FAO global cereal supply and demand indicators

 As a strong evidence of the continuation of a tight market situation in the new season (2008/09) the ratio of world cereal ending stocks in 2008/09 to the trend world cereal utilization in the following season is expected to reach only 19.7 percent, up marginally from the estimated 30-year low of 19.4 percent in 2007/08. Among the major cereals, market conditions for coarse grains (maize in particular) are expected to be the tightest. With the anticipated total utilization exceeding world production, the stock- to-use ratio for coarse grains is forecast to plunge to 13.9 percent, the lowest in 30 years. For rice, the ratio is expected to reach 23.9 percent, still relatively low and nearly unchanged from 2007/08. However, the wheat ratio is anticipated to rebound, by almost 3 percent, to 26.6 percent. The expected increase in world wheat production in 2008 is forecast to result in some replenishment of stocks and improvements in supply.

 In spite of the expectation for a strong recovery in grain production in 2008 in those major exporting countries which suffered production cutbacks in 2007, the ratio of their aggregate grain supplies compared to normal market requirements in 2008/09 is estimated to remain unchanged at a relatively low level of 118 percent. This represents a surplus of just 18 percent. However, the main reason for this ratio to remain low is maize production in the United States which is forecast to drop sharply from the previous year’s record level.

 The ratio of the major exporters' ending cereal stocks to their total disappearance in 2008/09 is forecast to remain at the 30-year low of 12.7 percent and unchanged from 2007/08. For wheat, the ratio is expected to recover slightly to 13.2 percent, which represents the second lowest ratio in three decades. For coarse grains, the ratio is expected to decrease sharply from the previous year's already low level to 8.6 percent, smallest since 1995/96. The anticipated drop in 2008 maize production in the United States against a rising use of maize for biofuels is the main factor for this drop in the ratio. The ratio for rice is expected to decline slightly, to 16.3 percent.

 World cereal production is estimated to be up 2.8 percent in 2008, which would represent another relatively strong increase after last year’s record crop, and is a welcome development in the face of the tight global supply/demand situation. However, with the coarse grain seasons far from completion in some major producing countries and the main rice seasons at a very early stage in Asia, this forecast remains very tentative and the final outcome will depend on weather conditions in the coming months.

 While cereal production of the LIFDCs is forecast to increase further in 2008, the rate of growth, at just 1.2 percent, would represent a decline for the third consecutive year. However, contrary to 2007, China (Mainland) and India, which account for some two-thirds of the aggregate cereal output, excluding, production in the rest of LIFDCs is estimated to increase this year by 0.7 percent, this marginal improvement is a positive feature after last year’s decline. However, the limited growth in these countries’ production this year means they will continue to rely heavily on imports to cover their consumption needs in 2008/09, at a time when international cereal prices remain at very high levels, putting an exceptional burden on their financial resources for another year.

 With cereal production falling short of total utilization in 2007/08 and stocks falling, prices of most cereals rose sharply and some are still increasing or remain at high levels despite improved production prospects in 2008. Because of the surge in international wheat prices, the wheat index jumped by 90 percent in 2007/08 marketing season (July/June) from 2006/07. This sharp increase followed a 25 percent rise in 2005/06. The maize index increased by 35 percent in 2007/08 marketing season (July/June) and this after a jump of nearly 45 percent jump in the previous season. Since the start of the year (January to June 2008) the rice index has averaged 90 percent above the corresponding period in 2007. The rice index in 2007 marketing season (January-December) had already risen by 17 percent compared to 2006.

1 The first indicator is the ratio of world cereal ending stocks in any given season to world cereal utilization in the following season. Utilization in 2009/10 is a trend value based on extrapolation from the 1998/99-2007/08 period.

2 The second indicator is the ratio of the exporters’ grain (wheat and coarse grains) supplies (i.e. a sum of production, opening stocks, and imports) to their normal market requirements (defined as domestic utilization plus exports of the three preceding years). The major grain exporters are Argentina, Australia, Canada, the EU and the United States.

3 The third indicator is the ratio of the major exporters’ ending stocks, by cereal type, to their total disappearance (i.e. domestic consumption plus exports). The major wheat and coarse grain exporters are Argentina, Australia, Canada, the EU and the United States. The major rice exporters are India, Pakistan, Thailand, the United States, and Vietnam.

4 The fourth indicator shows the aggregate cereal production variation from one year to the next at the global level.

5&6 In view of the fact that the Low-Income Food-Deficit Countries (LIFDCs) are most vulnerable to changes in their own production and therefore supplies, the FAO’s fifth indicator measures the variation in production of the LIFDCs. The sixth indicator shows the annual production change in the LIFDCs excluding China Mainland and India, the two largest producers in the group

7 The seventh indicator demonstrates cereal price developments in world markets based on changes observed in selected cereal price indices.