FAO/GIEWS - Food Outlook No.4 - September 2000 p. 6

Trade^1/

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1/ World trade in wheat and coarse grains is based on estimated imports delivered through 30 June of the July/June trade year. Some late-season purchases may be included in the next season if deliveries occur after 30 June. In general, exports and imports are calculated based on estimated shipments and deliveries during the July/June trade season and thus they may not be equal for any given year due to time lags between shipments and deliveries.

Early indications point to yet another active trade season after last year's unforeseen large expansion in world cereal imports

World cereal trade in 2000/01 is currently forecast at 232 million tonnes, some 11 million tonnes more than was reported in June. The estimated volume of cereal imports in 1999/2000 has also been raised, and is now put at 231 million tonnes, more than 6 million tonnes higher than estimated earlier. These revisions mainly involve upward adjustments to wheat and coarse grains, while estimates for rice imports have changed little. As far as the previous year is concerned, this month's revisions mostly reflect reports of higher grain imports by several countries; in Asia, China, Indonesia, the Islamic Republic of Iran and the Philippines; in Africa, Morocco, Kenya and Sudan; in Latin America, Mexico and Colombia; and the EC. Even more pronounced, however, is the revision to the forecast for cereal trade in 2000/01, which has been raised substantially compared to the previous report largely in view of reduced production prospects in several grain importing countries. FAO's first forecast for global cereal food aid shipments in 2000/01 (July/June) is put at 9.5 million tonnes, 5 percent below the revised estimate of 10 million tonnes shipped in the previous year.

For the developing countries as a group, cereal imports in 2000/01 are put at a record 168 million tonnes, up 2 million tonnes from last season's already high level. Based on this forecast, and taking into account the current prospects for cereal food aid and prices during the course of the 2000/01 season, the cereal import bill of the developing countries is expected to approach US$22 billion, just over US$1 billion above the previous year, but substantially below the high levels registered between 1994 and 1997, when cereal prices were much higher than in recent years. For the Low-Income Food Deficit Countries (LIFDCs), the total volume of their cereal imports in 2000/01 is put at 74 million tonnes, which would be roughly some 1 million tonnes more than last year, mainly because of a likely increase in imports by several countries in Africa. At this level, the overall cereal import expenses for the LIFDCs, as a group, is forecast at US$9.5 billion, up US$500 million, or 5 percent, from 1999/2000 but substantially below the levels in the mid-1990s, when it peaked at almost US$17 billion.

International trade in wheat and wheat flour (in grain equivalent) in 2000/01 (July/June) is currently forecast to reach 107.5 million tonnes, roughly similar to the previous year's revised volume, but 6 million tonnes more than last reported in June. Lower production and strong import demand in several countries are among the reasons for this month's upward revisions. At the current forecast level, world trade would be the highest on record, mostly reflecting a surge in imports by the developing countries, which are likely to reach 82 million tonnes, equivalent to US$10.7 billion in value terms. For the LIFDCs, although wheat imports could decline marginally to about 41 million tonnes, their value would remain roughly the same as last year, allowing for a small recovery in overall prices.

As in the previous year, continuing large imports by several countries in Asia are mostly responsible for the surge in world trade. China (mainland) is likely to return to the international wheat market this year as a bigger purchaser of wheat, importing at least 3.6 million tonnes, 1 million tonnes more than was anticipated earlier, due to deteriorating production prospects. The forecast for imports by the Islamic Republic of Iran has been raised this month by 800 000 tonnes to 6.8 million tonnes, in view of the tightening of the domestic supply and demand situation as severe drought hampered production for the second consecutive year. In Africa, the volume of wheat imports in 2000/01 could approach 25 million tonnes, up 6 percent from the previous year. This increase would be mostly on account of larger shipments into North Africa, where drought-reduced harvests have greatly increased import demand in some countries such as Algeria and Morocco. Following this month's upward adjustments to last year's import estimates of several countries in sub-Saharan Africa, the forecasts for imports for 2000/01 have also been raised, considering that this year's production prospects are generally the same as in the previous year. Wheat imports by some of the larger importers, such as Ethiopia, Kenya and Sudan, are now expected to remain close to last year's high levels.

Overview of World Cereal Imports - Forecast for 2000/01

Source: FAO
1/ Highly tentative.

