CEREALS

Record production but supplies remain tight

FAO’s latest forecast for world cereal production in 2007 continues to point to a record output, now put at almost 2 125 million tonnes (including rice in milled terms), up 6.2 percent from 2006. The bulk of the increase is expected in maize, reflecting bumper crops already gathered in South America and, if the outlook for record plantings materializes, large production in the United States, which should raise aggregate coarse grains production by over 9 percent. In spite of the strong anticipated increase in world cereal production, total cereal supplies in the new marketing season (2007/08) are foreseen to remain tight because of the expected surge in world cereal utilization. Total cereal utilization is forecast to rise by 2 percent from 2006/07 to 2 114 million tonnes, which would be some 1.4 percent above the 10-year trend. The main driver behind this expansion is strong demand from the biofuel and animal feed sectors. As a result, global end-of-season cereal stocks for crop years closing in 2008 are forecast to increase by only 2.1 percent (10 million tonnes) from their low opening level, to 413 million tonnes. At this level, world cereal stocks-to-use ratio in 2007/08 would reach 19.6 percent, slightly up from the 2006/07 reduced level. International trade in cereals in 2007/08 is forecast at 247 million tonnes, 3 million tonnes less than the 2006/07 estimated level, driven mostly by declines in maize and rice trade in 2007/08. The tight global cereal balance in 2006/07 and now, at the start of the 2007/08 season, have sustained prices of most cereals. With supply prospects for the new season pointing to continued tightness, they are likely to remain high, albeit generally weaker than in 2006/07.

Table 1. World cereal market at a glance