FAO/GIEWS - Food Outlook No.2 - April 2001 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. Trade in rice is reported on a calendar year basis for the first year shown.

World trade in 2000/01 could fall slightly below the previous season

The forecast for world cereal trade in 2000/01 has been lowered this month to 233 million tonnes, 3 million tonnes less than was reported in February. At the current forecast level, world trade in cereals in 2000/01 would be some 2 million tonnes below the previous season, which was a record. Among the individual cereals, trade in wheat is expected to contract the most while rice imports in 2001 are tentatively forecast to decrease marginally. By contrast, world imports of coarse grains are forecast to remain at last year's record volume.

The forecast for global trade in wheat and wheat flour (in grain equivalent) in 2000/01 (July/June) has been lowered by 1 million tonnes this month to 107 million tonnes. At this level, world wheat imports would be 2 million tonnes below the previous season's level. FAO's forecasts for wheat imports have been lowered continuously over the past few months largely due to China. Initially, the sharp fall in 2000 production in China gave way to expectations for much larger wheat purchases this season, but abundant stocks have confined wheat imports to a relatively small volume of high milling quality, needed for blending purposes.

Total wheat imports by countries in Asia in 2000/01 are currently forecast at 48 million tonnes, down 3 million tonnes from 1999/2000. Beside China, which is likely to import less than in the previous season, India and Pakistan, usually wheat importing countries, harvested bumper crops in 2000 and are exporting some of the surplus. Nevertheless, not all countries in Asia will cut their imports this season. In some of the drought-affected countries, such as the Islamic Republic of Iran, imports are expected to remain at last year's record volume. Wheat imports by Iraq are forecast to rise, not only because of lower domestic output, but also because of higher prices for petroleum, which the country exports in exchange for food imports under the UN agreement. Wheat imports by the Republic of Korea are also forecast to increase, although this would mostly reflect larger imports of feed quality wheat.

Aggregate wheat imports by countries in Africa are forecast to rise to 25 million tonnes, up over 1 million tonnes from the previous year and slightly higher than that reported in February. The increase from last year would be in response to larger imports by several drought-affected countries in North Africa, particularly Algeria, where imports are expected to surge to a new record. Total imports by countries in sub-Saharan Africa are expected to approach 8 million tonnes, down slightly from 1999/2000 but more than was reported earlier. Most of this month's upward revision reflects higher forecasts for Ethiopia. Despite larger wheat production in Ethiopia, some 6.5 million people will require food assistance. Therefore, the bulk of this year's large imports, put at some 900 000 tonnes, are expected to be in the form of food aid.

In Europe, total imports are expected to be smaller than in the previous season. Overall, this year's likely sharp drop in imports by the Russian Federation, mostly as a result of a recovery in 2000 production, would more than offset the expected surge in purchases by the EC, Poland and Romania. This month's forecast for imports by the EC has been raised to take account of stronger demand for milling quality wheat. In Poland, following a sharp drop in 2000 production, imports are forecast to double this year under the agreement to allow up to 1 million tonne of imports at zero-duty. Also in Romania, the decline in 2000 output coupled with small inventories is expected to necessitate large imports before the summer harvest. In the Latin American and Caribbean region, Mexico is expected to lower its imports because of higher domestic production. Imports by Brazil, the region's largest wheat importer, are forecast to surge above last year. The increase would also include a likely expansion in purchases from the United States of all varieties of soft wheat. This follows the Brazilian Government's decision in March to lift the phytosanitary restrictions on wheat imports from the United States.

Although world wheat trade in 2000/01 is proving less upbeat than was envisaged earlier in the season, it would still represent the second largest volume after last year's record. From the major exporters' perspective, this season is providing better opportunities especially for the United States and Argentina. Their wheat exports (on July/June basis) could increase by 4 million tonnes and 1 million tonnes, respectively. By contrast, neither Australia nor Canada may be in the position to repeat last year's above-average exports, mostly because of smaller export availabilities. Based on the slow pace of sales from the EC so far, exports from the Community are unlikely to exceed last year's levels and could even decline. Strong domestic demand during the first half of the season and the WTO-imposed ceiling of 14.4 million tonnes of subsidized wheat exports, coupled with continued low international prices, are among the main reasons for this development.

