CARRYOVER STOCKS

World cereal stocks at the close of individual countries' crop years ending in 1996 are currently forecast at 267 million tons, some 49 million tons, or 15 percent, lower than their opening levels and about 1 million tons more than reported in December. The recent upward adjustment mainly reflects revisions of ending wheat stocks estimates in a number of countries. By contrast, the forecast of coarse grain carryovers has been lowered again largely due to a further reduction of maize inventories in the United States. Ending rice stocks are also expected to be somewhat smaller than earlier reported. At 14-15 percent of trend utilization in 1996/97, global cereal stocks at the end of 1995/96 crop years would remain well below the 17-18 percent range that the FAO Secretariat considers as the minimum necessary for world food security.

WORLD CARRYOVER STOCKS OF CEREALS (Source: FAO)

Global wheat stocks for crop years closing in 1996 are now put at 107 million tons, somewhat more than reported in December but still the smallest volume since 1980/81. Among developed countries, most of the decline this year is expected to occur in the United States and the CIS. In the United States one indication of the tight export supply situation was the recent authorization to release up to 1.5 million tons from the 4 million tons wheat reserve to meet food aid needs of developing countries. In the EC, ending wheat stocks are now expected to be above earlier forecasts due to constraints placed on exports. Ending wheat stocks in eastern Europe have also been adjusted upward based on official revisions of the supply and utilization balances in Bulgaria and Romania. By contrast, in Hungary, forecasts of ending inventories have been lowered due to larger than expected exports during the first half of the marketing season and in the CIS they are forecast to fall by some 3 million tons from last year, or 23 percent. Production shortfalls in the Russian Federation during the past three years are estimated to have pushed wheat stocks down in the CIS to one-third of those estimated for the early 1990s.

Aggregate ending wheat stocks of the developing countries in 1996 are forecast at 57 million tons, exceeding last year's volume by almost 4 million tons, or 7 percent. In Asia, two successive bumper crops in India have boosted wheat supplies to record levels while in China above-average crops and continued large imports are likely to increase that country's inventories. In North Africa, by contrast, severe droughts in Morocco and Tunisia are expected to reduce their combined stocks by two-fifths. Weather-reduced production is also forecast to result in smaller wheat stocks in Latin America and the Caribbean, in particular in Mexico.

World coarse grain carryovers are forecast at 104 million tons, 43 million tons, or 30 percent, below their opening volume and about 2 million tons less than reported in December. Most of the recent adjustment is due to developments in the United States where a reduction in the estimate of the 1995 maize output, combined with a continuing strong domestic and export demand, has led to a further lowering in ending stocks by 3 million tons to 17 million tons, the lowest volume in over three decades. The forecast of EC coarse grain inventories have been revised upwards since December, but they are still at their lowest level since the early 1980s. Coarse grain stocks in the CIS are forecast to decline in 1996 by over 40 percent from last year's already reduced volume, largely due to production shortfalls and in spite of the substantial reduction in livestock inventories during the past few years. Last season's drought in South Africa has resulted in a reduction in maize stocks to one of the lowest levels since the mid-1980s.

Aggregate coarse grain stocks held in the developing countries are forecast to fall by over 4 million tons compared with last year, to 50 million tons. The bulk of the decrease is expected in the Far East where rising demand for feed grains is outpacing production increases. In Africa, most of the drawdown in coarse grain stocks is forecast for Morocco and Zimbabwe to offset lower output. In Latin America and the Caribbean, most of the decline is anticipated in Mexico due to smaller maize and sorghum crops harvested last year. Brazil, by contrast, should be able to increase its coarse grain stocks due to the bumper maize crop in 1995.

Global rice stocks are forecast to decline further by 2.1 million tons to 56.6 million tons at the end of the marketing seasons in 1996, the third consecutive decrease. Stocks in most of the major producing and consuming countries are likely to remain depressed as the increase in output in 1995 is not expected to be sufficient to keep pace with the projected growth in demand. Stocks in Bangladesh, China and India are likely to fall. By contrast, following the large imports made in 1995, Indonesia's rice stocks at the close of the 1995/96 season (31 March 1996) are likely to end higher than a year ago. Among developed countries, stocks in the United States are expected to fall steeply because of a reduced 1995 crop, while in Japan official indications are that rice inventories in 1996 will increase to 2.3 million tons, one of the highest volumes in recent years.

