FAO/GIEWS - Food Outlook No.5 - November 1999 p. 3

CEREALS

SUPPLY/DEMAND ROUNDUP

With the bulk of the 1999 cereal crops already harvested, or about to be gathered, latest information continues to point to another above-average world output of 1 866 million tonnes (including rice in milled terms), only slightly below the previous year's level. At this level, cereal output would be just below the anticipated utilization in 1999/2000 and, as a result, stocks which have been built up over the past three years would have to be drawn down by 2.5 percent. Nevertheless, the ratio of expected global cereal carryovers in 2000 to trend utilization in 2000/01, at 17.3 percent, would remain within the 17 to 18 percent range that the FAO Secretariat considers as the minimum necessary to safeguard world food security. However, it should be noted that although global cereal stocks are forecast to decrease, those held by the major exporting countries, which are the main buffer against any major production shortfall, are forecast to change relatively little from their opening level, which now stands at over 150 million tonnes, and is more than double the level 4 years ago when the last cereal price surge occurred. International export prices for the major cereals remain generally weaker than a year ago. As 1999 draws to a close, the probability of a major change in the 1999/2000 global cereal supply/demand outlook is diminishing. However, the number of countries facing food shortages throughout the globe is on the increase, reflecting war/civil strife, natural disasters and economic crises, and continues to give cause for concern (see page 6).

WORLD CEREAL PRODUCTION, SUPPLIES, TRADE AND STOCKS

As indicated above, FAO's latest forecast for world cereal production in 1999 now stands at 1 866 million tonnes (including rice in milled terms), 4 million tonnes down since the last report in September. The latest revision is mostly due to a reduction of the coarse grains estimates for several countries throughout the globe, but particularly in Asia and North America, which more than offset upward revisions for both the global wheat and rice crops. At the forecast level, world cereal production in 1999 would be 0.9 percent below last year but above the average of the past five years. The forecast for world wheat output has been increased by 3 million tonnes since the last report, to 582 million tonnes. The latest revision is largely the cumulative result of several small adjustments to estimates of crops already gathered in the northern hemisphere, as well as to forecasts for those yet to be harvested in the southern hemisphere. At the forecast level, wheat output in 1999 would be 2.1 percent down from 1998 but above the average of the past five years; significant production declines in Europe, North America and Africa and a marginal reduction in Central America would more than offset increases in Asia, South America and Oceania. Planting of the winter wheat crops for harvest in 2000 is already underway in the major northern hemisphere producers under generally favourable conditions. The area likely to be sown for next year's crop is very uncertain, but early indications suggest that no major change from last year would occur. FAO's forecast for the 1999 world coarse grain output has been revised downward by some 10 million tonnes since the last report, to 889 million tonnes, mostly reflecting downward adjustments to the forecasts for Asia and North America. At the forecast level, global output of coarse grains in 1999 would be 1.8 percent below the 1998 crop but close to the 5-year average; smaller crops are now expected in Asia, Africa, North and South America and Oceania, more than offsetting marginal increases in Europe and Central America. Global paddy output in 1999 is now forecast to reach a record 590 million tonnes (395 million tonnes in milled terms), well above last year's crop and the previous record of 578 million tonnes (387 million tonnes milled) set in 1997. In the southern hemisphere and around the equatorial belt, where the 1999 paddy season is virtually complete, output recovered significantly from last year's levels. In the northern hemisphere harvesting is in progress, and barring any major weather-related problems in the coming weeks, bumper harvests are expected in several countries.

FAO's forecast of world imports of cereals in 1999/2000 (July/June) has been raised by 3 million tonnes, to 221 million tonnes, since September, mostly reflecting stronger demand for wheat and coarse grains than anticipated earlier. At the forecast level, the volume of cereal imports would be 8 million tonnes, or nearly 4 percent above the previous year's revised level, with the expansion shared among a few developed countries and several of the developing countries, particularly those in the Low-Income Food-Deficit category. The forecast of global wheat imports has been revised upward by 1 million tonnes to 102 million tonnes, which would be 4.6 million tonnes, or 5 percent, more than in the previous year. Larger wheat imports are anticipated in several countries in Asia, Europe and North Africa. Global coarse grain imports in 1999/2000 are now forecast at 96 million tonnes, 1.5 million tonnes up from the September forecast and about 3.7 million tonnes above the previous year's volume. Similarly to wheat, larger coarse grain imports are expected in several countries in Asia, Europe and North Africa, as well as in some sub-Saharan countries in Africa. With regard to rice, world imports in 2000 are very tentatively forecast to remain close to the current year's level. Trade in 1999 is now forecast at 23.5 million tonnes, which is some 800 000 tonnes up since the last report but, nevertheless, 4 million tonnes below the previous year's record.

World utilization of cereals in 1999/2000 is forecast at 1 876 million tonnes, 10 million tonnes, or 0.5 percent up from the revised estimate for the previous year, and exceeding global production for the first time in four years. While food consumption of cereals is anticipated to continue to increase to keep pace with population growth, feed use of cereals is expected to decline for the second consecutive year, largely reflecting a continued contraction of the livestock sector in the Russian Federation.

International export prices of all major cereals have remained under downward pressure in recent weeks. By the third week of October, U.S. wheat No. 2 (Hard Red Winter, fob) was quoted at US$112 per tonne, down US$2 from August, and down US$16 per tonne from a year ago, mainly reflecting good harvest results in the major producing countries. International maize prices weakened further as well, also under pressure from larger harvests among some of the major producers. During the third week of October, U.S. No 2 yellow maize was quoted at US$67 per tonne, US$5 per tonne down from August, and US$33 per tonne below the price a year earlier. The FAO Rice Export Price Index (1982-84=100) averaged 109 points during October, 7 points down from August and the lowest level in the past five years. Again, the arrival of new crop supplies on the market, and record crops in some cases, and limited import demand, are the main cause behind the price weakness for rice.

FAO's forecast for global cereal stocks for crop years ending in 2000 has been raised by 8 million tonnes since the last report to 331 million tonnes, with the change amplified by an upward revision to last year's ending stocks. However, despite the latest revisions, world cereal stocks by the close of crop years ending in 2000 would be nearly 9 million tonnes, or 2.5 percent, below their opening levels, falling for the first time after successive build-ups during the past three years. As a result, the ratio of global cereal carryovers in 2000 to trend utilization in 2000/01 is expected to fall to 17.3 percent from the previous year's revised level of 18.1 percent but would, nevertheless, remain within the 17 to 18 percent range that the FAO Secretariat considers as the minimum necessary to safeguard world food security.