FAO/GIEWS - Food Outlook FAO Conference Summary, November 1997

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SUPPLY/DEMAND ROUNDUP



 

CEREALS

The outlook for global food supplies has changed little since the last report and latest information still points to a closely balanced supply and demand situation in 1997/98. With the bulk of the world’s 1997 cereal crops already harvested or about to be gathered, FAO’s forecast of global production has become more firm and now indicates a marginal increase from last year to a record 1 888 million tons (including rice in milled terms). At this level, cereal output would be close to the expected consumption requirements in 1997/98, while stocks would fall further from the already reduced level. The global stock-to-utilization ratio in 1997/98, at about 15 percent, would remain well below the 17-18 percent range that FAO Secretariat considers the minimum necessary to safeguard world food security. As 1997 draws to a close, the probability of a major deterioration in the 1997/98 global outlook from the current forecast is diminishing, notwithstanding the possibility that adverse weather, including that caused by El Niño (see Special Feature on El Niño), may still affect some of the remaining 1997 crops. However, even assuming no change from the current forecast, replenishment of cereal stocks to a level which would ensure world food security will have to wait at least another year, and will require a sizeable increase in production in 1998. Winter wheat planting of 1998 crops is already underway in the major northern hemisphere producers under generally favourable conditions. Early indications suggest that the area sown will remain similar to the previous year. However, the current strong El Niño weather phenomenon, due to peak in December, continues to give rise to concern in some important southern hemisphere producing areas where related weather extremes could have a serious impact on the 1998 harvests. In the current situation, with the margin of security provided by reserve stocks at a relatively low level, even a small deterioration in prospects for the 1998 crops, could lead to sharp price rises with serious consequences for the food security of many Low-Income Food Deficit countries, particularly those which depend on imports to meet a large part of their food requirements. FAO’s latest assessment indicates that in total, 29 of these countries, compared to just 25 in 1996, continue to face food shortages of varying intensity (see box below). Thus the situation calls for close monitoring in the months ahead.

WORLD CEREAL PRODUCTION, SUPPLIES, TRADE AND STOCKS
 
1995/96  1996/97 
estim. 		 1997/98 
f'cast
(. . . . . . million tons . . . . . .) 
Production 1/  1 729  1 883  1 888
Wheat  547  590  606
Coarse grains  810  912  900
Rice (milled)  371  381  381
Supply 2/  2 049  2 144  2 173
Utilization  1 796  1 852  1 888
Trade 3/  205  198  202
Ending Stocks 4/  261  285  278
SOURCE: FAO
1/ Data refer to calendar year of the first year shown. Rice in milled
equivalent.
2/ Production, plus opening stocks.
3/ July/June basis for wheat and coarse grains and calendar year
for rice.
4/ Does not equal the difference between supply and utilization
due to differences in individual country trade years.
 
 
MORE COUNTRIES AFFECTED BY EMERGENCIES IN 1997 

Although in developing countries, cereal production in 1997 is forecast to decline only slightly from last year’s good level, the number of countries facing food emergencies in 1997 has increased to 29 countries compared to 25 in 1996. Of the affected countries, 18 are in Africa, 5 in Asia, 5 in eastern Europe/CIS and one in Latin America.  

In Africa, food supply difficulties have been caused mainly by weather adversities in eastern Africa, although civil strife continues to play a significant part. In Ethiopia, the short rains failed in several areas resulting in a poor "belg" harvest and prospects for the main "meher" crops in the same areas are unfavourable. In Uganda, a smaller crop than last year is being harvested and maize and bean prices have substantially increased. The situation is particularly difficult in the eastern and north-eastern part hit hardest by a severe drought early on in the year and in the northern and western parts affected by civil strife. In Somalia, the recently harvested "Gu" crop was reduced for the third consecutive year, while in Tanzania the 1997 cereal crop declined by one-third from last year’s and food assistance is needed in many districts. In Rwanda and Burundi, production showed some recovery but continues to be well below pre-crisis levels. In Sudan, the first season harvest in the war-torn south was down and the food situation remains precarious. In western Africa, harvest prospects are generally favourable, but localized poor harvests are anticipated in parts of the Sahel. Elsewhere in western Africa, the already precarious food situation in Sierra Leone has continued to deteriorate and is likely to become desperate with the recently imposed embargo. In Liberia, some recovery in production is evident but the country will continue to need food assistance for some time. In southern Africa, while the overall food supply situation is satisfactory, shortages have developed in Malawi due to reduced harvest. There is also general concern about the possibility of an El Niño-induced drought during the just-started cropping season.  

