FAO/GIEWS - Food Outlook, April 1998

CEREALS

SUPPLY/DEMAND ROUNDUP

Early prospects for the 1998 cereal crops point to an output only slightly below last year’s record. Based on the condition of crops already in the ground and planting intentions for those to be sown later this year, and assuming normal weather for the remainder of the 1998 cropping seasons, FAO’s first forecast puts world cereal output this year at 1 895 million tonnes (including rice in milled terms), compared with 1 908 million tonnes in 1997. If current forecasts materialize, cereal supplies would be sufficient to meet expected consumption requirements in 1998/99 but global cereal reserves would continue to remain below minimum safe levels. It should be pointed out that, with many of the 1998 crops still to be sown and others just in the early stages of development, these forecasts are very tentative. A deterioration of the prospects for 1998 crops cannot be ruled out, particularly in several southern hemisphere countries affected by unpredictable El Niño-associated weather, and this could reverse this year’s modest improvement in the level of global cereal reserve stocks.

As mentioned above, FAO’s first forecast of world cereal production in 1998 is 1 895 million tonnes (including rice in milled terms), compared with 1 908 in 1997. Wheat output is provisionally forecast at 595 million tonnes, 3 percent down from 1997 and just on trend after above-trend crops in the previous two years. Although output is forecast to rise in Africa and Europe, this would be more than offset by lower crops expected in Asia, North America, and the CIS. In Argentina and Australia, the largest southern hemisphere producers, the bulk of the 1998 wheat crops will not be sown until later this year but early indications point to reduced wheat plantings in favour of other crops, and thus smaller outputs are tentatively forecast. Regarding coarse grains, FAO’s first forecast of global output in 1998 is 920 million tons, marginally up from 1997 and above trend for the third consecutive year. Output is forecast to increase in Asia, Africa, North America and Oceania, more than offsetting smaller crops expected in Central America, Europe and the CIS. In South America, output is anticipated to remain close to the previous year’s level. However, since most coarse grain crops in the northern hemisphere are yet to be sown, this early forecast is very tentative. As regards rice, in most of Asia, where the bulk of the crop is grown, the season has yet to begin pending the arrival of the monsoon rains. While it is still too early to make a firm forecast of 1998 paddy production, FAO is tentatively anticipating a decline in global paddy production in 1998 to 565 million tons from the record crop in 1997. This reflects unfavourable growing conditions in some countries in the southern hemisphere and around the equatorial belt after delays in seeding had been experienced due to adverse weather.

FAO’s forecast for world trade in the current 1997/98 marketing year has been raised by 600 000 tonnes since the last report to nearly 202 million tonnes which is 1.4 million tonnes above the previous year’s reduced volume. Record rice imports forecast in 1998 are expected to account for all of this increase as imports of both wheat and coarse grains are expected to decline. FAO’s forecast for global wheat and wheat flour (in wheat equivalent) imports in 1997/98 (July/June) is now 92.5 million tonnes, marginally down from the previous report and 1.2 million tonnes below the 1996/97 volume. A sharp reduction in purchases by the developed countries is expected to more than offset an increase in imports by the developing countries. The forecast for world coarse grain imports in 1997/98 (July/June) has been lowered by 1 million tonnes from the previous report to 87.7 million tonnes, which would be just below the previous year’s reduced volume. While aggregate imports by the developing countries in 1997/98 are anticipated to increase by almost 2 million tonnes, this would be more than offset by another reduction, for the sixth consecutive year, in imports by the developed countries. FAO’s forecast for world rice trade in 1998 has been increased by 1.7 million tonnes from the previous report to a record 21.6 million tonnes, mainly reflecting reduced 1997 crops and unfavourable prospects for 1998 main-season crops in some major importing countries.

FAO's latest forecast of world cereal utilization in 1997/98 is 1 889 million tonnes, or 1.7 percent up from the previous year and above the long-term trend. Global food consumption of cereals is forecast at 950 million tonnes, 1.5 percent up from the previous year, mostly reflecting larger consumption expected among the developing countries. At the forecast level, global per caput food utilization should be maintained at 163 kilograms in 1997/98. Global utilization of cereals as animal feed is also expected to increase in 1997/98 to 665 million tonnes. All of the growth is expected among the developed countries. With regard to the individual cereals, wheat consumption is expected to rise by 3.6 percent to 599 million tons, while rice consumption is expected to an increase by only 0.7 percent from the previous year to 384 million tons, mostly in Asia. Global use of coarse grains is expected to increase by just less than 1 percent to 906 million tonnes.

Global food aid shipments of cereals in 1997/98 (July/June) are now forecast to increase to 5.5 million tonnes, about 12 percent up from the sharply reduced volume in 1996/97 and still less than half the volumes of the early 1990s. Of the total, the low-income food-deficit countries (LIFDCs) are expected to receive about 4.6 million tonnes, which would be about 500 000 tonnes more than in the previous year. However, this amount would represent only 6.5 percent of their forecast total cereal imports in 1997/98, compared with 17 percent in the early 1990’s.

International wheat prices have weakened in the first quarter of 1998 as large supplies from Argentina and Australia started to enter the market. By the fourth week in March, wheat prices from all major origins were substantially below their previous year’s values. The price for US wheat No. 2 (HRW, fob) stood at US$141 per tonne, down US$4 per tonne from January and US$39 per tonne below the corresponding period a year ago. International maize prices have also weakened somewhat in recent weeks. By the fourth week of March, US maize prices were quoted at around US$111 per tonne, similar to January’s level but some US$13 per tonne less than a year ago. Prices remain under pressure reflecting weaker import demand from several countries in Asia, associated with the financial crisis, and from generally favourable 1998 crop prospects. By contrast, international prices for rice from most origins have strengthened during the first quarter of 1998. Import demand for rice remains strong while concerns over export availabilities have begun to surface. The FAO Export Price Index for Rice (1982-84=100) averaged 124 points during March, up from 123 points in February but down 7 points from a year ago.

FAO’s forecast of global cereal stocks at the end of the 1997/98 seasons is now put at 302 million tonnes, some 10 million tonnes, or 3 percent, above their opening levels. The bulk of this year’s increase is expected in wheat, while inventories of coarse grains and rice are forecast to decline slightly. However, although the modest stock replenishment expected for this year, and the second in succession, is a welcome development for world food security, the ratio of end-of-season stocks to utilization in 1998/99, now estimated at about 16 percent, would still be below the 17-18 percent range the FAO Secretariat considers the minimum safe level. Furthermore, as indicated earlier, although initial production forecasts for 1998 assuming normal weather until harvests later in the year point to a global cereal output large enough to meet expected consumption requirements in 1998/99, global cereal reserves are likely to remain below minimum safe levels for yet another year. Thus, the situation needs to be closely monitored in the coming months as any significant deterioration in the 1998 cereal production from current forecasts, which is still possible, could have serious implications for the global food supply/demand outlook for 1998/99.