Cereal output down, import bills to rise

by Chakravarthi Raghavan

Geneva, 14 Nov - With cereal production in the world estimated now to be reduced by about two percent, the food import bills of developing countries, and particularly the Least Developed and Net Food Importing countries is set to rise, according to the Food and Agriculture Organization.

FAO reported Wednesday to the World Trade Organizationís Committee on Agriculture that world cereal production in 2000 is now estimated at 1848 million tons (milled rice equivalent) or two percent down from the 1999 levels; sharp reductions of 40 million tons in output levels in Asia and with China will account for virtually all the decline.

FAOís representative, Mr.Panos Konandreas was advising the committee about developments in world cereal supply and demand balance, and the trends in cereal import bills of Least Developed Countries (LDCs) and the Net Food Importing Developing Countries (NFIDCs).

During discussions at the Committee, Egypt, Sri Lanka, Jamaica, Barbados, Trinidad and Tobago, Cuba and Mauritius said that the Marrakesh decision on measures concerning possible negative effects of the agricultural reform programme on the LDCs and NFIDCs had been ineffective. They called for more specific commitments to deal with the problems.

These countries, as also the EC and Switzerland, noted that the figures of food aid showed that food aid had increased at times when world prices were low, and declined when prices had risen. This, they said, showed that food aid had been used to off-load surpluses and not to deal with emergencies.

According to the FAO, world wheat production in 2000 is forecast to fall by about 8 million tons (from 1999 levels) to 582 million tons. Output has increased this year only in Europe and Central America and these gains were more than offset by significant declines in all other regions.

The forecast for world output of coarse grains points to a decline of about 13 million tons from the previous year. Persisting drought in China, southern and central parts of the USA, and throughout most of eastern Europe has been particularly hard on maize crops.

World paddy output is forecast to decline by 15 million tons from 1999. †Harvesting of the 2000 paddy crop is proceeding in the northern hemisphere countries but it is generally concluded in the southern hemisphere. While paddy production has been affected by weather and flood problems, especially in parts of Asia, government policies and low prices have played important role in encouraging farmers to diversify towards other crops, the FAO said.

Overall, cereal output in 2000 is anticipated to be well below utilization in 2000/01. As a result, world cereal stocks, by the close of the seasons ending in 2001, are now forecast at 288 million tons or 15% lower than their opening level and the lowest in five years.

The biggest declines in cereal stocks are expected in countries where production is likely to contract most, i.e. mostly in China and several countries in eastern Europe.

The current FAO forecast of world cereal trade in 2000/01 is 238 million tons, slightly above the previous season level, reflecting higher import demand in several countries. World wheat imports in 2000/01 (July/June) are forecast to remain close to the previous seasonís record volume of 109 million tons; imports of coarse grains could rise by 1.5 million tons to 104.5 million tons; for rice, the tentative outlook for calendar year 2001 is for trade to rise above the current yearís level to 24 million tons.

After remaining under downward pressure during the previous season due to weak demand and abundant supplies, international cereal prices have started making small gains in light of stronger import demand and indications of lower production and prospects for a large draw down of stocks.

For wheat, the increase in higher quality categories has been most pronounced, rising from an average price of US$115 per metric ton at the start of the season to $131 in October. Maize prices (FOB Gulf) have also strengthened between July and October, gaining about US$10 per ton. The FAO Export Price Index for rice (1982-84=100), which has been falling since the beginning of the year, increased by one point in October to an average of 95 points, still one of the lowest level in ten years. This slight recovery reflects some limited strengthening of prices for high quality rice, while lower quality grades remain under downward pressure.

With reduced carryover stocks and a relative tightening of global cereal markets, the size of forthcoming plantings play an even more important role in determining the direction and extent of price movements during the next season, FAO said.

As for food aid, according to the latest information supplied by the World Food Programme (WFP), total cereal food aid shipments in 1999/2000 (July/June) under programme, project and emergency operations amounted to 10.2 million tons, down by 800 thousand tons from the previous year. Among individual cereals, shipments of coarse grains (mostly maize) increased by over 200 thousand tons; rice fell by 600 thousand tons and wheat also fell by nearly 400 thousand tons.

Preliminary indications suggest that cereal food aid shipments in 2000/01 could reach 10 million tons, close to last yearís estimated volume. Shipments to the Russian Federation are forecast to decrease sharply, following this yearís improved harvests in that country. However, food aid needs are expected to be larger in Africa, but also in North Korea and the southern republics of the former Soviet Union.

As of late October, the number of developing countries facing serious food shortages and emergency situations stood at 32, FAO said. And between October 1999 and October 2000, the number of people facing serious food shortages increased from 52 to 62 million, the largest increase (45%) being in sub-Saharan Africa, mainly in the Horn of Africa.

The combined cereal import bill of the LDCs and the NFIDCs during the 1999/2000 season came to some US $5.8 billion, down 10% from the previous year and about the same level as the average of the 1993/94 to 1994/95 period. Out of this 10% decline in the cereal import bill, 3% is due to a reduction in the volume of imports and the remaining 7% percent due to a decline in the average price paid for imports.

The per unit import cost in 1999/00 for these countries, was about US$122 per ton compared to US$131 in 1998/99. Cereal food aid to these countries was relatively unchanged from the previous season and, thus, had little impact on the import bill. For the 2000/01 season cereal imports by LDCs and NFIDCs are forecast to increase by some 750 thousand tons from last seasonís level. Based on this forecast, and taking into account the current prospects for slightly higher cereal prices and freight rates during the course of the 2000/01 season, the cereal import bill of the these countries is forecast to increase by some US$ 800 million.

Overall, while the situation in the LDCs and NFIDCs, as reflected by recent levels of cereal import bills, has improved somewhat compared to 3-4 years ago, the food security situation in many of these countries remains precarious. Of the 32 developing countries mentioned above currently facing serious food shortages and emergency situations, the majority are in the LDC and NFIDC category.

The FAO representative also advised the AoA of the assistance being provided to LDCs and NFIDCs in adjusting to the new trading environment and to be well-informed in the current negotiations in Agriculture. The assistance was being provided at Regional and Sub-Regional levels and through country specific activities, aimed at raising food and agriculture production and productivity, increasing competitiveness in these sectors and providing analytical support to countries to be better prepared in the on-going negotiations on agriculture. .

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