FAO/GIEWS - Food Outlook No.2 - April 2000 p. 3

Cereals
Supply/Demand Roundup

Early prospects for 2000 point to a slight increase in global cereal production. Based on the condition of crops in the ground and planting intentions for those still to be sown, and assuming normal weather for the remainder of the 2000 cropping seasons, FAO's first forecast puts world cereal output this year at 1 890 million tonnes, slightly up from 1999 and above the average of the past five years, but somewhat below the long-term trend. If current forecasts materialize, output would not be sufficient to meet expected utilization requirements in 2000/01, and global cereal reserves, would have to be drawn down, for the second year in succession.

FAO's first forecast of world cereal production in 2000 is 1 890 million tonnes (including rice in milled equivalent), 1 percent up from 1999. Output of wheat is forecast to increase by 1 percent to 595 million tonnes. This would be above the average of the past five years, but still below the long-term trend for the second consecutive year. Production is expected to increase in Europe, especially in the main producing countries in the EC, where a significant expansion in plantings has been recorded. In Africa, production is expected to remain constrained close to last year's reduced level, reflecting unfavourable weather for the second consecutive year in the main wheat producing countries in North Africa. In Asia, output is expected to remain largely unchanged from the previous year. Elsewhere in the globe, smaller crops are expected.

World Cereal Production, Supplies, Trade and Stocks

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

In North America, production is forecast to fall, largely reflecting reduced area in the United States. In the southern hemisphere, although the wheat seasons have yet to begin in many of the major producing areas, slightly reduced crops are tentatively projected in South America and Australia following above-average and record outputs, respectively, in 1999.

FAO's first forecast of global coarse grains output in 2000 is 900 million tonnes, 2.7 percent up from 1999. As for wheat, this would be above the average of the past five years, but below the long-term trend for the second consecutive year. Early indications point to increased levels of production throughout all regions with the exception of Central America where a marginal reduction may occur. However, since the major coarse grains crops in the northern hemisphere are yet to be planted, this early forecast is very tentative.

As regards paddy production in 2000, in the northern hemisphere countries of Asia, where the bulk of the crop is grown, the season has yet to start pending the arrival of the south-west monsoon rains. However, early indications of planting intentions in these countries point to a decline in paddy area in response to government policies and/or low prices. In the southern hemisphere and around the equatorial belt, where the season is already quite advanced, a switch out of paddy cultivation to alternative crops has already been witnessed due to the previous season's low prices, and thus a smaller rice crop is in prospect. Based on these early indications for the main seasons in the northern hemisphere and the latest indications for those already planted in the southern hemisphere and the equatorial belt, FAO tentatively forecasts a decline in global output in 2000, to 395 million tonnes (or 590 million tonnes of paddy), compared to the record crop of 400 million tonnes (or 598 million tonnes of paddy) now estimated for 1999.

FAO's forecast of world trade in cereals in 1999/2000 (July/June) remains at 222 million tonnes, which is some 8 million tonnes or nearly 4 percent more than in 1998/99. The increase is attributed to larger imports of both wheat and coarse grains, which would more than offset the reduced volume of trade expected in rice. Imports of wheat are expected to increase by about 5 million tonnes to 102.5 million tonnes, and those of coarse grains, after an upward revision of 700 000 tonnes since the last report, are now put at 96.7 million tonnes, about 4 million tonnes up from the previous year. The forecast for trade in rice in 2000 has been revised downward since the last report, by 700 000 tonnes, and now stands at about 23 million tonnes, 2 million tonnes less than in 1999. For the developing countries as a group, despite a likely reduction in rice imports, aggregate cereal imports are forecast to reach a record volume of about 160 million tonnes. However, with prices generally below the previous year, the cereal import bill of these countries in 1999/2000 is likely to decline by nearly 3 percent compared to the previous year to approximately US$21 billion.

FAO's latest forecast for world cereal utilization in 1999/2000 is 1 885 million tonnes, 10 million tonnes, or 0.5 percent up from the previous year's level but slightly below the long-term trend. Food consumption of cereals is forecast to increase by 1.4 percent, maintaining global per caput food consumption at the previous year's level of 164 kilograms. Most of the increase in food consumption is expected to occur among the developing countries in Asia and Africa. Global feed use of cereals is expected to increase only marginally, to 656 million tonnes, with the bulk of the increase expected in the western hemisphere reflecting increased demand from livestock producers.

FAO's forecast of global cereal stocks by the close of the current seasons ending in 2000 has been adjusted downward slightly since the last report to 332 million tonnes, reflecting indications of smaller maize carryovers in China and some of the major exporting countries than earlier anticipated. At the current forecast level, world cereal carryovers would be 14 million tonnes, or 4 percent, below their opening level, declining for the first time in four years. World wheat stocks are forecast to fall by 3 percent to 136 million tonnes, while those of coarse grains are seen to fall by 8 percent to 137.5 million tonnes. By contrast, stocks of rice are expected to increase to about 59 million tonnes, their highest level since 1994. At the aggregate level, the ratio of global cereal carryovers to trend utilization in 2000/01, at 17.4 percent, would remain within the 17-18 percent range that the FAO Secretariat considers as the minimum necessary to safeguard world food security. However, if current forecasts of cereal production in 2000 materialize, to meet the expected level of utilization 2000/01, carryover stocks will have to be drawn upon again in the 2000/01 season.

International wheat prices have strengthened somewhat since the previous report, mostly reflecting concern over adversely dry conditions for the United States wheat crop. US wheat No. 2 (HRW, fob) averaged US$112 per tonne in March, about US$1 per tonne above the January level, although still some US$16 per tonne below that of March 1999. Prospects for a stronger upturn continue to be constrained by the relatively large stocks held by the major exporting countries. In the maize market, sudden price increases occurred in March reflecting rising import demand, and growing concern over continuing dry conditions in several major producing areas of the United States, where the 2000 crop is due to be sown soon. However, with ample supplies reported in the major exporting countries and large sales from China, the overall price increase remained limited. In March, the US maize export prices averaged US$95 per tonne, up US$2 per tonne from January but US$2 per tonne below the corresponding period last year. By contrast, with the arrival of new rice crops onto the market in some major exporting countries, and continued dull import demand, international rice prices declined further in recent weeks. The FAO Export Price Index for Rice (1982-84 = 100) averaged 103 points in March, down by 3 points from the previous month and its lowest level since June 1994.