FAO/GIEWS - Food Outlook No. 5 - Rome, December 2001 p. 4

Supply/Demand Roundup

As 2001 draws to a close, firmer information regarding the cereals harvests, just now being completed, indicates that global production will exceed earlier expectations and reach 1 870 million tonnes (including rice in milled equivalent). The upward revision mostly reflects better than expected results for recently completed grain harvests in some of the CIS countries in Asia and Europe, for maize in the United States, and for some rice crops in Asia. Nevertheless, at the current forecast level, output would be only marginally above the previous year's crop which, given the forecast for a 1.6 percent increase in total cereal utilization in 2001/02, would imply a significant drawdown in stocks.

FAO's forecast for world wheat production in 2001 now stands at 575.5 million tonnes, about 11 million tonnes up from the forecast in October, but still about 1.6 percent down from last year and well below the average of the past five years. The latest revision is largely the result of significant increases to the estimates for some CIS countries, both in the European and Asian regions, in particular the Russian Federation and Kazakhstan, where the recovery in production after last year's drought is stronger than expected. Elsewhere, some upward revisions have also been made for eastern Africa and for Australia, where results from the ongoing harvest are better than forecast earlier.

The bulk of the winter wheat crops for harvest in 2002 have already been planted in the major producing countries in the northern hemisphere. In North America, early indications in the United States point to a slight increase in area after last year's exceptionally low plantings, but the average condition of emerging crops is poorer than normal in many parts of the wheat plains due to drought in recent weeks. Dry weather is also hampering winter wheat development in parts of Asia, particularly in parts of China, where after a prolonged period of dry conditions, moisture levels are reported to be well below optimum for satisfactory crop development. In Europe, conditions have been generally favourable for winter grain planting throughout the EC and in central and eastern parts down into the western Balkans. However, further to the south in Romania and Bulgaria, and in the European CIS countries, dry weather has hampered winter grain sowing and adversely affected crop establishment.

FAO's forecast for the 2001 world coarse grain output has been revised upward by 15 million tonnes since October, to 900 million tonnes, almost 3 percent up from last year. As for wheat, a large part of the latest revision stems from new information on the harvest outcome in several CIS countries. A significant revision has also been made to the official estimate of coarse grains output in the United States, as late planted crops have benefited from unexpectedly favourable conditions leading to higher yields than expected earlier. Also in Africa, some upward revisions have been made to estimates for the western and eastern subregions in particular, where most harvests have recently been completed.

Harvesting of the 2001 main paddy crop in the northern hemisphere is well advanced and many countries are releasing firmer estimates of the size of their crops. FAO's forecast for world rice (milled) output in 2001 has been raised by 2 million tonnes since the October report, to 394 million tonnes, mainly on account of upward adjustments in Bangladesh, India and China. At this level, global production in 2001 would be about 4 million tonnes, or 1 percent, down from the previous season.

World cereal trade in 2001/02 is now forecast at 233 million tonnes, unchanged from the estimated volume in the previous season. World trade in wheat and wheat flour (in wheat equivalent) in 2001/02 (July/June) is currently put at 105 million tonnes, 1.5 million tonnes more than in the previous season. An estimated 2 million tonnes increase in wheat imports among the developing countries, into the LIFDCs in particular, would more than offset reduced shipments elsewhere. Global coarse grain imports in 2001/02 (July/June) are now forecast to decline by 2 million tonnes, from the previous season, to 104.5 million tonnes. The decline is largely accounted for by lower shipments to the developing countries, although imports by the LIFDCs group are expected to remain at about last year's level. Global rice trade in 2002 (calendar year) is tentatively forecast to rise to 23.3 million tonnes (in milled equivalent), 2 percent above the current forecast for 2001 following reduced 2001 crops in some important traditional importers. FAO's latest forecast for rice imports in 2001 stands at 22.8 million tonnes, 400 000 tonnes more than anticipated earlier and 1.3 percent above the estimate for 2000.

