PART II
Review of Commodity Markets

Beverages, sugar and fruits

COFFEE

World coffee prices continued trending downward throughout the 1998/1999 crop-year (October-September) due to weaker demand in several traditional consuming countries and increased export availabilities from Brazil. World prices increased slightly in May on expectations of a reduced crop in Brazil. However, this recovery was short lived as weather returned to normal seasonal patterns, and an overall bearish market sentiment prevailed for the remainder of the season. Downward price pressure was further exacerbated by the 40 percent devaluation of the Brazilian real against the US dollar in early 1999 that encouraged more competitively priced exports into the world market.

The average ICO composite price for calendar year 1999 was 86 US cents per pound, 21 percent less than 1998 and 31 percent lower than the 1994 through 1996 average. Prices of Colombian mild arabicas followed the overall downward trend as well. Colombian milds prices fell by 18 percent between 1998 and 1999, while Brazilian unwashed arabicas declined 27 percent over the same period. Robusta prices also declined 18 percent between 1998 and 1999, in response to more competitively priced supplies of Brazilian unwashed arabicas, which tend to compete with robusta on a varietal basis in world markets.

World green coffee production reached 6.3 million tonnes in 1998/99, up 474 000 tonnes or 8 percent over 1997/98. Latin American production increased almost 22 percent between 1997/98 and 1998/99, attributable to a 52 percent expansion in Brazilian production, which more than offset reductions in other major regional coffee producers. Production declines were notable for both Guatemala and Mexico, 19 and 14 percent respectively, between 1997/98 and 1998/99 due to damages sustained from Hurricane Mitch. Colombian production was also down by 6 percent for 1998/99 due to excessive rains which adversely affected bloom-stage tree development, resulting in reduced cherry (bean) output.

African coffee production increased 8 percent between 1997/98 and 1998/99, attributable to increased production in Uganda and Ethiopia. Both countries, the world's eighth and ninth largest producers, registered significantly higher outputs in the 1998/99 season, with increases of 19 percent and 33 percent, respectively. These increases more than offset a 25 percent reduction in Côte d'Ivoire, where the impacts of drought continued to diminish coffee production in 1998/99. Asian coffee production also declined in 1998/99, with a slight reduction of 2 percent in Indonesia and a 10 percent drop in Vietnamese production due to drought conditions that adversely impacted output.

Global production of arabicas (Brazilian, Colombian and other milds) fell by 7 percent to 3.8 million tonnes between 1997/98 and 1998/99. Robusta output, while expected to increase in the 1999/2000 crop-year, fell by 3 percent to 2 million tonnes during 1998/99 due to less than anticipated production in Vietnam, increasingly one of the most important robusta producing countries. Nevertheless, on balance, the share of arabicas in world coffee production increased from 65 to 70 percent between 1997/98 and 1998/99.

World coffee consumption in 1998 (calendar year) was slightly more than 6 million tonnes, about 48 000 tonnes more than 1997 levels. Consumption in the United States increased by 4 percent, but declined by more than 1 percent in the European Community, while re-exports from importing countries increased to 936 000 tonnes. Weaker demand in Japan and in developing countries in Asia and Latin America due to continued financial difficulties pressured consumption levels throughout 1999. Consumption in exporting countries is estimated at 1.5 million tonnes for 1998, similar to consumption levels of the previous year.

World exports of coffee were 4.8 million tonnes in 1998, a 12 percent increase over 1997. Exports from Brazil almost doubled to 1.3 million tonnes during 1998, and accounted for 28 percent of world total exports. The significant increases in Brazilian exports more than offset declines in other major Latin American exporters. Guatemala and Mexico registered the most significant declines in coffee exports between 1997 and 1998, with reductions of 21 and 19 percent respectively. Shipments from major African coffee exporting countries such as Ethiopia, Kenya and Uganda increased over the same period, while exports from important Asian exporters, Indonesia and Vietnam, declined.

World coffee stocks declined in 1998/99, primarily due to reduced output in major producing countries, particularly Colombia, Mexico, Côte d'Ivoire and Ethiopia. Reduced stocks levels were particularly notable for Brazil during 1998/99, where stocks fell by more than 30 percent as the devaluation of the real supported more competitively priced Brazilian marketings and encouraged increased export volumes.