Total imports into Europe are forecast to approach 12 million tonnes, down 1 million tonnes from the previous year, largely on account of sharply smaller imports by the Russian Federation. Compared to 5.3 million tonnes in 1999/2000, this year's imports are currently put at 3.5 million tonnes given much improved production prospects. By contrast Poland and Romania are expected to resort to large imports this season due to the sharp decrease in their domestic production as a result of the severe drought. Imports into the Latin American and Caribbean region are forecast to reach 18 million tonnes, up 400 000 tonnes from the previous year. The increase would be mostly in Brazil due to strong demand from domestic millers.

Turning to wheat exports, availabilities, especially among the major exporting countries, are expected to be more than sufficient to meet the anticipated demand. While reduced supplies in several eastern and central European countries would mean lower export availabilities from those origins, among the major exporters, shipments from the United States could increase by 3 million tonnes to 32 million tonnes. Other major exporters are all expected to maintain their last year's export level or even expand sales slightly. The increase in exports from the EC may prove limited despite larger supplies. One reason is the Uruguay Round Agreement on subsidized exports, which starting in 2000/01 forbids any rollover of `unused subsidy quota'. Another factor is a likely increase in low (feed) quality wheat production in France (due to excessive rains), which may prove more difficult to export considering this year's ample maize supplies. Nevertheless, much will also depend on the value of the Euro against the US dollar as well the world market price for wheat in the coming months.

The forecast for world trade in coarse grains in 2000/01 (July/June) has been raised by 4.5 million tonnes since the previous report, to 101.5 million tonnes. This upward revision takes into account higher import expectations for several countries, especially in Africa and Latin America. At this level, world imports of coarse grains would be slightly above the previous year's volume, the estimate of which has also been revised this month following upward adjustments to imports by the Taiwan Province of China, Egypt and Mexico. For maize, the largest traded coarse grain, this year's imports are put at over 70 million tonnes, unchanged from last year. Similarly, imports of sorghum are forecast to remain at last year's level of around 8 million tonnes. For barley, imports are expected to exceed 19 million tonnes, up 500 000 tonnes from the previous season. Overall, aggregate imports of coarse grains by the developing countries would remain close to last year's level of around 67 million tonnes, but, given the prospects for some increase in prices, the cost of imports for the developing countries could reach US$8 billion, slightly higher than last year. The import bill for coarse grains in the LIFDCs may also rise to US$2.6 billion, some US$300 million more than in the previous season.

In Asia, coarse grain imports by most countries are expected to be about the same level as last year and total imports for the region as a whole are likely to approach 57 million tonnes. The continuing strong import demand for barley in Saudi Arabia and for maize in the Far East, particularly in the Taiwan Province of China, Indonesia, the Republic of Korea and Malaysia, in addition to this year's higher maize and barely requirements in the Islamic Republic of Iran, would result in Asia's majority share of world trade remaining at roughly 55 percent. In Africa, total imports are forecast to increase by about 1.5 million tonnes from the previous year's already large volume to an all-time high of around 15 million tonnes. Given this year's much-reduced crops in North Africa, imports by Morocco and Egypt are forecast to surge. Also in the sub-Saharan region, several countries may increase their imports this year mostly because of domestic supply shortages, particularly in Angola, Ethiopia, Kenya, Niger, Senegal and Somalia.

Among the Latin American and Caribbean countries, total coarse grain purchases by Mexico, the region's largest importer, are expected to decline by about 600 000 tonnes from last year's peak to 9 million tonnes. Continuing strong demand from the animal feed sector in Mexico is mostly responsible for the recent surge in imports of coarse grains into that country, especially of sorghum. However, favourable production prospects, notably for maize, could lower Mexico's import demand this season. In South America, the forecasts for imports by several countries have been adjusted upward, mostly to cover larger than expected feed usage. However, in Brazil, maize imports are forecast to decline mostly on account of a larger domestic harvest.

Aggregate imports into Europe are seen to remain at last year's volume of 7.8 million tonnes, of which the EC accounts for almost 40 percent. While imports by the EC are likely to remain unchanged from the previous season, this year's reduced harvests in several central and eastern European countries could result in much higher imports, particularly by Poland, Slovakia and the Czech Republic. By contrast, improved crop prospects could result is a sharp drop in imports into the Russian Federation, by about 1 million tonnes to 800 000 tonnes.

