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News : International Last Updated: Apr 24, 2009 - 5:31:05 PM


World cereal production in 2008 to grow 2.8% to record; Wheat to account for bulk of increase
By Finfacts Team
Jul 18, 2008 - 2:50:06 PM

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The UN Food and Agriculture Organization's (FAO) latest forecast for world cereal production in 2008 stands at a record 2,180 million tonnes (including rice in milled terms), up 2.8 percent from 2007 but slightly lower than earlier anticipated. The bulk of the increase is expected in wheat, which is forecast at 658 million tonnes, representing a significant (8.3 percent) increase from 2007. In the northern hemisphere, where many of the wheat crops are being harvested or are already gathered, bigger harvests are expected in all regions with the exception of Asia, where although declining slightly, output will remain close to last year's record high.

In North America, harvesting of a significantly larger winter wheat area is already underway in southern parts of the United States and good yields are expected after generally favourable growing conditions. Together with larger spring wheat plantings, the country's aggregate wheat output in 2008 is foreseen to rise almost 18 percent to some 66 million tonnes, the largest crop since 1998. In Canada, a much larger wheat crop has been sown and if the season is normal, output could rise to almost 25 million tonnes, about 24 percent up from 2007.

In Europe, harvesting of wheat crops in some central and southern parts is already underway. Reflecting a larger area and better yield prospects, especially in some eastern parts of the region afflicted by drought in 2007, the aggregate output of the region is forecast to increase by some 14 percent to 215 million tonnes. Production in the EU-27 is forecast to reach 138 million tonnes, nearly 15 percent up from 2007's depressed output. In the European CIS countries, given an anticipated sharp recovery in Ukraine and another expected good crop in the Russian Federation, the aggregate output of the subregion in 2008 is set to rise to a bumper level in excess of 73 million tonnes.

In Asia, despite favourable prospects for this year's wheat crops in several major producing countries, the region's total output could slip back a little from last year's record level, because of dry conditions affecting some countries in the Asian CIS group and Near East subregion, to the east and south of the Caspian Sea. The most significant producing countries affected are the Islamic Republic of Iran, and Kazakhstan where outputs may fall by 20 percent and 15 percent respectively from last year's bumper crops, although their outputs would still be a comparatively good crop considering the past five year average. Production is also estimated to have declined 6 percent from last year’s record in Pakistan, because of a reduced use of inputs and shortages of irrigation water supplies, but nevertheless remain slightly above the average of the past five years. In India, where the harvest is already underway, the attainment of good yields has resulted in a more favourable outlook indicating that this year's crop could turn out to be a record, close to 78 million tonnes. In China (Mainland), despite drought in some eastern parts, increased plantings and higher yield expectations in areas not affected by dry conditions point to another increase this year, reaffirming the country's upward trend in wheat production.

In North Africa, wheat crop prospects are satisfactory in Egypt, the subregion's major wheat producer, and in Morocco, where the wheat crop is expected to recover from last year's severely drought-reduced level.

In the southern hemisphere, the 2008 wheat season is underway. In South America, plantings have increased in Brazil in response to a favourable outlook for producer returns, and with the help of government incentives. By contrast, in Argentina, policy measures to increase taxes on exports have effectively reduced farmers' incentives to produce wheat, which combined with unfavourable dry weather, looks likely to result in a reduction of this year's wheat area and a return to an about-average crop after last year's bumper level. In Australia, despite delayed and/or below-normal rainfall in some main producing regions during the planting period, a sharply larger wheat area is expected this year, reflecting the incentive of strong prices. Assuming relatively normal weather for the remainder of the season, wheat output is forecast to recover sharply in 2008 to about 24 million tonnes.

FAO’s forecast for the global coarse grains output in 2008 has been revised downward slightly in the past few weeks, to 1 078 million tonnes, largely to reflect the impact of adverse weather during the maize planting season in the United States, the world’s largest producer. Nevertheless, at the forecast level, world production of coarse grains would be virtually unchanged from last year’s record high. In South America, harvesting of the main season crops is underway and output is expected to increase to a new record of some 99.5 million tonnes, following area increases in Argentina and Brazil, the region's largest producers, in response to high international prices. In southern Africa, despite far from ideal weather conditions throughout the season, with late planting rains, followed by floods and a subsequent return to excessive dryness in parts, the overall outturn for the main coarse grain crops is judged to have been favourable, particularly in South Africa which was affected by drought last year.

In the northern hemisphere, the bulk of the 2008 coarse grains have now been sown. In the United States, the recently completed maize plantings declined sharply after last year’s exceptional high level and difficulties endured during planting due to excessive rains and flooding could lead to a lower planting/harvested ratio than normal, and most likely lower yields in the affected areas. Based on indications in late June, the country’s maize output is forecast at about 293 million tonnes, down nearly 40 million tonnes from last year, but still a relatively high level compared to recent history.

InEurope, coarse grains output is forecast to recover sharply from last year's reduced level when drought affected crops in some of the main producing countries in eastern parts of the region such as Hungary, Romania and Ukraine. This year's coarse grains crop in Asia is forecast to remain virtually unchanged from last year's good level. Production in China, by far the biggest producer in the region, is expected to remain well above the average of the past five years.

