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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 2018: 1 February, 1 March, 5 April, 3 May, 7 June, 5 July, 6 September, 4 October, 1 November, 6 December.

Early prospects for global cereal markets in 2018/19 are favourable

Release date: 03/05/2018

According to FAO’s first forecasts for the 2018/19 marketing season, cereal supplies should be sufficient to meet consumption requirements. While global cereal reserves are forecast to decline, the decrease is likely to mostly concern maize. Early indications also point to an only marginal contraction of world cereal trade from the 2017/18 record high, sustained by firm import demand particularly for barley, wheat and rice.  

World cereal production in 2018 to fall short of the 2017 near-record level

• Based on the conditions of crops in the ground, planting intentions for those still to be sown, and assuming normal weather for the remainder of 2018 cropping seasons, early indications for the 2018 cereal crops point to global output falling 41.2 million tonnes (1.6 percent) short of the near-record harvest of 2017, to 2 607 million tonnes.

• Most of this year’s projected decline is expected to result from a contraction in coarse grain production, forecast by FAO at nearly 1 350 million tonnes, 36.6 million tonnes (2.6 percent) below the record output gathered in 2017. The bulk of this drop would stem from a predicted 40.5 million tonne (3.7 percent) annual decline in world maize production to 1 047 million tonnes, which would more than outweigh expected expansions in world sorghum and barley outputs. Although the United States would account for the largest proportion of this decrease, due to a likely reduction in plantings, smaller crops are also forecast for several other major producing countries, including Argentina, Brazil, the EU and South Africa.

• World wheat output in 2018 is set to decline to 746.6 million tonnes, down 11.3 million tonnes (1.5 percent) from the 2017 above-average level. The Russian Federation, facing a likely decline of nearly 9 million tonnes mostly due to reduced yield expectations relative to last year’s exceptional outcome, is forecast to drive this year-on-year shortfall. With wheat production in the EU and India also expected to head for a decline in 2018, these decreases will likely outweigh anticipated gains in Australia and the United States.

• FAO tentatively forecasts world rice production in 2018 to reach 510.6 million tonnes, up 1.3 percent (6.7 million tonnes) from 2017 and setting a new high.  The increase is predicted to be driven by area expansion, mostly concentrated in Asia.  Nevertheless, early prospects are also positive for Africa and the United States. Instead, production in Australia could remain largely steady, while it is anticipated to decline in Latin America and the Caribbean and in Europe.

Global cereal utilization heading towards a new high in 2018/19

• FAO’s first forecast of global cereal utilization in 2018/19 suggests an increase of around 16 million tonnes (0.6 percent) from 2017/18, to a new high of 2 626 million tonnes. In addition to an expected rise in food consumption, large supplies and relatively low prices of cereals are also anticipated to boost demand for their feed use, especially in Brazil, China, Mexico, the Russian Federation and the United States.

• Global wheat utilization in 2018/19 is set to increase for the third consecutive season, reaching 743 million tonnes, up 0.8 percent from 2017/18. While total food consumption of wheat is forecast to keep pace with world population growth, its feed use may decline slightly, owing primarily to large supplies of more competitively priced coarse grains.

• Total utilization of coarse grains is projected at 1 373.5 million tonnes, up marginally (0.4 percent) from 2017/18. World feed use of coarse grains could increase by as much as 2 percent to 783 million tonnes in the new season, underpinned by a strong rise in the feed use of maize. Total feed use of maize is projected to exceed the current season’s high level by 2.8 percent to reach an all-time high of 615 million tonnes, with the biggest year-on-year expansions envisaged in China and South America.

• FAO’s first forecast sees world rice utilization to expand by 5.2 million tonnes in 2018/19 to reach 509 million tonnes. Food use is again predicted to drive this growth, overshadowing likely declines in feed and industrial uses.

Trade to remain high in 2018/19

• FAO’s first forecast of global cereal trade in 2018/19 is pegged at 406 million tonnes, implying a mere 0.6 percent decline from the all-time high anticipated for the current season.

• Total trade in coarse grains is projected to reach 185 million tonnes in 2018/19 (July/June), down 1.3 percent from 2017/18. Import reductions in China and the EU are envisaged to drive a 1.3 percent contraction in maize trade to 144 million tonnes, with barley trade flows also seen declining by 1.8 percent to just over 29 million tonnes.

• Global wheat trade in 2018/19 (July/June) is projected to remain close to the 2017/18 level, sustained by strong import demand, especially in Asia. Export supplies are likewise predicted to remain large, in particular in the Russian Federation, which is expected to retain its position as the world’s largest wheat exporter for the second consecutive season.

• Following a 0.7 million tonne upward revision since April, international rice trade in calendar year 2018 is now forecast at 47.6 million tonnes. This level would be just 1 percent short of the 2017 all-time high, owing to continued strong Asian import demand.

Smaller maize inventories in China behind expected decline in global cereal stocks in 2018/19

• At 735.5 million tonnes, FAO's first forecast for world cereal stocks at the close of seasons ending in 2019 points to global inventories falling 20.6 million tonnes (2.7 percent) below their opening levels. An expected reduction in maize inventories in China would account for most of this fall, resulting in the world cereal stock-to-use ratio dropping from a 16-year high of 28.8 percent in 2017/18 to 27.2 percent in 2018/19. Nonetheless, at this level, the ratio would remain above average and exceed the historical low of 20.4 percent registered in 2007/08.

• Wheat inventories could increase by 2.2 million tonnes (0.8 percent) in 2018/19 to nearly 279 million tonnes, as a projected further build-up in China would exceed drawdowns in a number of major wheat exporters, namely the EU and the United States. However, excluding year-on-year changes in China’s wheat stocks, global wheat inventories are seen to decline for the seventh consecutive year. Overall, therefore, while the global wheat stocks-to-use ratio is expected to drop only marginally in 2018/19, the major exporters’ stocks–to-disappearance ratio5/ (which excludes China) is forecast to decline more significantly, from 20.9 percent in 2017/18 to 19.2 percent in 2018/19.   

• Early indications suggest a modest tightening in world coarse grain supplies in the new season. Global stocks are seen declining for the first time in five-years to 283.5 million tonnes and the world stock-to-use ratio dropping from 22.5 percent in 2017/18 to 19.8 percent in 2018/19. However, most of the predicted decline would concern maize inventories in China, which are forecast to shrink sharply (by at least 15 million tonnes) given the Government’s recent policy measures to lower the state reserves. Among world suppliers, anticipated reductions would namely concern maize carryovers in Argentina and Brazil, which could lead to a minor decline in the major exporters’ stocks-to-disappearance ratio to 14 percent.

• By contrast, preliminary prospects point to global rice production exceeding utilization in the forthcoming season. As a result, global rice reserves at the close of 2018/19 seasons could be headed towards their third successive increase, reaching 173 million tonnes. This level would stand 1.2 percent above 2017/18 expectations, being sufficient to keep the world stock-to-use ratio at a comfortable 33.5 percent.

Summary Tables

 

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.