|No. 3||Rome, June 2003|
Early indications for global cereal stocks in 2003/04 point to a significant drawdown for the fourth consecutive season. World cereal stocks at the end of countries’ marketing seasons in 2004 are tentatively put at 399 million tonnes, some 69 million tonnes, or 15 percent, below their opening levels. Although a bigger global production is expected in 2003, the projected total cereal utilization in 2003/04 would still be larger than the expected production, thus necessitating a significant drawdown of stocks.
At the current forecast levels, the total cereal stocks-to-use ratio in 2003/04 would drop to 20 percent, even further below the two-decade low of 24 percent estimated for 2002/03. The forecast drop of around 37 million tonnes in wheat inventories would account for the bulk of the anticipated contraction in world cereal stocks in 2003/04, followed by a likely reduction of around 19 million tonnes in global rice stocks and 13 million tonnes in coarse grain inventories.
As in the previous seasons, lower stocks in China would account for the bulk of the reduction in world stocks. In view of another decline in 2003 cereal production, China is expected to reduce its stocks by nearly 61 million tonnes to meet the steadily rising domestic demand. While the exact size of stocks in China is uncertain, the large and rapid reductions in China’s cereal stocks make it difficult to analyze and understand domestic as well as international market developments (see next page..). Apart from the developments in China, stocks in India are also forecast to decline by 10 million tonnes in 2004, following a 19 million tonnes drop already estimated for 2003.
World Carryover Stocks of Cereals
By contrast, major grain exporters are expected to replenish their largely depleted stocks on the back of a strong recovery in their production. For wheat, stocks held by major exporters are forecast to rise to 44 million tonnes, up 8 million tonnes from 2003. The increase would be mostly in the United States, Canada and Australia, while inventories in the EU could still remain at relatively high levels and unchanged from 2002/03. For coarse grains, aggregate inventories in major exporters are expected to rise to 60 million tonnes, up 5 million tonnes from 2003, mostly in the United States, given the expected bumper maize crop in 2003. By contrast, inventories in the EU could decline in 2004 as production is forecast to remain at last year’s level but domestic utilization is likely to rise in view of the anticipated reduction in imports of feed wheat.
Global cereal stocks by the close of the seasons ending in 2003 are forecast at 468 million tonnes, almost unchanged from the previous report. At this level, world stocks would still be 112 million tonnes, or 19 percent, below their reduced opening levels; a decline that represents the largest year-on-year drop in two decades. The anticipated contraction in global stocks is mostly concentrated in China and India, but inventories held in several major exporting countries are also expected to decline as a result of reduced crops.
World wheat stocks by the close of the seasons ending in 2003 are currently forecast at around 180 million tonnes, up nearly 10 million tonnes since the previous report but still some 45 million tonnes, or 20 percent, below their opening levels. Most of the reduction from the previous season reflects drops in inventories in China (down 27 million tonnes), United States (down 9 million tonnes) and India (down 6 million tonnes). The cut in 2002 production in China and in the United States has been the main factor for the decline in their stocks. However, in India, which already started the season with large carryovers and even higher production in 2002, large exports could significantly reduce wheat inventories this season, although, according to the Government, they would still remain well above the minimum safe levels.
With marketing seasons in most northern hemisphere countries drawing to a close, production, trade and consumption estimates become firmer, resulting in adjustments to earlier estimates for end-of-season stocks. The most significant revisions since the previous report include upward adjustments to the estimates for the Russian Federation (up 4.5 million tonnes), Ukraine (up 1 million tonnes), the EU (up 1.3 million tonnes), Bulgaria (up 900 000 tonnes), the Islamic Republic of Iran and the Syrian Arab Republic (up 600 000 tonnes in each case). The only major downward revision concerns India (down 1 million tonnes).
Wheat stocks held by the five major exporters are currently forecast to reach 36 million tonnes, down 11 million tonnes, or 23 percent, from the previous season. Based on the latest forecasts, the ratio of major exporters’ total aggregate wheat stocks to their total disappearance (the sum of their domestic consumption and exports) is expected to fall to only 17 percent, down from the previous season and 3 percentage points below the average since the mid-1990s. Among the major exporters, only the EU is expected to end this season with higher wheat inventories (up 3.6 million tonnes) due to good production and large imports. However, wheat stocks held in the United States are forecast to hit a 20-year low of only 12 million tonnes, reflecting a sharp decline in domestic production. Severe droughts reduced production in Australia and Canada where, as a result, wheat inventories are also forecast to fall sharply in those countries.
World coarse grain stocks for crop years ending in 2003 are forecast to reach 167 million tonnes, down 10 million tonnes from the previous report and now 38 million tonnes, or 19 percent, below their opening levels. Most notable revisions since the previous report were made to carryover estimates for China, the United States, the Syrian Arab Republic, Saudi Arabia, Sudan and Egypt.
The anticipated decline in world coarse grain stocks in 2003 is mostly concentrated in China (maize, down 16 million tonnes from the previous season), where the increase in 2002 production has not sufficient to meet the rising feed demand, and in the United States (maize, down 13 million tonnes), mostly as a result of a poor harvest in 2002. A decline in maize production in Brazil is forecast to result in a significant (600 000 tonnes) drawdown of stocks in that country. All major exporters are likely to reduce their stocks sharply in 2003 except for the EU, where coarse grain stocks are likely to remain unchanged from their opening levels. For this reason, the ratio of major exporters' total coarse grain stocks to their total disappearance is also forecast to drop, reaching only 13 percent, which would be 3 percentage points below the previous season and the average since the mid-1990s.
The forecast for world rice inventories at the end of the marketing seasons in 2003 has been revised downward since the last report from 123 million tonnes to 122 million tonnes, some 28 million tonnes below their opening level and the lowest level for more than two decades. The overall contraction is mostly due to China and India, which are now set to experience reductions in the order of 15 million tonnes and 12 million tonnes, respectively.
The downward revision in closing stocks in 2003 was brought about by a lower official estimate for the United States and expectations of smaller carryovers in countries that harvested poor crops in 2002, namely India, the Republic of Korea and Japan.
There is still considerable uncertainty regarding the level of rice stocks at the close of the 2004 season, since they will mainly depend on the outcome of this season’s main paddy crops in Asia, the bulk of which have not yet been planted. However, based on current expectations of a moderate recovery in global output and steady growth in utilization, a 19 million tonnes drawdown in world rice inventories to 103 million tonnes is currently foreseen. China, which is estimated to hold about 60 percent of global stocks, would again account for much of the contraction given the expected drop in production this season. Similarly, an exceptionally low harvest in Australia should result in a sharp decline in end-of-season inventories in that country. Carry-over levels in India could also fall if the FCI policy to sustain international sales is maintained. Indonesia’s efforts to curb the level of imports may also result in lower closing rice inventories in 2004. Other countries may experience a drop in stocks, including Japan, under its programme to cut paddy production and increase rice utilization.