MARKET SUMMARIES

Cereals

World cereal production in 2007 is forecast to reach 2125 million tonnes, up 6 percent from the reduced level in 2006. It would exceed world cereal utilization in 2007/08 which is forecast to grow by 2 percent, to 2 114 million tonnes. As a result, world cereal stocks are likely to rise by 10 million tonnes to 413 million tonnes, still a very low level. World trade in cereals in 2007/08 is forecast at 247 million tonnes, down slightly from 2006/07. While the prospect of a strong recovery in global cereal production in 2007 is a positive development for the 2007/08 marketing season, total supplies in the new season would still be barely adequate to meet an anticipated rising demand, not only from the traditional food and feed sectors but in particular from the fast-growing biofuels industry. As a result, international prices for most cereals are likely to remain high and volatile again in 2007/08.

Wheat

World wheat production in 2007 is forecast to rise by over 5 percent to 630 million tonnes. Total wheat utilization is expected to reach 632 million tonnes, up 1 percent from 2006/07, mostly on faster demand for feed. World wheat inventories are forecast to decline for the second consecutive season, to 148 million tonnes, resulting in the world stocks-to-use ratio reaching 23 percent, down from the previous season and the lowest level since 1980. International trade in 2007/08 is set to remain almost unchanged at 109 million tonnes but export supplies in the new season may prove larger than in 2006/07 mainly because of the expected recovery in Australia’s production. As a result, wheat prices in 2007/08 are likely to remain strong, but somewhat below the high levels reached in the previous season.

Coarse grains

Global coarse grains production in 2007 is forecast at 1073 million tonnes, up 9 percent from 2006 and 3 percent above the 10-year trend. Industrial use, especially by the maize-based ethanol industry in the United States (the main protagonist), is the leading force behind a sharp expected rise in total coarse grains utilization in 2007/08. World inventories are forecast to recover from their very low opening levels, to 163 million tonnes, with most of the increase concentrated in Brazil, the EU and the United States. As a result, the world stocks-to-use ratio for coarse grains is forecast to rise to 16 percent, up from the previous season’s 14 percent low. International trade in coarse grains is anticipated to decline by 2 million tonnes to 108 million tonnes in 2007/08, mostly on smaller maize imports by several countries in Asia. In spite of larger exportable supplies this season, world prices are likely to remain high and volatile, supported by rapid increases in demand from the ethanol industry and uncertainties in the global petroleum sector.

Rice

Although still highly tentative, the FAO forecast of global paddy production in 2007 stands at some 633 million tonnes, virtually matching the record achieved in 2005 and 4 million tonnes above the estimate for 2006. Strong import demand is expected to drive international trade in rice to a new high of 30.2 million tonnes in 2007, largely spurred by a return of Indonesia as a major importer on the rice international scene. With production still running short of consumption, global rice reserves are forecast to shrink over the year, affecting predominantly major exporting countries. Thus, with most of them holding diminished supplies, the rise in import demand this year will need to be balanced at higher price levels, therefore confirming the prevailing tendency for international rice prices to strengthen.

Cassava

The outlook for global cassava production in 2007, while still subject to much uncertainty, could surpass last year’s record level. The favourable prospects are underpinned by measures to increase the utilization of the crop in the larger producing countries, especially for industrial usage including ethanol production. Global trade in cassava products in 2007 could expand considerably, reflecting the anticipated sustained price competitiveness of cassava relative to grains, combined with greater exportable supplies in Thailand, the world’s leading international supplier. World quotations of cassava products have strengthened in the past 12 months and their firmness is set to continue on account of buoyant import demand in Asia and a return to the international market place by the EU for procuring feed ingredients.

Oilseeds

Despite a slowdown in growth in world oilseed production, global supplies of oilmeals and oils in 2006/07 are forecast to remain ample relative to demand owing to record opening stocks. Nonetheless, oilseeds and meal prices have continued to rise, largely under the influence of surging feed grain prices. Unusually high maize prices are dragging up soybean prices as the two commodities are competing in both the feed and energy markets. As for vegetable oils, the firmness of prices mainly reflects poor harvests of high oil-yielding crops and a slowdown in palm oil expansion, against a backdrop of rising demand for biofuels. First forecasts for the 2007/08 marketing season suggest that the steady growth in global oilseed production could come to a halt, as maize cultivation is likely to expand at the expense of soybeans. Given the continued rise in oil and meal demand, this would cause global ending stock levels to fall after three years of growth, which, combined with tightness in cereal markets, would point to continued price firmness in the oilseed complex for the remainder of the year.

Sugar

World sugar prices reached their lowest level in two years in April 2007, when raw sugar prices averaged US cents 9.72 per pound, reflecting expectations of a much larger global surplus than previously estimated. International prices hit a 25-year high in early 2006 as global sugar markets were confronted for the third consecutive year with short supplies and increased demand for ethanol. Producers in many countries increased plantings in response to high sugar prices, with record crops in key producing nations expected to boost output to slightly more than 159 million tonnes in 2006/07, nearly 5 percent more than the previous season. The expected 2.3 percent growth in consumption would seem to provide only very limited support to the overall bearish outlook for the remainder of the 2006/07 marketing year.

Meat and meat products

Increased consumer confidence with meat quality and safety, following a reduced incidence of animal disease outbreaks in the past year, should result in a strong recovery in meat demand in developing countries in 2007, while in the more mature meat markets of developed countries, consumption growth is expected to remain modest. Overall, global meat output is beginning to respond to the renewed demand and is expected to grow by 2.3 percent in 2007. FAO’s meat price index has significantly recovered from a low in 2006 and, in March 2007, stood 7.8 percent higher than in March 2006. However, rising feed prices are putting pressure on livestock profitability. Global meat exports are anticipated to increase by 4.8 percent as trade bans are gradually lifted and markets return to more normal patterns.

Dairy

Prices of dairy products in international trade have soared since the fall of 2006 and are currently at historically high levels. The FAO price index of traded dairy products has risen by 46 percent since November 2006. International prices for milk powders have increased most and are now high relative to other milk products, as stocks in the European Union have disappeared and export refunds have not been applied. The surge in dairy product prices is expected to end over the next several months, especially for milk powders. Prices of other products such as cheese may remain firm or increase further. The outlook for 2007 is for stronger growth in global milk supply, which may increase by 2.7 percent, sustained largely by expansion in those countries more responsive to international prices. Drought in Australia, suspension of milk powder exports by India and Argentina’s export taxes are restraining export supply in the short term. However, EU dairy policy reform is changing the structure of international markets as its export market share declines, creating opportunities for emerging exporters.