Coarse grains

Introduction

The projections for coarse grains consist of the aggregation of three separate projections: maize; sorghum and millet; and other coarse grains including barley, oats, rye and minor grains. In aggregate, international trade in coarse grains is projected to increase by 15 percent by 2010, or about 15 million tonnes, compared to the average in the base period (1998 - 2000). This compares with virtually no growth in global trade during the previous decade, due largely to the shift in several countries from net importers in the 1980s to net exporters in the 1990s, primarily among the transition economies (Eastern Europe and the Commonwealth of Independent States [CIS]), a pattern that is expected to persist during the projection period. Almost all the projected growth in import demand is expected to come from the developing countries, primarily for feed use but also for food, although per capita food consumption of coarse grains is projected to decline slightly. Global coarse grain stocks are projected to contract compared to the base period, in line with the ongoing market and trade liberalization being undertaken by a number of countries.

Production

Global coarse grains production is expected to expand by 13 percent this decade, similar to the 1990s growth rate, which is expected to be attained through a combination of increases in average yields (up 7 percent) and area expansion (up 5 percent). In the case of coarse grain area, the projected growth rate shows a recovery from the negative growth recorded in the previous decade. In aggregate, the developed countries' projected coarse grain area is maintained at the level of the base period, reversing a decline during the previous decade when policies in some of the major coarse grain exporters restricted area. Land for coarse grain production also shrunk in the countries in transition during the previous decade, but is expected to recover slightly by 2010. Most of the global coarse grain area expansion, therefore, is expected to come from developing countries, especially Africa (particularly Nigeria, Sudan) and in the Latin Americans and Caribbean (LAC) region (particularly Brazil).

With respect to the developing countries, production prospects continue to be subject to the pressure of shrinking supplies of arable land and the growing scarcity of water. In particular, developing countries in Asia are likely to depend more on productivity gains in the future than on the growth in the land base,which is assumed to face more constraints (water, urbanization) than in other parts of the developing world. Productivity improvements are assumed to come largely from the widening adaptation of current technologies among developing country producers and from the revival of productivity in the CIS and Eastern European countries. Yields in the latter two groups actually fell following the political and economic reforms in the former Soviet Union and those countries within its sphere of influence.

Consumption

In general, growth in the consumption of coarse grains as food is projected to slow, except in parts of Africa where they are an integral part of local diets, including maize, sorghum, millets, and several traditional grains grown in these areas.^[6] The strongest growth in demand is expected for feed. Other uses of coarse grains, especially for fuel additives and alcohol-based beverages, are also likely to see relatively strong expansion this decade.

About two-thirds of the total world use of coarse grains is for feed, which is anticipated to grow by 13 percent over the projection period. The combination of feed demand in the countries in transition, in particular for maize and barley, and continued strong growth among developing countries, although at a slower rate than during the 1990s, is expected to account for most of the global increase in coarse grain feed use this decade. Among developing countries, projected increases in economic growth and urbanization are expected to continue to promote shifts in dietary preferences toward protein-based diets, thus leading to greater demand for grain feed. In the transition economies, which experienced sharp declines in the demand for grain during the previous decade, feed use is anticipated to recover this decade. The growth in feed demand should continue to remain moderately strong in the developed countries, only slightly below that of the previous decade.

Global food consumption of coarse grains is projected to continue to expand, albeit due entirely to population growth, as average per capita food consumption is expected to continue to decline from 29 kilograms in the base period to 28 kilograms by 2010. The largest declines in per capita food consumption are among developing countries, primarily in Asia and LAC. In Africa, developing countries are expected to only slightly reduce their individual annual intake of 75 kilograms. Rising incomes and growing urbanization are expected to contribute to the shift in demand away from the food consumption of coarse grains, especially maize, sorghum and millets, towards higher protein and more convenient, easier-to-prepare foods. The demand for other uses of coarse grains, especially for industrial uses and as alternatives to existing products, is expected to remain relatively strong. Coarse grains are used to make starch, beer and cane sugar alternatives, as well as in the production of adhesives and alcohol for petroleum additives.

Trade

Global trade in coarse grains is projected to reach about 119 million tonnes compared to an average of 104 million tonnes in the base period. The bulk of the increase is accounted for by maize, up 11 million tonnes to 85 million tonnes in 2010. Developing countries as a group are expected to increase their imports of coarse grains by 10 million tonnes, mostly in Asia, to meet an expected strong demand for feed. Total imports among the transition economies would remain unchanged from the base period average of 4.3 million tonnes.

Among the major coarse grain exporting regions, North America could expand exports by 14.5 million tonnes to 74 million tonnes, after very little growth during the previous decade. South American exports are also projected to grow by some 38 percent during the current decade, resulting in a growing share of the world market. By contrast, exports from Western Europe are projected to decline, reversing an expansion during the 1990s. Coarse grain exports from the countries in transition are projected to continue to expand, reaching 8 million tonnes by 2010, improving their net export position.