Table 1. World cereal production1 ( million tonnes)
  2006 2007
estimate
2008
forecast
Change: 2008
over 2007 (%)
Asia 913.6 944.4 943.2 -0.1
Far East 811.0 842.5 851.3 1.1
Near East in Asia 72.7 68.3 62.3 -8.9
CIS in Asia 29.7 33.5 29.4 -12.2
Africa 142.7 133.1 142.8 7.3
North Africa 36.0 28.9 31.9 10.5
Western Africa 49.5 47.3 50.3 6.3
Central Africa 3.2 3.3 3.3 1.4
Eastern Africa 32.5 31.5 31.4 -0.4
Southern Africa 21.5 22.1 25.9 17.3
Central America & Caribbean 36.9 40.0 41.9 4.7
South America 110.7 130.7 138.3 5.8
North America 384.5 462.1 432.5 -6.4
Europe 404.7 388.8 445.0 14.5
EU2 246.8 259.6 294.9 13.6
CIS in Europe 118.6 115.6 133.1 15.2
Oceania 20.0 22.8 37.8 65.6
World 2 011.8 2 120.6 2 180.2 2.8
Developing countries 1 155.9 1 195.8 1 213.5 1.5
Developed countries 855.9 924.7 966.7 4.5
- wheat 596.9 608.1 658.3 8.3
- coarse grains 985.7 1 074.4 1 077.6 0.3
- rice (milled) 438.1 438.1 444.3 1.4
1Includes rice in milled terms.
2EU-25 in 2006; EU-27 in 2007, 2008.
Note: Totals computed from unrounded data.

The 2008 paddy season has reached a critical stage, as, by now, planting of the main paddy crops in all the major producing countries is underway or already completed. Barring major shocks in the coming few months, global paddy production may rise by 1.4 percent to 666 million tonnes, (444 million tonnes in milled rice equivalent), 9 million tonnes above the excellent 2007 season results. Unlike in 2007, when much of the gain was concentrated in Asia, in 2008, producers in all regions have responded to high market prices in the first half of the year by increasing rice cultivation.

InAsia, significant to strong production increases are anticipated in several countries, as producers have also benefited from intensified government support to increase production. The main exceptions are likely to be China, where only a marginal rise in output is expected in 2008, partly reflecting the impact of the devastating earthquake in Sichuan Province, where 7 percent of national output is produced, and Myanmar, where, output may fall in 2008, due to the passage of cyclone Nargis through the most important rice producing area at the beginning of May. Against the backdrop of soaring world rice prices, several governments in Africa have renewed their commitments to achieve rice self-sufficiency in the next few years. However, regarding the current season, more remunerative rice prices and reduced competition from imports are encouraging local producers to expand the area under rice in all rice producing parts of the region. As a result, widespread increases in output are currently foreseen in 2008, although the final outcome will hinge on the weather patterns in the coming months, in particular the timing and distribution of precipitation in the western part of the region. In Latin America and the Caribbean, rice production is set to expand vigorously in 2008, sustained by favourable growing conditions in all the major producing countries of South America. In Central America and the Caribbean, where the season is less advanced, a recovery in Mexico and Nicaragua should sustain a 4 percent expansion in the subregion. In the rest of the world, rice output in 2008 is expected to change little in the United States. Drought resulted in lower plantings in Spain, which, together with some shift of Italian producers from rice to wheat cultivation, is expected to cut production in the European Union by almost 5 percent. By contrast, government assistance to the sector should boost production in the Russian Federation.

FAO food price indices

The FAO Food Price Index averaged 216 in June 2008, virtually unchanged from May as reductions in meat and dairy prices were offset by increases in export prices of cereals as well sugar and vegetable oils. At its June 2008 value, the FAO food price index was below its peak in March, but still be 30 percent above the June 2007 level.

The FAO Cereal Index averaged 274 in June, slightly higher than in May, driven by record maize prices, following reports of cuts in plantings and flood damage in the United States, the world’s largest producer and exporter of maize. The maize price strength also pushed up wheat prices while rice quotations tended to weaken as new crops were harvested in exporting countries. The index has gained 13 percent since January and is now 43 percent above the value in June last year.

The FAO Oils/Fats Index averaged 283 in the second quarter of 2008, respectively 76 percent and 151 percent above the corresponding values in 2007 and 2006. Steady expansion in the demand for vegetable oils and fats combined with slow production growth has led to a tightening of global supplies, thus pushing up prices. After a relative stabilization in April and May 2008, the index resumed growth in June, reaching a new record of 293 points, as prospects for a marked recovery in global oilseed production in 2008/09 have diminished. New price hikes for maize and crude oil are also contributing to the strengthening in prices for oilseeds and derived products.

The FAO Meat Index has risen considerably since the beginning of 2008 but showed signs of weakening between May and June when it fell to 135. While strong demand and high feeding costs have contributed to the rise in meat prices, increased slaughtering rates are expected to put prices under pressure at least in the short-term.

The FAO Dairy Index averaged 263 in June, which is 4 percent higher than in June 2007, but down 13 percent from its peak in November 2007, reflecting a weakening of import demand following production increases in traditional importing countries. Uncertainty remains concerning the export supplies from Oceania, which is containing the drop in milk product prices.

The FAO Sugar Index in the first six months of 2008 averaged 161, up 25 percent from the corresponding value in 2007. After increasing through February, prices came down considerably in April and May, but regained some momentum in June mainly because of the anticipated lower world sugar production in the 2008/09 season.

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