In Asia, a severe drought in Korea, D.P.R. last summer, coupled with a destructive typhoon, both occurring against a backdrop of two successive years of floods in 1995 and 1996, resulted in a most desperate food situation. Elsewhere, serious food supply problems persist in Mongolia, particularly for vulnerable sections of the population. In Iraq, while the food supply situation has eased with the implementation of the oil-for-food agreement (SCR 986), malnutrition remains a serious problem throughout the country. A recent FAO/WFP Mission observed that while the food rations provided under SCR 986 will provide a significant proportion of overall energy and protein needs, the provisions are low or deficient in a number of other essential nutrients which can only be supplied by a more balanced diet that includes fruits and vegetables as well as animal products.  

In the CIS, targeted food aid to vulnerable populations continues to be required in Armenia, Azerbaijan, Georgia, and particularly Tajikistan, where over 16 percent of the population need assistance to survive. 
 
 

As indicated above, FAO's latest forecast for world cereal production in 1997 now stands at a record 1 888 million tons (including rice in milled terms), 19 million tons up from the forecast in the previous report and marginally above the revised estimate of output in 1996. With most 1997 wheat harvests in the northern hemisphere, which account for the bulk of the world's wheat crop, drawing to a close, latest information points to a record global wheat output of 606 million tons in 1997, 16 million tons up from last year's good crop. Larger than expected crops have been gathered in several northern hemisphere countries, particularly in the CIS. In the southern hemisphere, despite earlier concern over the possible effect of El Niño, a good crop is now in prospect in Australia. However, in South America, where the 1997 wheat crop has also still to be gathered, possible El Niño-related rainfall could still have a major impact on harvest results there. For coarse grains, FAO's forecast for global output in 1997 has been increased, by 12 million tons, since the last report to 900 million tons, marginally below the 1996 crop but still above trend. The latest revision mostly reflects upward adjustments to the estimates for Europe, the CIS and Australia. World paddy rice production in 1997 is now forecast at 568 million tons (381 million tons in milled terms), 1 million tons up from the previous forecast, and virtually unchanged from the record crop last year. The latest revision is mostly due to an increase in China's expected production. The main paddy crops in the northern hemisphere are at an advanced stage of development and harvesting has started in some countries.

WORLD CEREAL PRODUCTION - FORECAST FOR 1997
 
Wheat  Coarse grains  Rice (paddy)  Total 1/ 
1996  1997  1996  1997  1996  1997  1996  1997
( . . . . . . . . . . . . . . million tons . . . . . . . . . . . . . ) 
Asia  230.4  246.1  220.6  199.8  519.0  518.1  970.0  964.0
Africa  22.8  15.4  87.2  81.7  15.7  16.2  125.6  113.4
Central America  3.4  3.7  27.0  28.3  2.0  2.1  32.4  34.0
South America  22.0  19.8  54.3  61.4  18.2  18.2  94.5  99.5
North America  92.0  92.3  296.3  289.6  7.8  8.2  396.0  390.1
Europe  128.3  132.8  159.8  167.9  2.9  2.6  291.0  303.3
CIS  67.4  78.3  55.3  62.1  1.3  1.5  123.9  141.9
Oceania  24.0  17.9  11.4  9.4  1.0  1.4  36.3  28.8
WORLD  590.2  606.4  911.8  900.1  567.8  568.4  2 069.8  2 074.9
Developing countries  275.3  281.7  378.0  361.3  542.0  541.7  1 195.3  1 184.7
Developed countries  314.9  324.7  533.8  538.8  25.8  26.7  874.5  890.2
SOURCE: FAO
1/ Total cereal, including rice in paddy terms.

The 1997 cereal output estimates are now firmer, since the last report, as harvesting has advanced well over the past two months in several countries throughout the globe. However, the major wheat crops in the southern hemisphere and the bulk of the main paddy crop in Asia have still to be gathered. Thus, the above forecasts are still subject to revisions. As mentioned above, the El Niño phenomenon which has been observed since March this year, and, according to latest information is developing as predicted to peak in December, gives cause for concern in some areas of the globe. However, as the most intense impact of El Niño is expected from December this year to March 1998, it is the 1998 cereal crops in several countries of the southern hemisphere, currently being, or soon to be planted, that are most at risk.