Among other exporters, the decline in 2000 production in several countries in Europe outside the EC has sharply reduced export supplies in the affected countries: Poland and Romania will not export wheat this season while Ukraine and Hungary could make only limited sales to world markets. Elsewhere, shipments from Turkey are also likely to remain at last year's reduced volume because of smaller domestic supplies. By contrast, India and Pakistan have large exportable supplies this season. Exports from India are forecast to be significant following the latest large sale to the Russian Federation (for 550 000 tonnes). Total exports from India are now expected to approach the Government's target of 2 million tonnes. Larger sales enabled India to export some of its surplus in recent months, but increasing competition from major suppliers could slow export sales considerably during the second half of this season.

Since the last report, the forecast for world trade in coarse grains in 2000/01 (July/June) has been lowered by 1 million tonnes to roughly 104 million tonnes. At this level, world imports of coarse grains would be similar to the previous year's record volume. Total imports of coarse grains by countries in Asia are put at over 56 million tonnes, down 2 million tonnes from the previous year and slightly smaller than were expected earlier. The decline since the last report reflects small downward adjustments to the forecasts for maize imports into several important markets combined with smaller forecasts for barley purchases, particularly by China and Saudi Arabia.

Aggregate imports by countries in Africa are now put at 14 million tonnes, up 800 000 tonnes from 1999/2000, but slightly below the previous estimate. The increase from last year would be mostly on account of larger imports of barley by Morocco and maize by Kenya, as both countries experienced a sharp fall in their domestic production because of drought. In Kenya, the drought has undermined the food security of more than 4 million people and a massive UN-led relief operation is under way. While imports of coarse grains by most other countries in Africa are not expected to diverge significantly from the volume of the previous season, several countries in southern Africa, especially Zambia and Zimbabwe, where 2000 production largely recovered, could sharply reduce their imports during the current trade season, which ends in July. However, imports could surge in 20001/02 based on the latest FAO assessment of sharply reduced 2001 production prospects in southern African region. High levels of imports will continue to be needed in Botswana, Lesotho and Swaziland, following two seasons of reduced harvests, and in Angola, because of civil war.

Imports of coarse grains by countries in Europe are likely to exceed 9 million tonnes, up over 1 million tonnes from the previous season. The increase is due to higher requirements in several central and eastern European countries, particularly Romania and Poland, following last year's poor output. Imports by the Russian Federation, however, are seen to fall sharply in response to much larger domestic production. Imports by the EC are likely to remain unchanged from the previous year and be mostly unaffected by ongoing problems associated with animal diseases. Beside, the bulk of imports by the EC are destined for Spain and Portugal, because of their special preferential import quota agreement when they joined the Community.

Total coarse grains imports by the Latin American and Caribbean countries could fall slightly below the previous year to just under 20 million tonnes. Total imports by Mexico, the world's second largest importer of coarse grains after Japan, are forecast to hit a new record of 10 million tonnes, as more maize and sorghum imports are needed to satisfy the fast growing demand from the livestock sector, especially because of the rapid recovery in Mexico's poultry sector after a disease-driven slow down in 1999. By contrast, a likely bumper maize crop in Brazil could not only lead to a drop in imports but also result in the country becoming a net maize exporter for the first time in nearly 2 decades. Prospects for its maize exports are good, especially in light of the increasing import demand for non-GM maize by some major markets.

The strong trade prospects this season would benefit nearly all five major exporters. The only exception may be the EC, where barley exports seem to have been affected most because of the slow pace of export licenses so far and a likely decrease in demand from Saudi Arabia, the world's largest importer of feed barley and the EC's biggest market. Sales from Argentina and the United States are forecast to exceed last year's levels, driven mostly by strong world import demand for maize. However, the forecast for exports from the United States has been cut by nearly 2 million tonnes since the previous report, mostly in view of a reduction in the forecasts for total world trade. While exports from Canada and Australia are not expected to diverge significantly from the previous year's levels, China, Brazil and the Republic of South Africa are all expected to see their sales rise significantly in the 2000/01 season. Higher exports from those countries would also largely compensate a sharp reduction in export supplies in some European countries, such as Hungary and Romania.

