Cereal supplies more abundant in 2019/20 than earlier anticipated

The Cereal Supply and Demand Brief provides an up-to-date perspective of the world cereal market. The monthly brief is supplemented by a detailed assessment of cereal production as well as supply and demand conditions by country/region in the quarterly Crop Prospects and Food Situation. More in-depth analyses of world markets for cereals, as well as other major food commodities, are published biannually in Food Outlook.

Monthly release dates for 2019: 7 February, 7 March, 4 April, 9 May, 6 June, 4 July, 5 September, 3 October, 7 November, 5 December.

Release date: 05/09/2019

Global cereal supplies in 2019/20 are expected to be higher than earlier anticipated following this month’s rise in the world cereal production forecast. Nonetheless, world inventories would still need to be drawn down, albeit less significantly than predicted at the start of the season, in order to meet the expected increase in utilization in 2019/20.

FAO’s new forecast for global cereal production in 2019 stands at 2 708 million tonnes, 23 million tonnes higher than the forecast made in July and now 55.4 million tonnes (2.1 percent) above the 2018 outturn. Almost the entire monthly increase is on account of an upward revision made to the forecast for world maize production, now pegged at 1 124 million tonnes, 2.0 percent higher than in July and up 0.7 percent from 2018. These more buoyant expectations mostly stem from improved yield prospects in the United States, despite excessive rainfall through much of the planting season. Additionally, with the maize harvest nearing completion in Brazil, the country’s 2019 production forecast was lifted recently, further augmenting global prospects.

These positive revisions outweighed an anticipated reduction in global wheat production in 2019, which FAO now pegs at 767 million tonnes, 4 million tonnes lower than in July. Reduced crop productivity in the Russian Federation and the European Union was only partially offset by an increase in production estimates for China and the United States resulting from positive yield revisions. Even with this month’s downward revision, this year’s global wheat output is still forecast to exceed 2018’s outturn by 36 million tonnes (5.0 percent).

The latest forecast for global rice production (milled equivalent) in 2019 is set at 517 million tonnes, a slight upward revision from the July report and now on par with last year’s record level. China accounts for the bulk of this increase, as farmers planted more paddy fields than previously anticipated, driven by expectations of better profitability. Similarly, in the United States, mirroring fewer than previously anticipated cuts in plantings, stemming from adverse weather and poor price prospects, production has been revised upwards. These increases are expected to more than offset a slight contraction in Bangladesh, on account of lower area sown, mostly owing to low market prices.

The record world cereal utilization forecast for 2019/20 has been further increased to 2 715 million tonnes, up 7 million tonnes from July and 37.0 million tonnes (1.4 percent) higher than in 2018/19. The forecast for total wheat utilization has been raised slightly (by 1.6 million tonnes) since the previous report to 760 million tonnes, pointing to a new peak and a 1.8 percent increase over 2018/19. While, in absolute terms, higher food consumption is the main driver behind this year-on-year growth in world wheat utilization, the overall feed use of wheat is expected to increase by 3.7 percent. This would represent a faster annual growth than in recent years, with a robust increase in feed use of wheat especially in the EU and the United States. Total utilization of coarse grains in 2019/20 is pegged at 1 437 million tonnes, also marking a new record, up some 5 million tonnes from the July forecast and 1.2 percent (17 million tonnes) larger than in 2018/19. Higher utilization of maize and barley account for most of the upward revision since July as well as the bulk of the expected increase from the previous season, more than offsetting a small decrease in the use of sorghum. World rice utilization in 2019/20 is anticipated to reach an all-time high of 519 million tonnes, up 1.3 percent year-on-year and resulting in a 0.5 kilo annual expansion in the per capita intake.

The forecast for world cereal stocks by the close of the 2020 seasons has been raised by 19.4 million tonnes since July to just over 847 million tonnes, but still down nearly 16 million tonnes (1.8 percent) from their opening levels. With this revision, the world stocks-to-use ratio for cereals in 2019/20 is expected to reach 30.3 percent, down slightly from 2018/19 but still a relatively high ratio, pointing to another comfortable season in terms of global supplies. The upward adjustment since July is mostly on account of much larger maize inventories that are forecast to be accumulated in the United States, where this year’s production prospects have improved considerably compared with earlier expectations. As a result, total coarse grain stocks at the global level are now projected at 395 million tonnes, some 24 million tonnes higher than the level anticipated in July but still 20 million tonnes (4.8 percent) below their opening levels. By contrast, the FAO forecast for world wheat stocks has been lowered by nearly 5 million tonnes since July, to 273.6 million tonnes, putting this season’s inventory level at 6 million tonnes (2.2 percent) above the previous season but still almost 10 million tonnes short of the 2017/18 record. This month’s downward revision is mostly triggered by forecast cuts for ending stock levels in several major exporting countries, in particular the Russian Federation, due to smaller production prospects than were earlier anticipated. While world wheat inventories by the close of seasons in 2020 would still show an increase from their opening levels, this is mainly on expectation of another sharp rise in inventories held by China which would more than offset anticipated declines in a number of major exporting countries. Total wheat stocks in China are currently set to reach an all-time high of 129 million tonnes, some 9.5 million tonnes (7.9 percent) above their opening levels. Global rice stocks at the close of 2019/20 are now pegged at 179 million tonnes, down fractionally from July’s forecast and 1.0 percent below the 2018/19 high. Rice importers are envisaged to account for all of this season’s reduction, amid expectations that countries such as Bangladesh, China and Indonesia will trim the large inventories they amassed over the previous season.

FAO’s forecast for world trade in cereals in 2019/20 stands at nearly 415 million tonnes, unchanged from the July forecast. This season’s trade is foreseen to remain close to the estimated trade volume for 2018/19, with expected increases in wheat and rice trade almost offsetting reduced trade prospects for maize and sorghum. The forecast for world wheat trade in 2019/20 (July/June) remains at 173 million tonnes, up 5 million tonnes (3.0 percent) from 2018/19, mostly supported by stronger import demand in Morocco and several countries in Asia. The increase is expected to be mostly met by higher shipments from Argentina, the EU and Ukraine. However, this season’s wheat sales by the world’s largest exporter, the Russian Federation, are forecast to contract to 32.5 million tonnes, down 3 million tonnes from 2018/19 due to tighter export availabilities. The forecast of world rice trade in 2020 (January-December) has been reduced by 0.5 million tonnes to 48 million tonnes, mainly reflecting prospects of lower import demand by China. Despite this revision, however, global rice trade is still forecast to surpass the 2019 level by 1.6 million tonnes (3.3 percent), with the recovery expected to be largely met by greater exports by China and India. While unchanged from the previous forecast, world trade in coarse grains in 2019/20 (July/June) is still seen heading towards a significant annual contraction, by 6 million tonnes (3.0 percent) to 193.2 million tonnes. The bulk of the predicted decrease is driven by a likely drop in world maize trade, which, at 160 million tonnes, would be 5.7 million tonnes smaller than in 2018/19, mainly on lower import demand in Canada, China and particularly the EU. Given the prospect for reduced world trade, reductions in maize shipments from the United States, Ukraine and, to a lesser extent, also South Africa, are likely to more than compensate for bigger sales by Argentina, Brazil and the Russian Federation.  

Source: http://www.fao.org/worldfoodsituation/csdb/en/
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