GRAINS: WORLD MARKETS
AND TRADE, PART ONE
NOVEMBER 12, 1997
This report provides the data and tables from the current GRAINS: WORLD MARKETS AND TRADE, PART ONE.
This report draws on information from USDA's global network of agricultural attaches and counselors, official statistics of foreign governments, other foreign source materials, and results of office analysis. Estimates of U.S. acreage, yield and production are from the USDA Agricultural Statistics Board, except where noted. This report is based on unrounded data; numbers may not add to totals because of rounding. The report reflects official USDA estimates released in the World Agricultural Supply Estimates -->WASDE 332-November 10.
This report was prepared by the Grain and Feed Division, FAS. Agbox 1048, 14th and Independence Ave. Washington DC 20250. Further information may be obtained by writing to the division, by calling (202) 720-6219, or by FAX (202) 720-0340
The next issue of the Grains circular will be available
electronically after 3:30 pm local time on December 12.
FOREIGN COUNTRIES' POLICIES AND PROGRAMS
The global production of wheat is projected to exceed 600 million tons for the first time in history, while China and the former Soviet Union, once the world's largest importers of wheat, remain all but absent from the international market. The abundant supply and diminished risk of sudden, large-scale purchases is expected to keep the global trade in wheat essentially flat for the third consecutive year as importers seeking price advantages continue their practice of hand-to-mouth buying. However, unlike the bumper crop of 1996/97, which saw three of the world's five major exporters bring in record harvests, most significant production increases in the current year are centered in traditionally non-exporting nations such as China, the former Soviet Union, India and Eastern Europe. The increased production will exceed consumption for the second year in a row, allowing for a growing recovery of the global stocks-to-use ratio. While global stock levels have rebounded significantly from recent all-time lows, the exportable supplies necessary to maintain the current high rate of consumption remain largely dependant upon continued high production.
Global rice trade in calendar year 1998 is projected at 19.2 million tons, a 1.2 million ton increase over the estimated 1997 level, and the third highest level on record. World rice production (rough basis) in 1997/98 is expected to be up slightly from the previous year due to increased crop prospects for many of the major exporters. The world's three largest rice exporters - Thailand, Vietnam, and the United States - all appear likely to see strong production and increased exportable supplies in 1998. Increased import demand is expected from Latin America, where adverse weather has affected production in several countries, as well as key Asian destinations such as Indonesia and the Philippines.
Global coarse grains trade is forecast at 91.8 million tons in 1997/98, slightly lower than 1996/97 levels. World trade in corn is forecast to decline slightly in 1997/98, to 65.4 million tons from the 1996/97 level of 66 million tons. Coarse grains consumption is forecast at a record 899 million tons in 1997/98 largely on the basis of increases in consumption in China, the United States, the EU and the former Soviet Union. World production of coarse grains is forecast to decline to 883 million tons, with the 22 million ton global decrease corresponding almost exactly with the reduced 1997/98 crop in China. As a result, global ending stocks of coarse grains are forecast to decline 16 million tons to 103 million tons, yielding a stocks-to-use ratio of 11.4 percent, the second lowest ratio on record.
Increasingly Broad World Wheat Demand is More Quality Conscious Than Before
We are living in a pivotal time for the global grain trade. Privatization is sweeping the globe while in the United States the Freedom to Farm Act has dramatically altered the support system U.S. producers had relied upon since the Great Depression. The impact of all this upon the world wheat trade will be substantial.
Competitor exporting nations are directing their efforts toward the creation of designer wheats in order to meet the demand requirements of the end-user (millers, bakers, noodle-makers and, ultimately, consumers). This focus on buyer needs will position our competitors well if old-line bulk grain purchasers China and the former Soviet Union (FSU) continue to become increasingly (and consistently) self-sufficient, consequently shrinking from the market movers they once were to but a small presence in the international wheat trade.
When the annual wheat imports of China and the FSU are broken out of the global totals, it becomes apparent that these two importers have been responsible for much of the variations in world wheat trade over the past 25 years. Put another way, global demand from all wheat importers other than China and the FSU has been rising steadily for a quarter-century. This underlying demand is more independent of fluctuations in local seasonal production than the largely weather-related purchasing patterns of the two large importers. Rising imports are driven instead by urbanization, a growth in income, and diet diversification, which together have produced a steadily increasing appetite for consumer-ready processed foods. Because of the deeply-rooted nature of these worldwide trends, the wheat imports underpinning global trade are expected to continue their steady growth for years to come. When combined with the global grain sector's new marketplace dynamics, this means that the sourcing decisions behind a growing majority of world wheat imports have moved from a government's simple concern for augmenting a shortfall in the domestic crop to a miller's, baker's, or noodle-maker's more sophisticated search for a clean, quality wheat with specifically desired processing characteristics which meet particular end-use needs.
