecast for world cereal stocks at the close of seasons ending in 2017 points to a 3.9 percent (25 million tonnes) decline from the previous year. Even at this lower level of inventories, the ratio of world cereal stock-to-utilization would hover around 23 percent, down from almost 25 percent in 2015/16, but above the historical low of 20.5 percent registered in 2007/08. Among the major cereals, the decline in stocks of rice, a cereal commodity destined primarily for human consumption, is expected to be more limited, with carryovers projected at 164 million tonnes. The 4.9 million tonne annual draw-down would be mostly attributable to the major rice exporting countries, amid sustained efforts to trim the size of public reserves and also subdued production growth prospects. Wheat inventories could decline by around 11 million tonnes, to nearly 194 million tonnes, with most of the cut concentrated in the Russian Federation and Ukraine. Maize inventories are projected to fall to around 205 million tonnes, down 11 million tonnes from this season, with maize stocks in China alone likely to contract by more than 6 million tonnes to 98 million tonnes (still the third highest on record). China’s inventories reduction assumes that the recent Government decision to terminate domestic price support and stockpiling programme of maize as of 2016/17 will help reduce domestic maize prices and boost its feed use. In the United States, however, maize inventories could climb for the fourth consecutive year and reach 48 million tonnes.
Notwithstanding very large availabilities for export, international trade in cereals is foreseen to contract in 2016/17 for the second consecutive year, falling by 1.4 percent (5 million tonnes) to 365 million tonnes. The anticipated decline in world trade would be mainly the result of a contraction in world demand, as many (but not all) importing countries have accumulated large stocks and/or are expected to reap large harvests this year. The decline in cereal trade is likely to stem primarily from reduced purchases of coarse grains, especially barley and sorghum (mainly by China), and to a lesser extend also maize (mainly by the EU), in spite of sharp anticipated increases in import by countries in southern Africa. Total trade in coarse grains in 2016/17 is projected to approach 168 million tonnes, down 3.1 percent (5.3 million tonnes) from this season. Maize trade is seen down slightly (0.4 percent) at 129 million tonnes, while world trade in barley and sorghum are projected at 25 million tonnes and 9 million tonnes, down 7.4 percent (2 million tonnes) and 25.4 percent (3 million tonnes) respectively. Global wheat trade in 2016/17 (July/June) is projected at 153 million tonnes, up 0.7 percent (1 million tonnes) from 2015/16 as higher imports by drought-stricken Morocco are expected to more than offset possible declines in deliveries to several countries in Asia. Forecasts of world rice trade in calendar 2016 have been lowered since last month to 44.9 million tonnes, or close to the 2015 level. The adjustment primarily mirrors smaller anticipated imports by African countries, where a combination of good crops and weak local currencies have curbed demand. Tentatively, a further fall of 1.8 percent to 44 million tonnes is forecast for world trade in rice in calendar 2017, as expected improved local availabilities could reduce imports by countries in Far East Asia.
1/ Production data refer to the calendar year of the first year shown. Rice production is expressed in milled terms.
2/ Production plus opening stocks.
3/ Trade data refer to exports based on a July/June marketing season for wheat and coarse grains and on a January/December marketing season for rice (second year shown).
4/ May not equal the difference between supply and utilization due to differences in individual country marketing years.
5/ Major wheat exporters are Argentina, Australia, Canada, the EU, Kazakhstan, Russian Federation, Ukraine and the United States; major coarse grain exporters are Argentina, Australia, Brazil, Canada, the EU, Russian Federation, Ukraine and the United States; major rice exporters are India, Pakistan, Thailand, the United States, and Viet Nam. Disappearance is defined as domestic utilization plus exports for any given season.