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FAO Raises 2009 Cereals Forecast Despite Rice Dip

“…world cereal utilization in 2009-10 was expected to grow faster than earlier anticipated, in part due to weaker prices.”

World cereal production this year is expected to be 2.234 billion tonnes, just two per cent below last year’s record crop and nearly 26 million tonnes higher than previously expected, the United Nations said Nov. 10.

In its latest report on food security and crop prospects, the UN Food and Agriculture Organization (FAO) said the improved outlook was mostly due to larger-than-previously forecast wheat crops in Asia, Africa, Europe and the U. S.

The stronger prospects for wheat and coarse grains more than offset a fall in the forecast for rice output, with the outlook deteriorating considerably since July because of poor rains and natural disasters in several major Asian producers, FAO said.

“A combination of a good outlook for production and relatively good carry-over stocks from the previous season lessens the concern regarding the overall supply situation, at least for the current season,” FAO said.

The UN agency is hosting a world food summit in Rome this week, hoping to win broad support for an increase in agricultural investments in poor countries to help them feed themselves.

The favourable outlook for cereals output in most of the world – confirming expectations that the 2009 crop will be the second largest ever after a record 2008 – will strengthen FAO’s case that it is unacceptable that 1.02 billion people should go hungry when supply is not the problem.

A top executive at agricultural commodities trader Cargill was quoted in the Financial Times as saying a drive towards self-sufficiency after last year’s food crisis will fail.

Wheat production is now expected to reach 678 million tonnes, up from the FAO’s previous forecast – issued in July – of 655.2 million tonnes.

However, as good supply helps lower prices, farmers in Europe and the United States are likely to sow less wheat for 2010 crops, FAO said based on early indications of winter wheat crops for 2010 harvest.

This year’s global forecast for coarse grains was also raised by 15 million tonnes to 1.108 billion tonnes to account for much

higher harvest expectations in the United States.

FAO expects paddy rice output to reach 672 million tonnes, down 2.3 per cent from the record 688 million tonnes harvested in 2008, noting that poor monsoon rains followed by floods had particularly hurt crops in India, with earthquakes, cyclones and landslides also affecting other producers.

FAO said world cereal utilization in 2009-10 was expected to grow faster than earlier anticipated, in part due to weaker prices. But the expansion would still allow for a small increase in the level of world cereal inventories which, by close of seasons ending in 2010, are forecast to reach an eight-year high.

CRISIS NOT OVER

Recent developments in export quotations confirmed the return of cereal markets to a more normal situation, except for rice, with international prices this season averaging 30 per cent below their levels during the corresponding period last year.

That, combined with a sharp contraction in world trade, has helped lower the global cost of imported cereals.

In poor food-importing countries, the total import volume in 2009-10 is expected to decline by 13 per cent because of bigger crops, and the overall cereal import bill could fall by as much as 27 per cent, or $8 billion, FAO said.

Still, FAO warned that although international food prices have fallen significantly from their peaks in 2007-08, at the domestic level they remain stubbornly high in poor countries.

Wheat and maize prices strengthened in October. Rice export prices are still way above pre-crisis levels, and 31 countries require emergency food assistance.

The situation is particularly serious in eastern Africa – where drought and conflicts have put more than 20 million people in need of food aid.

“For the world’s poorest people who spend up to 80 per cent of their household budgets on food, the food price crisis is not over yet,” FAO assistant director general Hafez Ghanem said.

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