Among the first requirements for a country's global
commercial acceptance (and often economic growth) is conformity
with the provisions of the World Trade Organization (WTO). The
WTO rules serve to liberalize controlled economies and open
domestic markets to greater international competition. In most
cases this has forced the relaxation of decades-old import
barriers and the elimination of monopoly purchasing practices in
countries which comprise a significant portion of the world wheat
import demand. As a result, in nations from Latin America to
Eastern Europe, where as recently as the beginning of the 1990's
the bulk of wheat imports were controlled by government entities,
today nearly all the trade is handled by private buyers.
Privatization typically results in a greater assortment of consumer products being made available to the overall population. Market-based economies often create importers who are willing to pay a premium for consistently high quality wheat, cargo after cargo. This dependability is crucial to importers because it allows them in turn to market a reliably superior product to their customers and in competition with their rivals. These same free-market forces push importers to seek a wide variety of wheat so as to expand their product line in an ongoing effort to capture additional market share. In fact, private sector millers (often the principal importers of wheat in a free market) generally are known for their high quality requirements as well as their constant search for different grades, classes and varieties of wheat for use in ever-expanding lines of consumer-ready products. For the world's exporters this multiple-buyer, varying-class, quality-conscious environment is a much more complex and competitive arena in which to market wheat than the common government agency large purchase practices of just five to seven years ago.
As privatization allows more importers to take advantage of the different classes of wheat and to exploit the unique uses to which each lends itself, many nations are likely to exhibit the same behavior as seen in Mexico. For years, Mexico's former government agency CONASUPO imported only hard red winter (HRW) wheat. Following privatization, however, dark northern spring and soft red winter have risen to comprise 20 percent of Mexico's wheat imports while HRW makes up the remaining four-fifths. Private buyers also may develop and remain loyal to a preferred wheat as has happened in the Philippines, where domestic millers reportedly have become accustomed to U.S. wheat varieties and results while finding competitor wheat too hard to mill. This bias enabled the United States to hold an 80 percent share of the price-sensitive Philippine wheat import market even in 1996/97, a year when U.S. wheat was not particularly competitive on price.
Egypt provides a good example of an import market in transition. Wheat imports were liberalized four years ago in Egypt, yet private sector modern milling capabilities have taken some time to build. During this period of construction the government remained Egypt's largest importer of wheat and flour, and while U.S. wheat is very competitive in Egypt's highly-developed market, price continues to be the primary consideration in the government's buying decisions. However, as the new private sector capacity now comes on line, government purchases as a percentage of the nation's total wheat imports have begun to diminish (from near 100 percent in 1992/93 to approximately 60 percent today). Meanwhile, given a choice (and, increasingly, they will be), Egyptian millers are said to prefer U.S. wheat over all others because of its proven quality, reliability and consistency. The millers' customers -- manufacturers of products for upscale markets -- themselves demand quality and consistency because their own consumers expect it. The behavior of Egypt's new private millers is typical to private buyers worldwide. Even millers in the European Union like the quality of U.S. wheat and the transparency of the United States' market -- imports from the United States have grown every year since 1993/94 and show no sign of slowing. In fact, total commitments for the first quarter of the current year already exceed the total amount for all of last year and very soon 1997/98 sales of U.S. wheat to the European Union will surpass one million tons for the first time in 15 years.
Finally, it has been often demonstrated that once the demand for a particular value-added grain product reaches certain sustained levels the processing capabilities necessary to produce the product simply move closer to the consumer base; for example, as an alternative to exporting breakfast cereals or pet foods from the United States to overseas markets, companies tend to build plants in the foreign countries in which such markets have developed and then proceed to produce the product locally. However, while processing capabilities can and are expatriated, adequate sources of base commodity supplies are more difficult to relocate. As global privatization naturally leads to an increase in the world consumption of value-added grain products, the United States, as the preeminent supplier of bulk commodities, will benefit. The strategic advantage the United States has in its year-round ability to deliver nearly every type of wheat to any world destination in a timely, reliable fashion and at a fair market price will become a primary consideration in the purchasing decisions of the new class of grain importers. Increasingly, quality may be the determining factor in where these buyers choose to source their wheat.
