Cereal forecast revision could ease price pressure

The UN agency's forecast for annual cereal output now stands at almost 2,005 million tonnes, almost 22 million tonnes up from the last forecast three months ago, but still down by 2.4 per cent from the previous year's record output. This revision means that the shortfall in production has been reduced and, subsequently, the expected draw down in global stocks is not as large as appeared necessary earlier in the season. However, the relatively large inventories forecast to remain among the major exporting countries will continue to be an important mitigating factor against upward price pressure on international cereal markets. Indeed, the FAO (Food and Agriculture Organisation) forecast for world cereal stocks at the close of crop seasons ending in 2006 has been raised to 444 million tonnes, 13 million tonnes up from the forecast in September. Nonetheless, international cereal prices are generally above those at the same time last season. Lower import demand and large supplies of feed wheat from the Black Sea region have limited the increase in prices of US origin wheat, which by late November were unchanged from the September level. However, FAO says that Argentine prices are sharply above their levels of a year earlier as a result of the large expected decline in domestic production. Based on latest indications therefore, FAO estimates that international trade in cereals in 2005/06 should be revised upwards by about 3 million tonnes since the previous report, to nearly 239 million tonnes, though this is still some 2 per cent below the estimated shipments in the previous season. The forecast for global cereal trade is still one of general decline. This mainly reflects improved 2005 cereal harvests in a number of major importing countries, notably in Asia. Among the individual cereals, trade of wheat and rice contracts but that of coarse grains increases slightly. Significant declines in wheat imports are anticipated in China and Pakistan driven by higher domestic production, while Bangladesh, Indonesia and the Philippines account for more of the anticipated decline in world rice trade following bumper crops this year. By contrast, higher imports of coarse grains are expected in the EU but also in a number of countries in Southern Africa where this year's harvest where reduced. In these countries, imports are mostly expected in the form of food aid.

Cereal forecast revision could ease price pressure

Global cereal production for 2005 will be higher than previously thought, and large inventories will continue to mitigate against upward price pressure, says FAO.

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