World Cereal Supply and Demand

1/ Data refer to calendar year of the first year shown. Rice in milled equivalent. 2/ Production plus opening stocks. 3/ July/June for wheat and coarse grains and calendar year (second year shown) for rice. 4/ May not equal the difference between supply and utilization due to differences in individual country marketing years.

World cereal utilization by the end of the seasons in 2002 is forecast to reach 1 942 million tonnes, up 9 million tonnes from the previous forecast in October. At this level, world cereal utilization would be 30 million tonnes, or 1.6 percent, more than in the previous season and 1 percent above the 10-year trend. The continuing weak cereal prices is the most important factor for faster growth in cereal utilization. Among the major cereals, wheat consumption is expected to register the sharpest increase, a development which also reflects larger utilization of lower quality wheat, mostly for animal feed. Total use of coarse grains is also likely to demonstrate a notable increase, especially for industrial use, while feed demand is also likely to expand. Rice consumption is likely to keep pace with the increase in population but the expected contraction in global rice output could result in a small reduction in non-food use of rice in some countries.

The forecast for world cereal stocks by the close of crop years ending in 2002 has been lowered by 9 million tonnes since the previous report in October, to 553 million tonnes. The latest downward revision is largely a result of adjustments to the historical domestic utilization estimates for wheat and maize in China. At the current forecast level, world cereal stocks would be 75 million tonnes, or 12 percent, below their already reduced opening levels. However, the bulk of this decline is accounted for by China, where domestic cereal production is forecast to fall, while total utilization would continue to increase. World wheat stocks by the close of the seasons ending in 2002 are forecast to drop to 201 million tonnes, down 6 million tonnes from the October forecast and 36 million tonnes, or 15 percent, below their opening levels. Apart from China, the wheat stocks of the major wheat exporting countries are also expected to fall, bringing a sharp drop in their share of global stocks. As a measure of availabilities, the ratio of their aggregate wheat stocks to their total disappearance (the sum of their domestic consumption and exports) could fall to 16.5 percent, the lowest since the price-hike period in the mid-1990s. The forecast for world coarse grain inventories for crop years ending in 2002 has been lowered by 5 million tonnes since the previous report to 213 million tonnes, down 22 million tonnes, or 9 percent, from the previous year. Again, apart from China, ending stocks in all major exporting countries are also forecast to decrease. As for wheat, the ratio of their stocks to total disappearance is expected to drop. The forecasts for world rice stocks at the close of the marketing seasons in 2002 has been raised by 2 million tonnes to nearly 139 million tonnes, which nevertheless remains below their estimated opening level by 17 million tonnes. The recent upward revision mostly reflects the improved production outlook in China, which will imply a smaller drawdown from inventories than previously anticipated. Although the major exporters are expected to account for the bulk of this season's contraction, stocks are expected to fall also in some importing countries.

International prices for most cereals have changed little since the previous report. In November, the U.S. wheat No. 2 (HRW, fob) averaged US$128 per tonne, up slightly since September but some US$2 per tonne below the price a year earlier. Wheat prices have slipped below the previous year's levels in recent months, despite a decline in global wheat production this year. However, this could be explained by the existence of relatively large export supplies in a number of important wheat producing countries as well as the absence of any significant improvement in world import demand. After falling sharply between August and October, international maize prices have risen somewhat in recent weeks. Most supportive to prices is this year's expected drop in production in the United States. In November the U.S. maize export prices (U.S. No.2 Yellow, fob) averaged US$90 per tonne, up US$6 per tonne since September. However, large maize inventories, on top of abundant supplies of feed wheat, will continue to weigh on prices. International rice prices have come under pressure in the past three months from the arrival of new crops on the market. The FAO Rice Export Price Index fell by 1 point to 88 in September and again in October, to 87, but held steady in November. Both high and low quality rice prices have come under pressure to the same extent.