For further information, please contact James Gartner at
ASEAN Moves Forward in Tackling
Difficult Trade Issues
ASEAN, the Association of Southeast Asian Nations, continues to make progress in reducing trade-distorting measures on goods--including bulk agricultural commodities--that have met with little success in other trade organizations.
ASEAN was established in Bangkok, Thailand in August 1967 with the stated purpose of promoting economic cooperation and improving the welfare of its peoples. In 1976, a secretariat was established in Jakarta, Indonesia to provide administrative support. At the Fourth Summit Meeting in early 1992, decisions were made to set up the ASEAN Free Trade Area (AFTA) within 15 years, based on the Agreement on the Common Effective Preferential Tariff (CEPT) Scheme which was signed in 1992. ASEAN is sometimes confused with APEC (Asia-Pacific Economic Cooperation), another organization formed in 1989. Six countries are members of both groups.
Although current news about Southeast Asia is mostly about financial and economic woes, consider this:
At present, ASEAN consists of ten countries, nine of which are members and one of which has observer status. Members are Brunei, Burma, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, and Vietnam. Cambodia is an observer. Brunei, Philippines, and Singapore will be implementing the new ASEAN Harmonized Tariff Nomenclature System (HS) in 1998; Indonesia is working towards implementing the system; and Malaysia, Thailand, and Vietnam will implement it by the year 2000.
Current economic and financial difficulties place the timetable for implementation of the AFTA into doubt but it is too early to assess what alterations, if any, will be made.
What it Means for U.S. Grains
At the time of setting up the AFTA, unprocessed agricultural products were excluded but that has since changed. According to the ASEAN Secretariat, by 2003, over 87 percent of the tariff lines concerning bulk agricultural commodities--comprising nearly two-thirds of trade value--will be covered under the barrier-reducing measures. At this time, details are awaited from the Secretariat on specific items included in the liberalization.
It is important to note that the ASEAN free trade area is not a customs union; hence, favorable access to one country does not imply automatic access to all others. If successfully implemented, the inclusion of bulk agricultural commodities would represent significant progress on a class of products that has proven to be very troublesome in world trade talks and which has frustrated WTO and APEC members.
The forgoing may explain why Australia and New Zealand are seeking formal ties to the AFTA. China, Japan, and South Korea also have ambitions of joining ASEAN. The inclusion of these countries, particularly Australia and China, could be detrimental to U.S. grain exports, assuming access to ASEAN members through WTO was on less favorable terms.
AFTA could, however, generate economic growth within the region by spurring development of agricultural industries such as poultry production and processing, leading to increased imports of U.S. feed grains.
Want to Know More?
Further information about ASEAN, its agreements, and forthcoming meetings can be obtained from its Internet site at http://www.aseansec.org/1024x768.html. For information on unprocessed agricultural products, click on "Publications," then "AFTA Reader," and finally "Inclusion of Unprocessed Agricultural Products."
The United States Agricultural Trade Office in Singapore has created a "Southeast Asia Netscape Bookmark" file containing an extensive list of Internet sites of interest to U.S. food and agricultural product exporters. To receive the bookmarks electronically, send a message to the Trade Office at firstname.lastname@example.org or fax (65) 732-8307.
Based on reports from the Agricultural Trade Office, American Embassy, Singapore; and information from the ASEAN Secretariat. For further information, please contact Rick O'Meara at (202) 720-4933.
Rice Market Liberalization in Cote d'Ivoire Leads to Restructuring
In August, 1994 the Cote d'Ivoire began a rice market liberalization process that culminated with the freeing of ordinary rice imports this past January. Formerly, all imports and domestic marketing of rice were controlled by a government monopoly; now, import tariffs represent the only factor in rice market intervention. Importers need only submit to the importer's code, and their is no longer any form of government intervention in domestic rice markets.
Rice market liberalization was part of a government policy geared toward the privatization of agricultural enterprises and the limiting of state intervention in agricultural production and marketing, all in line with reforms recommended by the World Bank and the International Monetary Fund. The opening up of the rice market is being duplicated in other sectors, including non-agricultural, in a general structural reform of the Cote d'Ivoire's economy. These developments have provided the impetus for significant improvement in the country's economic situation. The GDP has been growing at the rate of 7 percent during the past two years, inflation has been reduced sharply, the external balance has become favorable, and there has been a large influx of foreign capital.