FAO's forecast of world imports in cereals in 1997/98 (July/June) has been raised by 1 million tons, to about 202 million tons, since September. This would be about 4 million tons, or 2 percent above the revised estimate of the previous year's reduced volume. The latest revision reflects increased forecasts for coarse grains and rice imports which, in aggregate, would more than offset a major downward adjustment to that for wheat. The forecast of global wheat imports in 1997/98 has been lowered by 1 million tons since September to 93 million tons, which would be close to the revised estimate for 1996/97. Although the latest reduction reflects downward adjustments to the expected imports by some developing countries in Asia, total imports by the developing countries as a group are still expected to rise by 3 million tons from the previous year to about 76 million tons. By contrast, and offsetting this increase, aggregate imports by the developed countries are expected to fall by 3 million tons to 17 million tons. Global coarse grain imports in 1997/98 (July/June) are now forecast at 90 million tons, 1 million tons up from the September forecast and about 3 million tons above the previous year’s volume. Increased imports by the developing countries, which are forecast close to the 1995/96 level at about 59 million tons, accounts for all of this year’s anticipated expansion. The expected increase among these countries would more than offset a forecast reduction in coarse grains imports by the developed countries, for the sixth year in succession. With regard to rice, world imports in 1998 are tentatively forecast to increase to about 19 million tons, from the latest estimate of 18 million tons traded in 1997. Many of the major importing countries are expected to enter 1998 with lower stocks than a year earlier, while consumption is forecast to rise.

World utilization of cereals in 1997/98 is forecast at 1 888 million tons, nearly 2 percent or 36 million tons up from the previous year, and above the long-term trend (1984/85-1996/97) for the second consecutive year. Global food consumption of cereals in 1997/98 is forecast to rise by 1.5 percent to 950 million tons, with most of the increase expected in the developing countries. This expansion would be sufficient to maintain per caput food consumption at around the previous year’s level. Global feed use is expected to rise significantly, by about 3 percent, to 667 million tons. The increase in both in the developed and developing countries reflects good coarse grain crops and generally lower prices compared to the previous season.

Based on early indications, cereal food aid shipments in 1997/98 (July/June) are forecasts to remain close to the reduced 1996/97 level, now estimated at about 5 million tons. Last year’s cereal shipments fell for the fourth consecutive year, by some 2.8 million tons or 37 percent below the 1995/96 level. Of the total cereal shipments in 1996/97, LIFDCs received about 4 million tons, 2.6 million tons, or 39 percent, less than in 1995/96, which covered only 6.5 percent of these countries estimated total imports compared with about 13 percent in 1993/94. Shipments of non-cereals as food aid also fell in 1996 (January/December) and early indications point to a further reduction in 1997. Furthermore, as far as the obligation under the 1995 Food Aid Convention is concerned, total grain shipments (including pulses and derived products) in 1996/97 were close to the minimum commitments of 5.35 million tons (in wheat equivalent).

With the exception of rice, international export prices of all other major cereals have remained firm or strengthened somewhat in recent weeks, mainly reflecting active trading. By late-October, U.S. wheat No. 2 (Hard Red Winter, fob) was quoted at U.S.$ 158 per ton, up about U.S.$ 8 per ton from September but still some U.S.$ 22 per ton down from a year earlier. International maize prices have strengthened further, reflecting a fundamentally tight supply situation in the long-term, recent strong import demand and concerns over the 1998 production prospects for some southern hemisphere producers where output may be adversely affected by El Niño. By late-October, United States maize prices were quoted at around U.S.$ 123 per ton, up by about U.S.$ 11 per ton from September. By contrast, international rice prices remained depressed over the past weeks reflecting the arrival of new crop supplies in some Asian countries and limited new demand. The FAO Export Price Index for rice (1982-84=100) averaged 121 points during the first three weeks of October, 1 point below the previous month. In the same period, quotes for Thai 100B rice averaged U.S.$ 281 per ton, down U.S.$ 2 per ton from the preceding month, and about U.S.$ 40 per ton below the price a year earlier.

