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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 2017: 02 February, 02 March, 06 April, 04 May, 08 June, 06 July, 07 September, 05 October, 02 November, 07 December.

Record cereal production to boost global supplies in 2016/17

Release date: 02/02/2017

Confirming prospects of a record harvest, FAO’s estimate of world cereal production in 2016 has been lifted further to 2 592 million tonnes, up 15 million tonnes (0.6 percent) from December. This month’s revision mostly reflects larger-than-expected wheat harvests in Australia and the Russian Federation, combined with upward adjustments to world maize production, almost entirely due to an increase in China’s estimate. These increases more than offset a reduction in the forecast of world rice production, as a result of lower reported outturns in China, Pakistan, the United States and Viet Nam.

Early production prospects for the 2017 cereal crops are mixed. Planting of the winter wheat crop in the Northern Hemisphere is virtually complete. In the United States, large supplies and relatively low prices induced farmers to cut down winter wheat seedings to their second-lowest level on record, while less than ideal weather may constrain yields somewhat. Canada’s winter wheat area is similarly down, mostly on reduced price prospects. In Europe, beneficial weather promoted the establishment of the EU’s winter crop, although cold temperature in January may have caused some damage. Overall area in the EU is anticipated to stay unchanged from last year. Production prospects remain favourable in the Russian Federation, resting on greater winter wheat area coverage and good crop conditions. Although limited snow cover in southern parts of Ukraine raised some concerns, overall conditions are satisfactory, with area sown estimated to have exceeded the 2016 level. In Asia, larger wheat plantings in India, coupled with sufficient water supplies for irrigation, are forecast to sustain a small production gain in 2017. By contrast, poor rains during planting and reduced water supplies for irrigation have dampened early prospects in Pakistan. In China, continued strong production incentives provided by the Government’s minimum purchase price programme encouraged a moderate increase in wheat plantings, thus boosting the production outlook for the country.

In the Southern Hemisphere, after the previous year’s severe dry conditions, more favourable weather is forecast to result in a rebound in cereal production in Southern African countries in 2017. In particular, maize output in South Africa is seen to return to near-average levels, due to an expected rebound in plantings of more than one third and yield recoveries. In South America, early estimates point to larger grain plantings in Argentina and Brazil, supported by high local prices and conducive weather. Australia and Indonesia are headed towards area-led output expansions for rice, while improved growing conditions are behind positive yield expectations in important South American rice producing countries, most notably Brazil. Sowing progress has been slow in Viet Nam, given excess rains over southern parts of the country. In Sri Lanka, more considerable challenges have been faced, with paddy plantings substantially constrained by insufficient precipitation and short water supplies for irrigation.

FAO’s forecast of global cereal utilization in 2016/17 has been raised by nearly 3 million tonnes from December to 2 567 million tonnes, up 2 percent (50.4 million tonnes) from 2015/16.  This month’s upward adjustment mostly reflects a 2.2 million tonne increase in food and industrial uses of wheat in several countries. Together with slightly higher forecasts of coarse grain utilization, the revision more than offset a 1 million tonne cut to non-food uses of rice. Total wheat utilization is now projected at 736.5 million tonnes, up 22 million tonnes (3.1 percent) from 2015/16. A strong increase in feed use, due to ample supplies of low quality wheat, is anticipated to account for much of this growth. World utilization of coarse grains in 2016/17 is forecast to expand by 23.6 million tonnes (1.8 percent) to nearly 1 330 million tonnes, with greater feed use in the United States, following last year’s record harvest, accounting for much of the projected expansion. Despite this month’s downward adjustment, world rice use remains forecasted to expand by 1 percent from 2015/16 to 500 million tonnes, sustained primarily by growing food use.

The FAO forecast of global cereal stocks by the end of seasons in 2017 has been raised by a further 11 million tonnes to a record 681 million tonnes, up 3 percent (20 million tonnes) from the previous season.  Improved production prospects resulted in sizeable upward adjustments to wheat inventories in Argentina, Australia and Brazil since December. Combined, these lifted the forecast of world wheat inventories in 2016/17 by 6.5 million tonnes to a new record of 245 million tonnes. At this level, wheat stocks would exceed the 2015/16 estimate by 8.3 percent (almost 19 million tonnes), with most of the year-on-year increase still anticipated to be concentrated in China, the United States and the Russian Federation. As for coarse grains, mostly reflecting higher projected maize inventories in China, FAO’s forecast of world coarse grain stocks now points to a 0.7 percent (2 million tonnes) annual rebound to their second highest level on record. Compared with the previous season, the largest increase is expected in the United States, where coarse grain stocks are forecast at an all-time high of 64 million tonnes, up as much as 32 percent from their opening level. Yet, this gain is expected to be partly offset by significant drawdowns in China and Brazil due to lower production. In the case of China, cuts would be further aided by the recently announced plans seeking to reduce the country’s maize inventories by promoting industrial use, even if the move is likely to have more impact on stock levels next season. World rice stocks are now forecast at 170 million tonnes, down 0.6 percent year-on-year and slightly below the December forecast. China and the United States were behind the latest downward revision, although in both cases rice inventories are still seen at record or near-record levels.

Despite upward revisions to projected wheat flows, international trade in cereals in 2016/17 is still expected to fall by 1.2 percent (4.7 million tonnes) from 2015/16 to 391 million tonnes. The contraction is expected to be driven by a 5 percent (9 million tonnes) reduction in world trade of coarse grains to 177 million tonnes, largely as a result of reduced maize, barley and sorghum purchases by China. By contrast, expectations of more upbeat imports by India, Brazil and Viet Nam have raised December forecasts of total trade in wheat by 2.4 million tonnes to 171 million tonnes. At this level, global wheat trade would be 1.7 percent (2.8 million tonnes) higher than the estimate for 2015/16, registering a new record. Most of the expansion would be sustained by India, where total imports are now projected at a ten-year high of 3.5 million tonnes. Yet, this forecast could undergo a further upward adjustment, as persistently elevated domestic prices and the recent removal of import duties on wheat raise prospects of even bigger Indian imports than currently foreseen. Larger exportable availabilities and stronger Asian demand are similarly envisaged to drive a partial revival in world trade in rice in calendar year 2017, which is now put at 43 million tonnes, up from a revised estimate of 42 million tonnes for 2016.



Summary Tables

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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.