THE world cereal crop, including milled rice, is expected to increase to 1,971 million tonnes this year, according to the UN Food and Agriculture Organisation (FAO)’s Food Outlook report.
This prediction is above the average of the past five years, but down slightly on last year’s record level.
According to the report, the forecast was based on “conditions of crops already in the ground and planting intentions for those still to be sown later this year and assuming normal weather for the remainder of the 2005 cropping seasons.”
Despite the generally good news, the report says, dry weather in several Asian countries since late last year has negatively impacted the 2004 secondary paddy crop season, which is nearing its conclusion and is blamed to have led to international price increases.
However, prices for wheat and coarse grains remain below last year reflecting large availabilities in the major exporting countries, generally favourable prospects for the 2005 crops and relatively slack demand.
If the current production forecasts hold true, FAO forecasts that world cereal output in 2005 may not be sufficient to meet next year’s expected utilization without a draw down of world carryover reserves.
A notable reduction of 16 million tonnes in world stocks may in fact be needed, even if world cereal utilization in 2005/06 remains close to trend at some 1, 955 million tonnes.
However, should it exceed trend, as has been the case this season, the bigger deficit would have to be met by larger draw-down of stocks while cereal prices may also rise sharply.
Food Outlook has revised upward its forecast for global cereal trade in 2004/05, mainly because of higher wheat imports.
Based on the latest indications, international trade in cereals in 2004/05 is forecast at 231 million tonnes, up 3 million tonnes from the previous report but still slightly below the previous season.
According to the report, meat market is expected to recover in 2005 as markets open up and exportable meat supplies increase.
However, the report warns that meat markets in 2005 could still be influenced heavily by food safety concerns, in the wake of Asian human fatalities due to avian influenza and mad cow disease (BSE).
Shifting exchange rates, and production and trade policy developments may also slow the recovery.
Coffee prices have recovered somewhat from record low levels, but the report questions whether structural changes in the coffee sector and markets can sustain the current upward trend.
International prices of banana recovered in 2004 in response to higher demand in the northern hemisphere and changes to the import of system of the 10 countries that joined the European Union in 2004.
Sugar prices also strengthened in 2004 and early 2005 reflecting shortfalls in supplies, which Food Outlook expects to continue in 2005 because of strong import demand and unfavourable production prospects in India.
The FAO commodities and trade division publishes Food Outlook four times a year as part of the Global Information and Early Warning System, beginning with the April 2005 issue.