LATEST CEREAL EXPORT PRICES *
 
1997  1996
October  Sept.  October
(. . . . . . U.S.$/ton . . . . . .) 
United States 
Wheat 1/  158  150  180
Maize  123  112  131
Sorghum  117  109  118
Argentina 2/ 
Wheat  152  154  145
Maize  123  112  149
Thailand 2/ 
Rice white 3/  277  288  330
Rice, broken 4/  197  208  210
SOURCE: FAO, see Appendix Table A.9
* Prices refer to the third week of the month.
1/ No. 2 Hard Red Winter (Ordinary Protein).
2/ Indicative traded prices.
3/ 100% second grade, f.o.b. Bangkok.
4/ A1 super, f.o.b. Bangkok.

FAO's forecast for cereal stocks for crop years ending in 1998 has been lowered by 2 million tons since the last report to about 278 million tons, which would be about 2 percent below their opening levels with the change from the previous year amplified by an upward revision to last year's ending stocks. The bulk of this year's decrease in world cereal stocks is expected in coarse grains and rice. Although wheat inventories are forecast to increase for the second consecutive year, mostly among the importing countries, global wheat inventories will remain much below the levels of the early nineties. Globally, the ratio of end-of-season stocks in 1998 to

trend utilization in 1998/99 is forecast at slightly below 15 percent, remaining well below the 17 to 18 percent range which the FAO Secretariat considers as the minimum necessary to safeguard world food security.



 
 

OTHER FOODS

World cassava production in 1997 is forecast to grow by 1 percent to 164 million tons, mainly reflecting increased output in Africa and Asia, while that in Latin America and the Caribbean is anticipated to remain similar to the previous year. Demand for cassava is on the rise in most of the major consuming countries. In Africa, consumption of fresh cassava is expected to increase as a substitute for more expensive or unavailable cereals. In Asia, usage of cassava in feed, alcohol and starch production is expected to expand, while in Latin America, the crop is evolving from a traditional staple to a market oriented raw material for the manufacture of food, feed and industrial products. World trade in cassava dry products is forecasts to rise by some 3 percent in 1997 to 6 million ton. Although the EC remains a major user of dry cassava products for livestock feed manufacture, this year's increase in trade mainly reflects larger shipments to non-EC countries, in particular several countries in Asia. Thailand and Indonesia continue to be the major suppliers to the world market. Demand for cassava in the EC has been somewhat depressed compared to 1996 due to weaker demand for compound feed for pigs and increased usage of domestically produced feed grains. As a result, the EC import price for cassava pellets, the major cassava product traded internationally, fell in the first nine months of 1997 to the lowest level in real terms for the last ten years.

Global output of milk is expected to increase by 1 percent in 1997, to 545 million tons, bringing to an end several years of stagnation. Among the developed countries, the continuing decline in output in the CIS has been more than offset by increased production in several other countries. In the developing countries, growth in milk production was particularly strong in Asia and Latin America, largely reflecting an expansion in demand in these regions. International demand for dairy products during 1997 has been mixed. Imports of cheese remained similar to the previous year, trade in butter increased, mostly due to a sharp increase in purchases by the Russian Federation, but international demand for milk powder was subdued for most of 1997. Apart from a decline in butter stocks in the EC, reflecting growth in domestic demand and larger exports, public stocks of dairy products in 1997 have not changed significantly. Indicative dairy export prices for most dairy products were lower during the first nine months of 1997, compared to a year earlier. However, butter prices began to strengthen from the middle of the year and, since September, milk powder prices have also firmed. With regard to prospects for the dairy sector in 1998, the small growth in milk output witnessed this year is expected to continue. However, supplies of dairy products on the international market are not expected to change significantly and sustained demand should support the continuation of the current strengthening in dairy prices.

FAO forecasts world sugar production in the 1997/98 cropping seasons at 123 million tons, marginally above the previous year's level. Increased production anticipated in Europe, North America and Latin America should offset an expected decrease in the Far East. However, world sugar consumption in 1998 is also forecast to increase, rising by 2 percent to just over 123 million tons, mostly in the Far East and Latin America, and outgrowing production. As a result, a drawdown in global sugar stocks is expected. The emerging tighter supply situation in 1997/98 is already supporting international sugar prices. Over the past four months, the International Sugar Agreement composite daily price fluctuated in a narrow range, remaining on above U.S. cents 11 per lb.

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