Overview of World Cereal Imports - Forecast for 2000/01

Source: FAO

Weak global rice demand and low prices continue to dominate the international rice market in the first quarter of 2001. As a result, FAO's forecast for world rice trade in calendar year 2001 has been reduced from the previous report by 900 000 tonnes to 22.3 million tonnes. At this level, the volume traded this year would be marginally lower than in 2000, reflecting mainly a depressed import demand in Asia.

Owing to the satisfactory production outcome during the 2000 season and large opening stocks, Indonesia is expected to slash rice purchases in 2001 by 800 000 tonnes from last year to 1.2 million tonnes, 600 000 tonnes less than previously anticipated. The revision reflects the recent introduction of new import restrictions and a weakening of the local currency, which should make foreign supplies less competitive on the domestic market. The forecast for Bangladesh, which has harvested bumper crops for the last three years, has also been cut by 200 000 tonnes to 300 000 tonnes, the lowest level since 1997. Sri Lanka's rice purchases in 2001 are currently forecast at 100 000 tonnes, half the level originally expected, but much higher than the official 27 000 tonnes estimate for 2000. By contrast, imports by Iraq in 2001 are currently put at 1.2 million tonnes, unchanged from last year, but 200 000 tonnes more than previously anticipated. The forecasts for the other major importers in the region remain unchanged from the last report, at 1.2 million tonnes for the Islamic Republic of Iran and at 700 000 tonnes for Malaysia and the Philippines. Following a rise in tariffs from 50 percent to 75 percent announced in February, the 2001 import forecast for Nigeria has been lowered by 100 000 tonnes to 800 000 tonnes, the same level as last year. Official estimates for Guinea have put imports in 2000 at 150 000 tonnes, reflecting good harvest during the past season despite the occurrence of conflicts and natural disasters. The forecast for 2001 has been revised downward accordingly from 240 000 tonnes to 150 000 tonnes, pending more information on the country's production this season. By contrast, the forecast for the Côte d'Ivoire has been raised slightly to 800 000 tonnes, which would still be 100 000 tonnes less than last year. Shipments to Senegal and South Africa have been lowered from the last report by a combined 90 000 tonnes. In Latin America and the Caribbean, the import forecast for Brazil remains unchanged at 800 000 tonnes in 2001, 140 000 tonnes more than last year, in anticipation of a fall in production. Shipments to Guatemala are also anticipated to rise slightly from last year, following an increase in the preferential access quota, the bulk of which are likely to be in the form of paddy rice. The forecast for Peru, however, has been lowered by 80 000 tonnes to 97 000 tonnes based on an official estimate. No major revision has been made for the other countries in the region.

Since the last report, the 2001 forecast for China's exports has been reduced by 500 000 tonnes to 3.0 million tonnes, about the same level as last year. Shipments by India have also been cut by 400 000 tonnes to 1.3 million tonnes. Although the country has authorized the sale of 2 million tonnes of rice from Government stocks for export, the minimum prices for releasing them from inventories remain too high for Indian rice to compete on world markets. By contrast, deliveries by Thailand have been raised by 200 000 tonnes to 6.2 million tonne, the new Government export target, which remains still short of the 6.6 million tonnes shipped last year. The drop in output last season may also prompt a cut in sales by Pakistan from the 2 million tonnes in the previous year to 1.9 million tonnes, unchanged from the previous report. The export forecasts for Argentina and Uruguay have been lowered by about 50 000 tonnes each, in anticipation of much smaller crops this year. As a result, exports from those countries are expected to fall by 150 000 tonnes and 65 000 tonnes, respectively, from last year. Deliveries by Viet Nam have been revised downward by 500 000 tonnes to 3.5 million tonnes, a mere 100 000 tonnes more than in 2000 and well below the 2001 target of 4 million tonnes. The country has recently announced minimum export prices. For instance, the price for 25 percent broken rice was set at US$140 per tonne, which is low relative to prevailing international price levels. By contrast, deliveries by Egypt have been adjusted upward by 150 000 tonnes to 500 000 tonnes, substantially higher than the 350 000 tonnes exported last year. The forecast for sales by Australia has also been raised by 150 000 tonnes to 700 000 tonnes. At that level, exports would be 200 000 tonnes more than in 2000 and the best performance ever. Deliveries from the United States remain officially forecast at 2.7 million tonnes, only 100 000 tonnes less than in 2000.