Outlook for 1999/2000

Preliminary forecasts indicate world coffee production may reach 6.27 million tonnes during 1999/2000, slightly less than one percent below 1998/99 output. While Brazil remains the world's largest coffee producer, 1999/2000 production in this country is expected to decline nearly 23 percent, from 2.17 to 1.6 million tonnes, due to a drought in late 1999 which adversely affected the coffee trees. Brazilian production could be diminished further to this forecast in 1999/2000 given that the new crop year is an "off" year in the normal biennial pattern of coffee production. Colombian production is forecast to decline some 13 percent in 1999/2000 due to damage sustained in the coffee-growing region from the January 1999 earthquake. Although the trees were largely unharmed, the implication is for decreased production due to damage to coffee harvesting and handling infrastructure. Production in two key producers, Vietnam and Côte d'Ivoire, is expected to recover from the adverse impacts of droughts over the past several years. Record production of robusta coffee is expected for 1999/2000 in Vietnam, which may continue to pressure near term robusta prices in the world market. Reports indicate that excellent weather and new trees coming into production could increase the Côte d'Ivoire production by as much as 53 percent in 1999/2000, from 165 000 to 252 000 tonnes. Additionally, the recent liberalization of the coffee marketing sector in Côte d'Ivoire may provide a boost to exports in the near to mid-term.

Further recovery in the economies of Asia and Latin America may be supportive of increased coffee consumption in the 1999/2000 year. Stronger macroeconomic forecasts for Eastern Europe and other emerging markets, particularly for those markets with stagnant or depressed demand trends in recent years, may generate further stimulus to consumption later in the season. Although world prices may remain at lower levels for the near term given current market fundamentals, anticipated reductions in Brazilian coffee production as well as subsequent declines in export volume, could support some recovery in world prices in 1999/2000.

¹ Production of green beans in crop year beginning in the year shown.
Estimates.

¹ Export of green beans, crop year beginning in the year shown.

COCOA

Cocoa bean prices declined to the lowest levels of the past five crop-years (October-September) in 1998/99 due to abundant world supplies and weaker than anticipated demand. Continued economic difficulties in the Russian Federation, Eastern Europe, Brazil and the Far East contributed to downward price pressure. Cocoa prices slumped to the lowest level of the season, $1 202 per tonne, during the last quarter of the 1998/99 season.

Provisional data indicate that 1998/99 world cocoa bean production reached 2.76 million tonnes, a 3.2 percent increase over last year. The increase was largely attributable to a 6 percent increase in output from Côte d'Ivoire, the world's largest cocoa producer, which together with increases in Nigeria, Indonesia and Ecuador more than offset declines in other producing countries during the season. Ecuador's 1998/99 production more than doubled after recovering from the previous season's significant losses due to adverse weather conditions. Production declined in 1998/99 in Ghana, the world's second largest cocoa producer, by 8 percent to 375 000 tonnes. Output in Brazil declined throughout 1998/99, due to "witches' broom" disease, which continues to decimate the cocoa crop in Bahia. Brazilian production decreased 22 percent between 1997/98 and 1998/99, hitting a forty-year low of 133 000 tonnes.

World grindings of cocoa beans, an approximate measure of world cocoa consumption, declined slightly in 1998/99 to 2.78 million tonnes. Grindings in most major consuming countries, except the EC, increased in 1998/99. Consumption in the United States increased 2 percent in 1998/99, but grindings in the EC fell by 3 percent as manufacturers reduced output in response to anticipated declines in demand. Demand stagnated in emerging markets, particularly in the area of the former USSR where grindings declined 5 percent, due to continued financial difficulties in the Russian Federation. Cocoa producing countries accounted for 30 percent of total world grindings during 1998/99, 5 percent lower than the previous season.

World stocks of cocoa beans fell by 1 percent in 1998/99, from 1.25 to 1.23 million tonnes mainly due to losses during storage. The world stocks-to-grindings ratio, an overall indication of world cocoa availability, also declined from 44 to 42 percent. However, the decline failed to inhibit bearish market sentiment as technological advances in delivery and handling systems have allowed firms to operate with smaller working stocks levels. Greater vertical integration among manufacturers and processors have also ensured secure uninterrupted supplies.

Preliminary trade data indicate that world exports of cocoa beans increased 4 percent to 1.91 million tonnes in 1998/99. Larger shipments from Indonesia and Nigeria were responsible for much of the growth, as larger crops in these two countries led to increased export availabilities. Also, market development activities by the Ghanaian Cocoa Board - and a currency devaluation that made Ghana-origin cocoa more price competitive - resulted in large export shipments from that country. However, exports from Côte d'Ivoire, the world's largest cocoa exporting country, fell by 4 percent to 895 000 tonnes during the same period.