Regarding exports, this year's large maize supplies in the United States would more than offset the likely sharp reduction in export availabilities in China and Hungary due to an expected decline in their production. Total exports from the United States in 2000/01 (July/June) are forecast to rise by 3.5 million tonnes from the previous year to 57.5 million tonnes, which would be the largest volume since 1995/96. By contrast, shipments from China could fall by 2 million tonnes, to just over 5 million tonnes, while sales from Hungary could be halved to around 1 million tonnes. Higher shipments are also forecast for Argentina, Canada and the Republic of South Africa, while exports from Australia and the EC could remain unchanged from the previous year.

The forecast for global rice trade in 2000 has been adjusted upwards by about 200 000 tonnes from the last report to 22.4 million tonnes. Nevertheless, this would be 2.7 million tonnes, or 11 percent, less than in 1999. The expected decline is a consequence of much reduced import demand, because many of the major importing countries had bumper harvests. The expected fall in both trade and prices in 2000 will lead to an estimated 28 percent decline in the value of international rice trade. As a result the rice import bill of the Low Income Food Deficit Countries is forecast to drop by about 37 percent from 1999 to US$1.9 billion.

The latest upward revision of the global rice trade forecast mainly reflects an increase in the expected imports by Madagascar, from 90 000 tonnes to 310 000 tonnes, the result of an estimated 15 percent drop in production. Import shipments to the Russian Federation and Sri Lanka were also raised by 50 000 tonnes and 70 000 tonnes, respectively.

By contrast, the forecast for rice imports by Indonesia, the world's leading rice importer, has been cut by 100 000 tonnes to 2.2 million tonnes, compared to 3.8 million tonnes estimated for 1999. The estimate of China's (Mainland) imports, mostly of high quality rice from Thailand, has also been reduced by 50 000 tonnes to 200 000 tonnes based on import record during the first seven months of the year of about 120 000 tonnes. The expected rice imports by the other major importing countries in 2000 have been left unchanged from the levels indicated in the previous report.

On the export side, the forecast for rice shipments out of China (Mainland) has been raised by 400 000 tonnes from the previous report to 3 million tonnes. Official records show that the country has already shipped over 1.8 million tonnes from January to July, about 43 percent more than the amount exported during the same period last year. The forecasts of exports by Pakistan and Egypt have also been adjusted upwards by a combined 80 000 tonnes. By contrast, exports by Viet Nam are now expected to be 200 000 tonnes lower than anticipated earlier at 3.8 million tonnes. During the first eight months of the year, Viet Nam is estimated to have exported about 2.4 million tonnes, down by over 30 percent from the same period last year. This decline is due to the general weakness in the global import demand and flood-related logistical problems encountered domestically during the last couple of months. India's rice exports are also expected to be lower at 1.3 million tonnes, 100 000 tonnes less than earlier expected, because its rice is less competitive than supplies from other origins. Expectations regarding shipments from the other major rice exporters are unchanged from the previously reported volumes. Thailand, the world's leading exporter, shipped a total of about 3.7 million tonnes during the January to August period, down by 4 percent from the same period in 1999. For the rest of the year, Thailand's monthly rice exports would need to average about 570 000 tonnes in order to realize the Government export target of 6 million tonnes. In the United States, the third largest rice exporter, the Government agreed to lift the ban on sales of rice and other food commodities to Cuba, the Islamic Republic of Iran, Democratic People's Republic of Korea, Libyan Arab Jamahiriya and Sudan. It should be noted that Cuba used to be the largest rice market for the United States prior to the trade sanctions. However, it is not clear as to when actual rice shipments to the country would resume, since Cuba still does not qualify for loan and credit facilities provided by both the United States Government and private companies.

For the year 2001, world rice trade is tentatively forecast to increase slightly from that exported in the current year, to about 23 million tonnes. Indonesia will probably continue to be the largest world rice importer, as it has been for the last three years, with the Islamic Republic of Iran, the Philippines and Brazil remaining very important rice markets. Imports by Iraq are expected to surge, to compensate for the drought-reduced paddy output. On the export side, Thailand and Viet Nam, the two leading rice exporters, are forecast to expand their volumes by 7 percent and 5 percent, respectively, while shipments from the United States are projected to be similar to the level anticipated for the current year. The level of rice sales from China, which has been a major source of supplies during the last three years, will largely depend on the level of stocks that the country wants to keep, given that its paddy output is forecast to drop by 5 percent or 9 million tonnes.