Rice production in the Cote d'Ivoire has been rather flat during the past decade, averaging around 450,000 tons (milled basis). The gradual increase in total rice consumption has been supported by rising imports, which have averaged 350,000 tons in recent years. With per capita consumption at just over 50 kgs., rice is an integral part of the diet. Retail prices and availability of rice are considered to be relatively favorable when compared with competitive foodstuffs such as yams, cassava, plantain and corn, because of their seasonal nature and the lack of effective preservation methods for these crops. In any case, rice is preferred by most Ivorian consumers, especially by the many large, low-income urban households.
Rice import liberalization has brought about a proliferation in the domestic market of several types of imported and local brands, in bags of 50, 45, 25 and 5 kgs. The market structure is now well defined as follows: mass consumption (25-30 percent brokens) represents 70 to 75 percent of consumption; semi-deluxe (10 to 15 percent brokens) represents 20 to 25 percent; and deluxe rice (5 percent brokens) accounts for the remaining 5 percent of consumption. The high level of competition among importers has aroused consumer consciousness of price and quality. During the past couple of years, this competition has resulted in improvements in the quality of imported rice for mass consumption, and is also having a favorable influence on the quality of locally-milled rice.
Asian rice continues to dominate the market, with Vietnam and Pakistan dividing the lion's share of the 242,000 tons imported in the first six months of 1997, followed by Thailand and China. In 1996, India was the big supplier, but has not been a factor this year; nor has Australia. The United States has enjoyed only a very small share of the Ivorian rice market, delivering just over 34,000 tons in 1996. This included PL 480 shipments as well as commercial sales, and consisted almost entirely of brown rice. The PL 480 program funded an additional 29,000 tons of brown rice for delivery in 1997.
The United States is the principal supplier of brown rice to the Cote d'Ivoire. A reduction in the import tariff for brown rice, made in August 1997, should further enhance the opportunities for U.S. rice in the Cote d'Ivoire (the rate was reduced from 15 percent to 5 percent). This move was made by the Ivorian government to aid local rice mills, which suffer from inconsistent domestic supplies, and welcome imported brown rice to keep their factories running. Meanwhile, the import tariff for milled rice containing more than 15 percent broken kernels was increased from 2 percent to 15 percent, while the import tariff for milled rice with less than 15 percent broken kernels (deluxe and semi-deluxe) remained unchanged at 25 percent.
The market for semi-deluxe rice (10 to 15 percent brokens) is expanding rapidly in the Cote d'Ivoire. The United States should be in a position to take advantage of the recent import tariff changes and supply additional brown rice to fit the semi-deluxe category, helping fill the demands of both millers and consumers.
Based on reports from the Office of Agricultural Affairs at the U.S. Embassy in Abidjan. For further information, please contact Linda Kotschwar at (202) 690-1147.
Further Liberalization in Morocco Widens Market for U.S. Grains
In a continuing effort to open its grain markets to the world, the Government of Morocco (GOM) liberalized grain imports in May 1996. It then abandoned its strict import licensing system for ad valorem tariffs, as agreed in trade negotiations under the WTO. The GOM also recently announced a tariff reduction on wheat imports that will reduce costs for millers and will increase competition for the Moroccan wheat market. These events exemplify the recent general policy directions in Morocco, where economic liberalization is a broad goal of the Moroccan government.
General Economic Overview:
Morocco achieved 12.3 percent economic growth in 1996, spurred largely by the outstanding performance of the agricultural sector. Agricultural production weighs heavily on overall gross domestic product (GDP). The surge in production in 1996 accounts for up to 12 percent of overall economic growth. The outlook for 1997 is not as positive. Agricultural output is expected to fall significantly and, likewise, GDP is expected to shrink.
Shrinking inflation rates have been a success story for the Moroccan Central Bank. Tight monetary policy has slowed inflation to 3.0 percent in 1996 from 6.1 percent in 1995. Consumers may face higher food prices in 1997, however. Since food expenditures weigh in heavily at roughly 45 percent of household expenditures, higher food prices could cause hardship for the average family whose per capita income is $1,380 per year.
The GOM continues to liberalize its banking sector, but some work remains to be done. Despite the Central Bank's efforts to encourage private banks to lend at lower rates they continue to charge a 4 percent risk premium. Local financing for importers is available, but interest rates are high and generally require substantial collateral. The dirham is freely convertible, but the GOM does maintain a system of foreign exchange control.