Shipments to the United States, the world's largest importer of cocoa beans, increased from 342 000 tonnes in 1997/98 to 424 000 tonnes in 1998/99 as manufacturers took advantage of lower bean prices to increase bean imports and grindings, thus replacing some imports of cocoa butter, a higher value product. EC bean imports also increased 5 percent from 1.1 to 1.2 million tonnes over the same period, primarily due to stocks building in response to low world prices. Imports by the countries of the former USSR, particularly the Russian Federation, fell by 23.5 percent to 130 000 tonnes during 1998/99.

The outlook for world cocoa production indicates further expansion despite expectations that sluggish demand may continue in emerging markets given the economic slowdown in some countries and ongoing financial difficulties in others. Preliminary estimates for 1999/2000 indicate that world cocoa bean production may increase, primarily due to expectations that favourable weather conditions may produce larger crops in Côte d'Ivoire, Ghana, Nigeria and Cameroon, the four major cocoa producing countries in Africa, as well as in Indonesia, the largest cocoa producer in Asia. On the other hand, further declines in Brazilian production are expected due to the continuing problems with "witches' broom" unless a solution to the fungal infection is found. Nonetheless, growth in world production could outstrip consumption growth in 1999/2000, potentially resulting in increased stocks and further downward price pressure. However, the bearish near term scenario of continued lower prices may be partially mitigated by potentially larger grindings by manufacturers and processors in importing countries, particularly North America.

TEA

Preliminary estimates indicate that world tea production in 1999 declined for the first time in four years, down from a record 1998 output of nearly 3 million tonnes to 2.7 million tonnes. Smaller crops were harvested in most major producing countries, as unfavourable weather affected yields in Bangladesh, India, Indonesia and Kenya.

Drought from January to May 1999 in Bangladesh, followed by heavy rains and flooding from June to August, resulted in an 18 percent decline in production. In India, a severe drought in the north-eastern state of Assam, the main tea growing region, accounted for an 8 percent decline in output during the first 11 months of the year, compared to the corresponding period in 1998. Although some recovery was expected in the last month of 1999, the overall output for the year is estimated to have been reduced by about 5 percent, to 825 000 tonnes. In Indonesia, adverse weather coupled with civil unrest early in the year is estimated to have contributed to an 8 percent reduction in output. After a record expansion in Kenyan production in 1998 of more than 33 percent, cold weather in the tea growing areas reduced harvests 1999. Cumulative production from January to November was 221 633 tonnes, down 17 percent from the same period in 1998, and overall output for the year is estimated to have been reduced by some 15 percent. Production in Malawi and Tanzania is estimated to have declined by 4 percent each, while production in other major producing countries was generally unchanged from 1998. Unfavourable weather and lower grower prices in Sri Lanka contributed to a reduction in harvests in that country in the first 8 months of 1999, but higher prices in the final quarter of the year boosted production. Pruning carried out by smallholders during the period of lower prices should increase future yields.

Trade data for 1998 indicate a more than 7 percent increase in world tea exports, totalling 1.27 million tonnes for the year, mainly due to a 32 percent increase in exports by Kenya, which reached a record level of 263 000 tonnes. Sri Lanka shipped a record 265 000 tonnes in 1998, 3 percent more than in 1997, in large part due to growth in consignments to the Russian Federation. Exports from India in 1998 were maintained at the high levels achieved in 1997. Exports from both Argentina and Tanzania expanded by 3 000 tonnes, representing growth rates of 5 percent and 16 percent, respectively. Following smaller shipments to its major markets (the United States and Germany) in 1997, exports from China recovered in these markets in 1998.

In 1998, most of the growth in import volumes occurred Pakistan. Significant growth was also experienced in the United States, as imports expanded by 20 percent, possibly relating to the impact of consumer promotion of the health benefits of tea consumption in that country. However, the expansion was not sufficient to offset declines in other developed countries, such as the EC and the Russian Federation. A marked trend in recent years has been the shift in demand towards the import of quality teas in mature markets, not only in the United Kingdom and the Russian Federation which are traditional markets, but in the rest of Europe as well.