EXPORT PRICES

International wheat prices rose further during the months of December and January. Depending on type and origin, wheat export prices in December were quoted at between 2 to 7 percent above their November levels. Larger purchases together with some weather concerns and the imposition of a wheat export tax by the EC were among the main factors contributing to the December rise in prices. While by mid-January wheat prices from most origins had fallen slightly compared to the beginning of the month, this decline was temporary as the market began to take note of large purchases by China and rumours of possible credits for the Russian Federation to buy wheat. Therefore, by the end of January, United States wheat export prices (fob, Gulf) rose to U.S.$ 215 per ton, above prices reached by the end of December and nearly 38 percent higher than a year earlier.

By the end of January, Chicago Board of Trade (CBOT) futures had also reacted strongly to China's purchases and to reports of colder temperatures in the Great Plains that threatened the production prospects for the United States wheat crop. Nearby March contracts for soft red winter wheat rose to a new 15-year high of over U.S.$ 193 per ton. Similarly, a new high was also set for July contracts at over U.S.$ 166. This indicates that wheat export prices could be expected to remain strong well into the early months of the 1996/97 season.

LATEST CEREAL EXPORT PRICES *

SOURCE: FAO, see Appendix Table A.9
* Prices relate to the fourth week of the month.
1/ No. 2 Hard Winter (Ordinary Protein).
2/ February shipments.
3/ January shipments.
4/ April shipments.
5/ November shipments.
6/ Indicative traded prices; prices relate to the third week.
7/ 100% second grade, f.o.b. Bangkok.
8/ A1 super, f.o.b. Bangkok.

Maize export prices continued their steady rise in recent weeks following very active trading in a persistently tight market. By late January, the price of United States No 2 yellow maize (delivered Gulf ports) rose to over U.S.$ 163 per ton, a gain of nearly U.S.$ 19 per ton since November, and almost U.S.$ 57 per ton or 54 percent above a year earlier. This development is a result of reduced coarse grain supplies in general and smaller barley and maize shipments from several exporters in particular.

While traders anticipate a significant increase in the United States' maize area, in 1996, the futures market has continued to remain extremely volatile in recent weeks and CBOT futures surged to new contract highs on several occasions. In early January, Chicago maize futures for March contracts rose sharply and daily quotations increased to highs not seen since 1983, reaching U.S.$ 147 per ton. This development was a result of continuous, strong export activity, dry weather conditions in South America and the release of data on livestock numbers in the United States, which confirmed that domestic feed reductions due to high prices had not yet started. By mid-January, weather improvement in the southern hemisphere resulted in a large sell-off by some funds and led to a temporary fall in the futures market with the March price losing some U.S.$ 7 per ton. However, prices regained some of their earlier losses and by the end of January they rose again to U.S.$ 145 per ton. With spring planting in the northern hemisphere still some months away and supplies tight, a continued volatile market and firm prices are likely possibilities in the next few months.

International rice prices were generally firm in January because of a tightening of export supplies from Thailand. The FAO Export Price Index for Rice (1982-84=100), which had fallen by one point to 142 in December, recovered in January to 143 points. Thai 100 B was quoted at U.S.$ 380 per ton, U.S.$ 30 up from November. Thai A1 Super fluctuated, but ended lower at U.S.$ 269 per ton, U.S.$ 3 less than in the corresponding week in the previous month. Vietnamese rice prices remained high with its 5 percent brokens quoted at about U.S.$ 330 per ton. The price of PR106, 10 percent brokens from India eased slightly from its December level. United States long grain rice prices weakened substantially with US No. 2 4 percent brokens quoted at about U.S.$ 396 per ton, U.S.$ 11 per ton down from in December. California medium grain No. 1, 4 percent, however, remained firm.