Selected Economic Data (1996):
Total area: 446,550 sq km (slightly larger than California)
Land use: arable land (18%), permanent crops (1%), meadows and pastures (28%) forest and woodlands (12%), other (41%)
Major agricultural products: wheat, barley, citrus fruit, vegetables (especially tomatoes, potatoes and olives), sugar beets
Total agricultural imports (billion $US): 1.96
Major agricultural imports: wheat, wood products, corn, sugar
U.S. share of total agricultural imports (percent): 17.4
Total agricultural exports (billion $US): 1.69
Major agricultural exports: fresh fruit, fresh vegetables, fish
Share of total agricultural exports to U.S. (percent): 4.14
Agricultural trade balance with the U.S.(million $US): -271
Other major exports (million $US): phosphate ($350), phosphoric acid ($532)
Population (million): 26.8
Population growth rate (percent): 2.06
Unemployment (percent): 18 in urban areas, higher in rural areas
Real GDP growth rate (percent): 12.3
Income per capita ($US): 1,382
Inflation (CPI, percent): 3.0
% of imports: 23.5
% of exports: 35.3
% of GDP: 20.4
% of workforce (1985): 50
Agriculture employs half the workforce, most of whom work small family farms of less than 5 hectares. Export crops, namely citrus and fresh vegetables, are normally produced by more progressive farmers with larger farms and advanced technology. Wheat and barley crops account for over half of the total area cropped in Morocco and add considerable value to agriculture's contribution to GDP.
Morocco's comparative advantage lies in citrus and fresh vegetable production, yet vast area is devoted to wheat and barley production. The GOM recognized that resources should be focused on the most profitable sectors. Nevertheless, the government is reluctant to make changes when it comes to liberalization of staple commodities and to phasing out support payments to small producers and low-income consumers.
Production: As noted previously, significant area is dedicated to wheat production and wheat output weighs heavily on overall performance of the agricultural sector. The GOM provides a support price to wheat growers, now equivalent to around $257 per ton, at which level it guarantees purchases by government-licensed grain dealers. Most wheat area is completely dependent on rainfall for moisture, and thus tends to fluctuate sharply from year to year. Only a very small percentage of the wheat area is irrigated, virtually all of this for planting seeds. Most of the wheat crop is produced on small farms where often it is also consumed. Average production during the 1987/88-1996/97 period was 3.5 mmt. Morocco produced a bumper crop of 5.9 mmt in 1996/97, but output in 1997/98 is expected to drop by more than half.
Consumption: Wheat is a staple of the Moroccan diet. The government still subsidizes the annual consumption of one million tons of wheat flour for low income consumers. This program has cost the GOM about $165 million per year. The government plans eventually to do away with flour subsidies.
As a result of grain market liberalization many new products are available to the consumer. Flour mills are investing heavily in new equipment and in developing new specialized products to increase their markets. A growing middle class, increased urbanization, and changing lifestyles have led to increased wheat use at the expense of barley. Wheat consumption on average over the past ten years has grown by 2.3 percent, just slightly more than the population growth rate.
Trade: Morocco is a wheat deficit country and imports primarily soft wheat and durum wheat. Imports averaged 1.97 mmt during the 1986/87-1996/97 period. Due to production shortfalls in 1997/98, imports are expected to reach 2.4 mmt.
In October 1997, the GOM announced a reduction in durum and soft wheat tariffs that will make imports more attractive. The duty on durum wheat was reduced from 58 percent to 17.5 percent, while that for soft wheat was lowered from 74 percent to 64 percent.
Morocco purchases most of its wheat from France; the U.S. sold half as much soft wheat last year as the French and Argentina managed to sell its first wheat cargo of 150,000 mt. Clearly, competition for the Moroccan market is strong. That competition is likely to heat up in 1997/98 as exporters aim at a market with high demand and importers try to capitalize on the tariff reduction. With respect to durum wheat, the U.S. is a major durum supplier along with Canada. In 1996/97 Morocco imported roughly 130,000 mt of durum wheat from each but Canada has been increasing its market share.
Production: Coarse grain area has remained stable over the 1987/88-1996/97 period, but yield and production have swung unpredictably from year to year. Morocco produced a bumper crop in 1996/97 of just over 4 mmt up from a record low of 680,000 mt the previous year. 1997/98 yields are forecast at half of last year's and the current production estimate is a mere 1.5 mmt.