The price of black tea generally declined in all auction markets in the first half of 1999, due to early forecasts of larger crops in major producing countries and continued weak demand in the Russian Federation. However, prices recovered as revised production estimates indicated lower harvests. The FAO composite price trend for tea (a weighted average price of tea traded in the major auction markets of Kenya, India, and Sri Lanka) indicated a sustained price decline in the first half of 1999, from an average of 166 US cents to 161 US cents per kg. However, in the third quarter prices recovered by 11 percent to 178 US cents per kg. Prices further improved in the fourth quarter and averaged 183 US cents per kg, up 3 percent from the previous quarter.

Price expectations for 2000 remain uncertain, partly as a result of changing trading patterns in some countries such as the Russian Federation where financial difficulties have led to the substitution of lower priced teas for more expensive higher quality varieties. Positive signs of growth in imports for several key markets may support a recovery in prices, particularly in the United States and the Near East. Although import demand has increased in the Near Eastern markets such as Saudi Arabia, Iraq and the United Arab Emirates, continued expansion will most likely depend on continued firmness of oil prices. Reports indicate increased stock accumulation, which if continued over the near term, could provide a basis for firmer prices in the short term.

SUGAR

World sugar production exceeded consumption for the fifth consecutive year in 1998/99 (October-September), resulting in record carryover stocks and continued downward price pressure. The ongoing financial difficulties facing many countries curtailed demand in several large sugar importers for most of the season, while weak currencies relative to the dollar encouraged exports of surplus production, particularly from Brazil, the world's largest sugar exporting country. Sugar production in developing countries was estimated at 89.1 million tonnes for 1998/99, an 8.4 percent increase over last season, due to increased production in Latin America and the Far East. For developed countries, reduced crops in Europe and Australia resulted in a 5.4 percent decrease in sugar production to 42 million tonnes.

Oversupply and weak demand continued to put downward pressure on sugar prices, which fell to a thirteen-year low of 4.78 US cents per pound in April 1999. Larger than anticipated import demand by the Russian Federation provided limited price support to the world market during the latter part of the 1998/99 season. The July through September average price was 5.93 US cents per pound, up from the April through June average price of 5.73 US cents per pound. Prices continued to strengthen slightly through the first quarter of 1999 to 6.43 US cents per pound. However, the average price for 1999, at 6.27 US cents per pound, was almost 30 percent lower than the 1998 average price of 8.9 US cents per pound, and almost 50 percent lower than mid-1990s average annual price of 12.2 US cents per pound.

World centrifugal sugar production in 1998/99 was 131.1 million tonnes, raw equivalent, up 4.5 million tonnes over 1997/98, and 10.2 million tonnes more than the average 1994/95 to 1996/97 production level of 120.9 million tonnes. Production increases in Brazil, India, China, Thailand and Cuba more than offset declines in the EC, Australia and Mexico. Centrifugal sugar production of cane origin was 94.3 million tonnes, up 6.1 million tonnes over last year, constituting 72 percent of total world sugar production for 1998/99. Total world beet sugar production declined by 1.6 million tonnes to 36.8 million tonnes, or 18 percent of total world sugar production. Beet sugar typically comprises a slightly higher percentage of the world total, with the 1998/99 decline attributable to adverse weather conditions and lower than anticipated sugarbeet yields in the EC and the Ukraine, more than offsetting record beet sugar production in the United States.

European sugar production declined 1.35 million metric tonnes in 1998/99, from 19.1 to 17.7 million tonnes due to poorer weather conditions and a return to average yield levels after the previous year's record production. Sugar production declined in the Russian Federation and the Ukraine, due to the economic crisis and ongoing production inefficiencies at both the farm and factory level. Beet sugar production was 1.4 million tonnes in the Russian Federation, close to 20 percent lower than mid-1990s production levels. Ukrainian 1998/99 production, at 2.05 million tonnes, has declined by almost 44 percent over the past five years.

North American sugar production in 1998/99 was 7.6 million tonnes, with record production levels in the United States for the third consecutive year. Record production of both beet and cane sugar was attributable to favourable growing and harvest conditions, plus increased cane planted area and new higher yielding sugarcane varieties. Sugar production in Mexico declined by 300 000 tonnes to 5.1 million metric tonnes in the 1998/99 season

Latin American sugar production increased 4.6 percent in 1998/99, primarily due to increased production in Brazil, the world's largest sugar producer. Brazilian sugar production, at 19.1 million tonnes for the 1998/99 season, was almost 40 percent higher than the average for the previous three seasons of 13.7 million tonnes. Continued expansion in Brazilian sugar production resulted in large part from depressed world oil prices, which diverted larger volumes of sugarcane formerly used for alcohol fuel manufacturing to sugar production, subsequently pressuring the world market. Sugar production in Cuba for the 1998/99 season was 3.6 million tonnes, up 400 000 tonnes over last year, attributable to both more favourable weather conditions and the restructuring of the Cuban sugar sector over the previous two years.

