Cereals

Supply/Demand Roundup

GLOBAL OUTLOOK 1 /
Wheat	2001/02	2002/03
Production
Trade
Stocks
Prices
Coarse Grains
Production
Trade
Stocks
Prices
Rice
Production
Trade
Stocks
Prices
stable up down: These signs refer only to the direction of change from the previous season.
1/ Production refers to the first year; stocks refer to crop seasons ending in the second year; trade and prices for wheat and coarse grains refer to July/June and for rice refer to the second year.

Tighter supplies have led to generally higher prices for most cereals during the current season, but a weakening trend has prevailed in the past weeks, reflecting generally favourable prospects for the 2003 crops and ample excess supplies in several non-traditional exporting countries. Early indications for 2003 cereal production point to an increase in output of some 3 percent from the previous year’s below-average level. 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 2003 cropping seasons, FAO's first forecast puts world cereal output this year at 1 895 million tonnes (including rice in milled terms), 62 million tonnes up on 2002 and above the average of the past five years.

Global production of wheat, coarse grains and rice to rise in 2003

World wheat production in 2003 is provisionally forecast at 591.5 million tonnes, 3.6 percent up on 2002 and the largest crop since 1999. The bulk of the increase is expected in Australia, Canada and the United States, where production in the previous year was severely reduced by drought. Assuming a return to normal weather this year, outputs in those countries could increase significantly. In the United States, winter wheat plantings rose and over-winter weather was generally satisfactory. Thus the outlook is for a larger area harvested this year and better yields. Although the winter wheat in Australia and the main spring wheat crop in Canada will only be sown in the coming months, early indications point to a significant increase in plantings in response to relatively favourable prices in 2002/03, while yields are expected to recover from last year’s drought-reduced levels. Elsewhere, larger wheat crops are envisaged in 2003 also in South America, where Brazil has introduced incentives to promote domestic production, and in some wheat producing countries in Africa, reflecting better weather. By contrast, wheat production is set to decline in Asia, where dry weather conditions have prevailed, and in Europe, particularly in the European CIS countries where the winter has been particularly harsh for the winter wheat crops.

Regarding coarse grains, FAO's first forecast of global output in 2003 is 908 million tonnes, nearly 4 percent up on 2002 and above the average of the past five years. The bulk of the increase is expected in North America where, as for wheat, coarse grain production should recover sharply from last year’s drought-reduced low levels. Early indications point to the likelihood of increased coarse grains outputs also in several other regions, although generally much less pronounced. In South America harvesting of the first 2003 coarse grain crops is already underway in some countries and prospects are mostly favourable despite little change in plantings, as good yields have been reported. Similarly, in Central America, a return to average yields after low levels in the previous season could result in a bigger crop. In Africa, a marginal increase is also forecast, although at this early stage prospects for many of the region’s crops are very uncertain. However, recent good rains in the southern subregion have improved crop prospects, alleviating the earlier fear of a major reduction. In Oceania, a recovery in Australia’s coarse grain output is also envisaged in 2003 from the drought-reduced level last year. Elsewhere, coarse grains output in Asia is seen to remain unchanged in 2003: a recovery in India after last year’s poor monsoon is expected to be mostly offset by a reduction in China. In Europe, the outlook is currently for a reduced coarse grains output, largely on account of poor prospects in the CIS countries.

The 2002 paddy season is about to be concluded in the northern hemisphere, with several countries still engaged in the harvesting of their second or third crops. As a result, official estimates of production in 2002 continue to be subject to a number of revisions, which have resulted in a new figure for global paddy output of 579 million tonnes, down from a previous estimate of 582 million tonnes. The revision is mostly on account of a significant reduction in the estimate for India and China, the two major rice producers. The 2003 season is already well advanced in the southern hemisphere and along the equatorial belt, where several countries are already harvesting their main crops. Still highly tentative, FAO’s first forecast of paddy production in 2003 stands at 592 million tonnes (395 million tonnes in milled equivalent), 13 million tonnes or 2 percent above 2002, based on expectations of a return to a normal monsoon pattern. A recent weakening of the El Niño phenomenon has also allayed fears of a recurrence of the weather anomalies that disrupted the sector in 1997.

El Niño approaches the end of its cycle

Latest reports from the major climate monitoring systems (IRI, the International Research Institute for Climate Prediction, BOM, the Australian Bureau of Meteorology, and NOAA/CPC, the US Climate Prediction Center), confirm earlier expectations that El Niño conditions, after weakening in the first quarter of 2003, would dissipate almost completely from April onwards. Most indicators now point to neutral conditions in the next few months with some signs that La Niña conditions may develop towards the end of the year.

Cereal utilization to decline in 2002/03

World cereal utilization in 2002/03 is forecast at 1 947 million tonnes, which would be marginally below the previous season’s level and slightly below trend. The volume of cereals used for human food is forecast to rise only modestly, while world feed and other uses could contract. However, among the major cereals, an emerging feature has been the sudden increase in feed wheat use given its large supplies and more competitive prices relative to maize in international markets.

Smallest cereal stocks since the mid-1970s

The forecast for world cereal stocks by the close of the seasons ending in 2003 has been raised slightly since the previous report to 470 million tonnes but remains some 108 million tonnes, or 19 percent, down from the previous year and the lowest level in more than two decades. The drawdown is mostly due to a sharp drop in world cereal production in 2002 and is mainly concentrated in China and India.

Small decline in world cereal trade in 2002/03

World trade in cereals in 2002/03 is forecast at 241 million tonnes, slightly more than expected in February but still 2 million tonnes below the estimated level in 2001/02. The anticipated decline from the previous season would be mainly driven by a contraction in wheat and rice trade, while trade in coarse grains is forecast to increase.

World Cereal Production, Supplies,

Trade and Stocks

Cereal prices remain under downward pressure

International wheat prices declined in March in view of generally favourable global crop prospects for 2003 and continuing large exports from non-traditional exporters. The U.S. wheat No. 2 (HRW, fob) averaged US$146 per tonne in March, down US$7 per tonne from January but still up by US$20 per tonne from a year ago. Prices for low-to-medium grade wheat, for which export supplies are more abundant this season, fell more sharply. International maize prices have remained largely unchanged in recent months due to downward pressure from more competitively priced low-quality wheat supplies and continuing large maize sales by China. In March, the U.S. maize export prices (U.S. No.2 Yellow, fob) averaged US$105 per tonne, virtually unchanged from January but US$15 per tonne up from a year earlier. International rice prices have moved little since the last Food Outlook, with the FAO Total Price Index (1998-2000=100) averaging 74 in March, 2 points above February and 1 point above January. The arrival of new crops in a number of markets has stifled most upward pressure on prices.