The United States will likely expand its majority share of the global coarse grain market from 54 percent in the base period to 58 percent in 2010, primarily in maize. Other countries expected to significantly increase their net export positions include Australia, Brazil, Canada, Hungary, Kazakhstan, the Russian Federation, South Africa and Ukraine. Most of the United States’ export gain will likely come from China, which is projected to become a net importer of maize compared to its current large net export position (13 million tonnes in 2002/2003). So far, the accession of China to the WTO has not been binding on its maize exports nor has it promoted imports under its TRQ commitment (7.2 million tonnes by 2004). In the longer run, the ability of domestic production to meet growing domestic demand, in particular for feed, will primarily determine China’s net trade position.

Southeast Asia will likely increase its share of the global import market to 23 percent, due mostly to China’s changing net trade position, while other major individual country importers are expected to maintain their historic shares, including Mexico (10 percent), Saudi Arabia (6 percent) and Egypt (4 percent). Japan, the world’s largest market for coarse grains (20 percent), could see slower import demand due to its relatively slow economic growth predicted for the projection period (compared to other OECD countries).

Stocks and prices

End-of-season coarse grain stocks are anticipated to further shrink as governments seek to disengage from direct production and market support and to limit their financial exposure by holding fewer surplus stocks. By 2010, global coarse grain carryover stocks, as a percent of total utilization, could fall to 22 percent, compared to 28 percent in the base period. While not as critical for global food security as wheat and rice inventories, coarse grains are still considered in many countries, especially some of the most food-insecure, as staple food. However, with more countries expected to emerge as net exporters of coarse grains by 2010, there could be some cushioning of the impact of lower stocks on global food security by diversifying exportable supplies.

Real coarse grain prices are expected to remain close to the long-term downward trend by 2010. Deflated international maize prices are projected to be about 1 percent above the base period price by 2010, while for sorghum/millet and other coarse grains, prices could be 1 - 2 percent below the average level in the base period. In nominal terms, international maize price projections for 2010 would be a substantial improvement over the depressed prices registered during the base period.

Issues and uncertainties

Coarse grain production in the EU and some transition countries could be constrained as a result of the CAP Reform. Based on the latest analysis provided by the European Commission (EC), area devoted to coarse grains in the EU (15) could be reduced under the Reform proposals, compared to a baseline projection to 2009/10, from a decline from about one percent for barley to the heaviest loss for rye at 9 percent^[7]. Rye intervention would be abolished under the CAP Reform. European Commission (2003a) As a result of the CAP Reform, EU (15) coarse grain production was projected to fall by about 2 percent by 2009/10, compared to the baseline. Even when the projections were done for the expanded EU (25), coarse grain area would still be smaller, compared to the baseline, except for barley, which is the most important grain crop among the 10 new EU members.

EU coarse grain trade could diverge from the baseline projections with the expansion of the EU. Many of the largest coarse grain exporters in the region are among the new members and they will be affected by CAP reforms, and by any decisions taken on export subsidies during the current round of the WTO negotiations. While the final schedule of export subsidy reductions has yet to be decided, barley will be the coarse grain most affected according to the EU Commission. In addition, if the current strength of the Euro is maintained throughout the medium term, this could put upward pressure on EU export prices of coarse grains.

In terms of global coarse grain trade, China’s role will be the key to future developments. China has become one of the world’s largest coarse grain exporters, especially of maize. In spite of commitments under its accession to the WTO, coarse grain imports have remained within 2 - 3 million tonnes in recent years. The current assumption is that the country cannot continue to draw down inventories to meet domestic demand and exports, and will have to import larger volumes in the medium term. However, the actual volume and timing of these imports are subject to much uncertainty and speculation.

As for the volume of imports, it is unlikely that China’s coarse grain imports would exceed 8 million tonnes, about 5 percent of the projected domestic consumption, which conforms to the 95 percent self-sufficiency goal of the Government. Just when China will revert to a net coarse grain importer is more difficult to project, although some import activity could occur after it re-negotiates its TRQ commitments in 2005.

The adoption of GM seeds is not anticipated to make a substantial difference in global coarse grain production over the projection period. The bulk of the GM traits have been designed to reduce production costs, primarily through insect resistance and herbicide tolerance traits, rather than for yield enhancing properties, although there is some evidence that average yields have improved with the adoption of GM maize. Some 12 million ha were planted to GM maize in 2002, about 9 percent of the global total. GM maize has been primarily adopted by commercial farmers in the United States and Argentina, the two largest exporters. However, the ongoing controversy related to the acceptance of food and feed produced from GM crops will likely constrain their adoption in the medium term.

Table 2.10. Coarse grains: production projections

^1/ 1998-2000 Average