Far Eastern production increased 13.7 percent to 39.7 million tonnes in the 1998/99 season. Production in Thailand rose by 1.1 million tonnes, to 5.5 million due to a return to more normal weather and yields, as the sugar sector recovered from the previous year's unfavourable El Niño weather patterns. Australia's sugar production declined slightly more than 16 percent to 4.9 million tonnes due to excessive rains which reduced sugar content at the mills. Sugar production in China was 9.1 million tonnes in 1998/99, up nearly one million tonnes over the previous season.

Total world sugar exports were 39.1 million tonnes in 1998, slightly more than 3 percent over the previous year's total. Brazil and the EC continue to dominate world trade in raw and refined sugar, respectively. For refined trade, white sugar exports from the EC enjoying export restitutions grew by 12.6 percent, with total export volume of 8.9 million tonnes. Brazil's raw sugar exports rose by 32 percent to 8.7 million metric tonnes. Guatemala, Mexico and Colombia also showed increased raw sugar exports, while significant declines were noted for Cuba and Thailand. Cuba's exports declined by one million tonnes in 1998 due to competition from other western hemisphere exporters. Thai exports declined by nearly 40 percent as the global financial crisis continued to curtail import demand in several Asian countries, while other importing nations purchased more competitively priced supplies from Brazil.

Outlook for 1999/2000

Global sugar supplies are expected to continue in surplus throughout the 1999/2000 season. World sugar production is forecast to increase by 2.4 percent to 134.3 million tonnes. Given moderate economic recovery in the Near and Far East, consumption is forecast to increase 1.8 percent, up slightly from previous years. Global ending

stocks are forecast to increase by 5.9 million tonnes, approaching a record 50 percent ending stocks-to-use ratio, with stocks levels nearly 44 percent higher than average ending stocks from 1994/95 through 1996/97.

In early 2000, low world sugar prices are challenging trade policy in several major sugar importing countries which utilize price support schemes and tariff rate import quotas to support the domestic sugar industry. Low prices are leading other net-importing countries to review trade measures that could provide greater protection to their domestic sugar industries. For example, the Russian Federation, the world's second largest sugar importer, is considering the imposition of a tariff rate quota on raw sugar during 2000 to protect the domestic sugar industry. The sugar import policies of other major importers are under stress as well - in the United States where record domestic production, increased NAFTA quota access and WTO-sanctioned minimum import quota levels are seriously challenging current sugar policy.

Continued low world prices may lead to more restrictive trade measures in the sugar market over the near term. For 1999/2000, sustained downward price pressure may occur, with upward price movements dependent upon economic recovery in Asia and the Russian Federation, and Brazilian export policy. Developments in Brazil will continue to have an enormous impact on the world sugar market in 1999/2000, with export volumes largely dependent on how much sugarcane production is re-diverted into fuel alcohol for domestic energy utilization in response to rising world oil prices.

BANANAS

Banana prices generally weakened in 1999 mainly as a result of abundant supplies entering international trade coupled with constrained demand growth in the emerging markets of the former USSR and China. Despite being relatively strong during the first quarter of 1999, import prices in some of the world's largest banana import markets, including the United States, France, Germany and Japan, declined significantly from the second quarter onwards. In some of these markets prices reached very low levels that had not been observed since 1996.

Preliminary estimates for worldwide banana imports in 1999 pointed to an increase from the previous year. Underpinned by the relatively low level of prices, import volumes increased by 10 percent in the United States and 13 percent in Japan. Imports into the EC, estimated on the basis import licenses issued for all origins, also increased significantly from 1998. Also noteworthy in 1999 was the doubling of banana imports in the Republic of Korea as this country recovered from the financial crisis it faced during preceding year.

