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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 2016: 04 February, 03 March, 07 April, 05 May, 02 June, 07 July, 08 September, 06 October, 10 November, 08 December.

Higher projected cereal consumption in 2016/17 paves the way for lower stocks

Release date: 07/07/2016

FAO’s latest forecast for 2016 world cereal production stands at 2 544 million tonnes, 0.6 percent (15.3 million tonnes) higher than the 2015 estimate and fractionally above the previous month’s forecast. Prospects mainly improved for wheat, but also for rice and barley, while the maize production forecast was sharply cut.
                                                         
Expectations for global coarse grains production in 2016 were revised down by 8.2 million tonnes to 1 316.4 million tonnes. The decrease is mostly attributable to a deteriorated outlook for Brazil, where dry weather impaired prospects for the second maize crop. Expectations for maize output in China were also downscaled, as plantings contracted following reduced government support. By contrast, 2016 world wheat production is now pegged at 732 million tonnes, 8 million tonnes higher than anticipated in June, but still slightly below the 2015 record. This month’s upward revision rests on improved crop prospects in the EU, the Russian Federation (where a record crop is expected) and the United States, owing to favourable weather. Larger harvests are also foreseen in China and India, while dry conditions dampened the outlook for Turkey. Forecasts of rice production in 2016 have been upgraded by 0.8 million tonnes since last month, now pointing to world rice output surpassing the 2015 depressed level by 1.0 percent to 495.2 million tonnes. The revisions chiefly reflect improved expectations for crops in Asia, in particular the Lao PDR and Pakistan, more than offsetting reduced prospects mainly for Brazil.

The forecast for world cereal utilization in 2016/17 has been raised by nearly 10 million tonnes, to 2 555.6 million tonnes, or 1.3 percent above the 2015/16 estimate. The new outlook reflects prospects for increased wheat utilization, in particular for feed use, which has been raised by 4 million tonnes, mostly on expectation of stronger demand in the EU, Indonesia and the United States, but also for food consumption and industrial usage.  As a result, total wheat consumption is now forecast to rise to 726 million tonnes, some 8 million tonnes higher than anticipated last month and 0.8 percent above the 2015/16 estimate. Total utilization of coarse grains is projected at 1 326 million tonnes, up 1 million tonnes from the previous forecast and 1.4 percent above the 2015/16 estimate. The small increase since last month reflects expectations of slightly higher food and industrial use of coarse grains. By contrast, their use as feed, although still estimated to rise by 2.3 percent from the previous season, was lowered by almost 900 000 tonnes to 759 million tonnes, largely on account of Brazil, China and the Russian Federation. Underpinned by rising food use, global rice utilization is expected to reach around 503 million tonnes in 2016/17, up 7.2 million tonnes year-on-year.

The forecast for global cereal stocks by the end of seasons in 2017 has been trimmed by almost 7 million tonnes since June and now stands at 635 million tonnes, 1.5 percent below their opening level. The current forecast would put the world cereal stocks-to-use ratio for the 2016/17 marketing season at 24.2 percent, well above the historic low of 20.5 percent registered in 2007/08. This month’s stock revisions mostly concerned coarse grains, now foreseen to shrink by 3.5 percent to 253.5 million tonnes, or 9.3 million tonnes less than expected in June. The revision ensues a downscaling of projections for ending maize inventories in Brazil, China, Ukraine and the United States. The forecast for global wheat stocks in 2017 has been raised by 1.4 million tonnes from last month to 217 million tonnes, up almost 5 million tonnes, or 2.3 percent, from the previous season and the highest stock level in fifteen years. Higher forecasts for Australia and India were largely responsible for the upward adjustment. However, much of the overall year-on-year increase in world wheat inventories is likely to be driven by  accumulations in China (from 60 million tonnes to 70 million tonnes), the Russian Federation and the United States. Combined, these would more than offset declines in North Africa and several countries in Asia. Despite an upward revision since last month, world rice stocks are still predicted to fall for the third successive season, dropping to 164.8 million tonnes. The year-on- year contraction would mainly be on account of India and Thailand, the two leading rice exporters, but drawdowns are also seen taking place in Bangladesh and Brazil due to reduced output expectations.

World trade in cereals in 2016/17 is currently forecast to approach 374 million tonnes, up 4.8 million tonnes from June, but still 1.9 percent (around 7 million tonnes) below the 2015/16 estimate. If confirmed, this would be the first contraction since 2012/13. This month’s upward revision mostly reflects improved trade prospects for wheat (up 3.6 million tonnes from June), supported by stronger import demand in Indonesia, India and Turkey.  Year-on-year, the projected decrease in world cereal trade would be mainly on account of a fall in coarse grains and a slight reduction in rice, countering a likely expansion in wheat trade. Global trade in coarse grains in 2016/17 is projected at 171.5 million tonnes, down 4.5 percent from the 2015/16 record, primarily reflecting sharp cuts in barley and sorghum imports by China. By contrast, world wheat trade is expected to set a new record of 158.5 million tonnes, up 0.8 percent from 2015/16, mainly sustained by stronger import demand by Morocco and several countries in Asia.  Rice trade in calendar 2017 is forecast at 43.8 million tonnes, close to the 2016 expected reduced level and some 300 000 tonnes below last month’s expectations. On the export side, ample availabilities in competing origins may dampen India’s competitive advantage, leading to reduced sales by the country for a third successive year.



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.