From the supply side, banana export volumes increased 23 percent in the Philippines and 13 percent in Colombia as these suppliers recovered from the damage caused by adverse weather during 1998. Exports from Panama also increased significantly (33 percent) from the abnormally low level of 1998 when labour problems severely thwarted exports. Export volumes remained relatively stable in Ecuador and Costa Rica, the world's largest and second largest banana exporting countries respectively. This was also the case for the former Windward Islands, although exports from this origin remained significantly lower than those of earlier in the decade. As expected, banana exports contracted significantly in Guatemala (-54 percent) and Honduras (-75 percent) due to the extensive damage inflicted to their banana sectors by hurricane "Mitch" in the latter part of 1998.

The outlook for 2000 remains clouded with uncertainties due to several factors exerting contrasting forces in the market. On the one hand, several factors could lead to reductions in supply, and eventually to upward pressure on prices. In 1999, some of the major banana marketing companies started to cut back on the size of their banana plantings in various countries of Latin America. Also, as of late 1999, these same companies lowered the prices paid to independent banana producers for their fruit. Inclement weather, including unseasonably cool temperatures in some exporting countries of Latin America and the Caribbean in the latter part of 1999 and early in 2000, is also likely to have a negative impact on the volume of bananas entering the international market, at least in the early part of the year. From the demand side, the apparent signs of an economic recovery in the area of the former USSR, which could translate into increased banana demand in this emerging market, are also among the factors supporting an upward outlook on prices.

On the other hand, it is expected that export volumes in Guatemala and Honduras will continue to recover and approach pre-"Mitch" levels, significantly increasing the level of global export availabilities compared to those of 1999. Also, there have been indications that the Philippines might be considering the removal of a 1973 executive order that has since set a limit to the area of land that can be legally cultivated with bananas, officially opening the door to more plantings. In addition, the continued devaluation of the Ecuadorian Sucre against the US dollar would make exports from this origin more competitive in international markets thereby working against any possible supply contraction there. Another element of uncertainty in the outlook for the banana market is the still unsettled situation of the EC banana import regime.¹ However, resolution of this issue would be unlikely to substantially affect trade in the near term.

TROPICAL FRUITS

World production of tropical fruits in 1999 was estimated at 57.5 million tonnes, a 5.5 percent increase over 1998. A significant percentage of this increase was attributable to a recovery in mango production in India. Increased pineapple production in Thailand and expanded papaya production in Indonesia also contributed to the overall upward trend in tropical fruit production in 1999. The volume of trade in fresh tropical fruits is very low, averaging slightly over three percent of production for the past five years, as output is mainly consumed in domestic markets. Exports are also constrained by restrictive quarantine requirements in importing countries, prohibitive freight costs and a significant level of product perishability.

Mango production accounted for nearly 40 percent of total tropical fruit production in 1999, slightly more than in 1998. Total 1999 world mango production, estimated at 22.8 million tonnes, increased 8.8 percent over 1998's reduced crop, and abundant exportable supplies tended to depress world price levels for most of the year The overall increase in world mango production was partially attributable to a recovery in the Indian crop after excessive heat, heavy rains and disease problems significantly reduced the 1998 harvest. Indian mango production increased from 9 to 11 million tonnes in 1999, accounting for close to half of total world production. Slight production increases in China and Mexico, 2.4 percent and 5.3 percent respectively, were estimated in 1999.

International trade in fresh mangoes has increased dramatically over the past five years. World mango exports increased 9.4 percent between 1998 and 1999, from 466 000 to 510 000 tonnes, with 1999 volume up 43 percent over the 1994 to 1996 average. Mexico continues to be the world's largest mango exporter, accounting for slightly more than 40 percent of total world export trade in 1998. Mexico's mango exports increased 12 percent in 1999 from 187 000 to 209 000 tonnes, after variable temperatures had an adverse impact on the 1998 harvest. The Philippines, as the world's second largest exporter, accounted for 10 percent of world trade in 1998, exporting 53 000 tonnes more in 1999 than in 1998. The United States accounted for slightly more than 42 percent of estimated world mango imports in 1998.

The world's third largest exporter of mangoes during 1998 was Brazil, surpassing India in total export volume for the first time. Brazilian mango exports have increased significantly over the past five years, with 1998 exports increasing 135 percent over the average export volume of 1994 to 1996. EC mango imports for 1998 increased 12 percent, from 117 000 to 131 000 tonnes, achieving a stronger than expected growth rate due to lower prices and heavier market promotion.

World pineapple production, currently estimated at 13.1 million tonnes for 1999, increased 5.3 percent over the 1998 season, due to a recovery in Thailand and Brazil. The three top pineapple producing countries, Thailand, Brazil and the Philippines, account for more than 40 percent of total world production. Thailand's 1999 production increased 18.3 percent over last year, from 1.97 to 2.33 million tonnes, as production recovered from adverse weather conditions and drought the previous year. Brazilian production increased by 6.6 percent during 1999.

International trade in pineapples fell by 5 percent in 1998, primarily attributable to sharp declines in export availabilities in Côte d'Ivoire and the Philippines. Costa Rica, the world's largest fresh pineapple exporter, continues to expand export volumes and has demonstrated significant growth over the past five years. Costa Rican export volume grew by almost 19 percent in 1999, up 72 percent from the average for 1994-96. The EC, the United States and Japan remain the top three importers of fresh pineapples world-wide. A significant percentage of world pineapple production is utilized for value-added processed products such as canned segments and concentrated juices.

World production of avocados increased 3.4 percent in 1999, from 2.18 to 2.26 million tonnes. Mexico remains the world's most significant producer of avocados, with total 1999 production slightly over 900 000 tonnes or close to 40 percent of total world production. Avocado production in the United States, in past years typically the world's second largest producing country, declined by 16 percent in 1999 to 131 000 tonnes, due to an early freeze in California and continued problems with pest infestations, resulting in increased avocado imports. EC avocado imports increased 11 percent between 1997 and 1998, accounting for 63 percent of total world import demand.

World 1999 papaya production increased 5.3 percent in 1999, with total world production estimated at 5.1 million tonnes. Papaya production has remained fairly constant, between 4.8 to 5 million tonnes for the past five years. Brazil is the world's largest papaya producer, with 1999 production estimated at 1.7 million tonnes. Slightly more than 2.5 percent of total fresh papaya production is traded internationally, with Mexico and Malaysia the top exporters. The United States and Singapore remain the world's top importers, accounting for 42 percent and 18, respectively, of total world import trade. Brazil, while not ranking among the top world exporters of papaya, is attempting to expand trading opportunities through increased consumer awareness in the EC market.

Production of other tropical fruits, such as durian, guava, lychee, mangosteen and rambutan, increased slightly more than 1 percent, to about 14.1 million tonnes in 1999. The Philippines and India, each with estimated production around 3.7 million tonnes, account for more than 50 percent of total world production of this tropical fruit group. Indonesia, the world's third largest supplier, accounts for 14 percent. Growth in import demand for other tropical fruits has primarily been driven by Asian markets. However, significant reductions in overall trade were noted between 1997 and 1998, primarily attributable to declining Malaysian imports. Malaysian domestic production of these tropical fruits has increased over the past five years.

Production and trade of fresh tropical fruits is expected to increase over the near term. Improved weather conditions in most regions, supported by a continued upward trend in import demand for fresh tropical fruits should support expanded world trade in 2000. However, the outlook for continued growth is particularly dependent on product quality, improved handling and freight costs, plus increased consumer awareness of tropical exotic fruits. Additionally, an important policy development for producers of tropical fruits world-wide is the implementation of phytosanitary measures banning methyl bromide, an infestation treatment widely used in international tropical fruit trade. The lack of appropriate alternative treatments to methyl bromide could significantly curtail the future prospects of increased tropical fruit production and international trade.

CITRUS

Fresh citrus

Prices for fresh citrus rose in 1998/99 in major markets in the wake of much-reduced output in the main producing areas. The price rise was particularly strong for oranges in the United States and Japan.

The contraction in global citrus production resulted mainly from lower output of oranges and tangerines in the Northern Hemisphere. Global production of oranges decreased by 14 percent in 1998/99. In the United States, orange production fell by 23 percent due to a freeze in California and drought in Florida during the flowering season. Similarly, unfavourable dry weather led to a fall in Mexican output of oranges. In most Mediterranean countries overall citrus output decreased owing to various factors, including the very high temperatures experienced in the summer 1998 and the down year of the production cycle in many countries. A notable exception was Turkey, where citrus production increased by 24 percent as orchards recovered from the severe frost of the previous season. In Brazil, orange production contracted during the marketing year 1998/99 (1998 harvest).

Total tangerine production fell by 12 percent, as output in China and Japan was affected by adverse weather conditions, and Spanish production dropped by 17 percent. World output of lemons and limes declined by 3 percent as a result of lower harvests in the United States and, to a lesser extent, in the Mediterranean region. Output remained almost unchanged in Argentina and Mexico. The 1998/99 world grapefruit crop was 2 percent below the level of the previous season. Production contracted in the United States, Israel, Mexico and China but increased in Cuba and the Southern Hemisphere.

Global exports of fresh oranges fell by 12 percent in the 1998/99 season. Exports were halved in the United States due to the much lower Californian crop, and they decreased markedly (-8 percent) in most Mediterranean countries. However, shipments increased from Southern Hemisphere countries such as Australia (15 percent) and South Africa (2 percent). World tangerine exports contracted by 9 percent as a result of a sharp fall in Spanish exports that was only partly offset by higher shipments from Morocco and Turkey.

Conversely, global exports of lemons and limes rose 3 percent from the previous season. Exports remained stable in the United States and the Mediterranean region, where the strong recovery of Turkish shipments offset reduced exports from the other countries. The quantities shipped by the Southern Hemisphere rose substantially, with the strongest increase in Argentina, 15 percent. World exports of grapefruits increased by 5 percent, as shipments from the United States were driven up 8 percent, enhanced by the good quality of the fruit, while consignments from the Southern Hemisphere rose 4 percent. In the Mediterranean region, a surge in Turkish exports, up 82 percent from a year early more than compensated reduced deliveries from Israel, down 10 percent.

Citrus prices are expected to decrease somewhat in 1999/2000, as global output is forecast to rise significantly, particularly for oranges. However, this downward trend should be mitigated somewhat by higher demand stemming from an expected economic recovery in the countries of Asia as well as those of the former USSR.

Production in 1999/2000 is expected to grow significantly in major producing countries. The orange crops in Brazil and the United States are expected to rise by 13 percent and 26 percent respectively. Mediterranean output of oranges and tangerines is set to rebound 10 percent, owing to favourable weather last summer and the high year of the tree production cycle. Production of lemons is expected to increase markedly in the United States (27 percent) and the Mediterranean countries (12 percent), while it should remain stable in Argentina. Consequently, world exports of oranges, tangerines and lemons are forecast to increase in 1999/2000. The recent opening of markets where citrus imports were restricted on phytosanitary grounds is likely to support this trend. Exports of fresh grapefruit might contract slightly as lower harvests are expected in Florida and in the Mediterranean area, and a higher percentage of the fruit is expected to go to the currently remunerative juice market.

Citrus juices

Prices of frozen concentrated orange juice (FCOJ) decreased markedly from the previous season under the effect of large inventories in the main producing countries (United States and Brazil) and lower demand in the United States, the world's largest market for orange juice. On the other hand, concentrated grapefruit juice prices firmed up throughout 1999 due to lower output, primarily in Florida, and a general reduction in stocks.

Less citrus went to processing in 1998/99 mainly as a result of smaller orange crops in major producing countries of the Northern Hemisphere. The fall in processed volumes was particularly marked in the United States (due to a lower Florida crop), Mexico (where more fresh oranges were exported to the United States), Italy, Israel and Greece. Conversely, production of citrus juice rose strongly in China due to higher output of oranges. In Brazil, the world's largest producer of orange juice, citrus processing increased by 3 percent in 1999 (Brazilian marketing year 1999/2000).

World exports of citrus juices were estimated at approximately 39 million tonnes of fresh citrus equivalent in 1999, almost unchanged from the previous year. However, the sharp fall in FCOJ prices led to reduced export earnings for both developed and developing countries. Brazil and the United States are the world's two largest exporters of orange juice. Brazilian exports of orange juice (65 degrees Brix) are estimated at 1.2 million tonnes in 1998/99. The United States exported 106,000 tonnes in the same period and exports are forecast to remain at a similar level in 1999/2000.

Inventories of FCOJ in Brazil and the United States have decreased from their record levels of 1998 and are considered as close to normal. With larger orange crops in Brazil and Florida, the supply of FCOJ is likely to be abundant in 1999/2000. Furthermore, the trend is for diminishing demand for FCOJ to the benefit of not-from-concentrated orange juices. As a result, some downward pressure on FCOJ prices is expected to continue. Prices for concentrated grapefruit juices are likely to remain relatively high due to tight supplies in Florida, Cuba and the Mediterranean region.

1 See note on the WTO dispute settlement process in Part 1.