Consumption: While production varies sharply, coarse grain consumption has been steadier, averaging 3.1 mmt over the past ten years. Of that, barley comprised three-fourths of all coarse grains consumed. Of course, barley is also the only major coarse grain produced domestically. The second major coarse grain consumed in Morocco is corn, most of which is imported.
Roughly half of all coarse grains are consumed as feed in the poultry, dairy, and livestock sectors, with poultry consumption ranking highest. Feed use in the poultry industry is reportedly rising. Poultry, hatchery and feed millers have formed an alliance called the Poultry Industry Federation (FISA) in an effort to develop their industry but growth continues to be hindered by Morocco's inadequate marketing and distribution systems. Coarse grain demand in the dairy and livestock industries has been flat, hindered themselves by low herd size and limited progress in production techniques. Thus, any increase in coarse grain demand will stem from rising poultry production, as the poultry industry steps in to fill the gap between livestock supply and consumer demand for animal products.
Trade: The government liberalized feed grain imports in 1996. Private importers are still getting their bearings.
In 1997, the tariff on sorghum was reduced from 19 percent to 7 percent, bringing its price into an improved competitive position relative to corn.
Corn imports are roughly three-fourths of total coarse grain imports, the remainder of which is barley. Several end users have expressed an interest in importing sorghum now that the GOM has reduced the import tariff.
Policy: The government is aware that its dairy and livestock sectors will not be able to meet the needs of its growing population and have taken steps, albeit with limited success so far, to improve production in those sectors. No policy changes are expected to increase grain production. In fact, the GOM seems prepared to turn increasingly to the international market to meet its feed grain needs.
Rice is a minor crop in Morocco. A small area is put into production each year, yielding roughly 40,000 tons (milled basis). Rice use is at a low level in Morocco; it is not part of the traditional Moroccan diet, as are wheat and barley. With annual rice consumption at around 50,000 tons, Morocco has been importing 10,000 mt of rice annually to supplement its domestic production.
Based on reports from the Agricultural Affairs Office, American Embassy, Rabat. For more information, please contact Deanna Johnson at (202) 720-4204.
WORLD WHEAT SITUATION AND OUTLOOK
While world trade is forecast to increase slightly to its highest volume in three years, it will remain significantly below levels reached in the early 1990's. However, production is down by nearly 20 million tons, about 12 percent, from 1996/97 levels in traditional exporters Argentina, Australia, Canada and the European Union, a loss which is only partially offset by a 6.5 million ton increase in the projected production in the United States. Import demand has become less concentrated in the absence of large purchases from China and the former Soviet Union but is expected to continue unabated along the gradual upward trend of the past 25 years.
Higher production estimates for Australia and Russia led to increased export forecasts of one-half million tons and 250,000 tons, respectively. A newly-signed agreement has Pakistan supplying Afghanistan with up to 50,000 tons of wheat each month for a period of one year, beginning in November.
Recent large purchases of wheat for feeding boosts forecasted imports by South Korea up over one million tons from last month. For the European Union a strong import pace and concerns over limited quality supplies prompted an increase of 800,000 tons in projected imports. With a higher production estimate the import forecast for Russia is reduced by 250,000 tons, making Russia a net exporter for the first time since the dissolution of the USSR.
WORLD RICE SITUATION AND OUTLOOK
Currency turmoil and weak demand sent export quotes out of Asia spiraling downward during the month of October. Export quotes in Thailand for all grades fell by nearly $25/MT over the course of the month as the Baht continued its free fall. The prospect of the upcoming harvest also helped to suppress fragrant prices. In Vietnam, quotes fell about $10/MT during October on light demand and strong competition from cheap Thai rice and new crop from Pakistan, but were able to regain about half of that in early November. However, the drop in Thai prices has narrowed the spread between Thai 100B and Viet 5% to approximately $12/MT. Export quotes in Pakistan were also on a downward trend during October as new crop moves into position. Meanwhile, U.S. quotes managed to strengthen slightly during the month on strong paddy sales to Latin America.
The 1997 rice export forecast for the United States is revised down 100,000 tons, to 2.4 million tons, as U.S. shipments have slowed somewhat in recent months.
The 1997 rice export forecast for India was raised 250,000 tons, to 1.75 million tons, as shipments of parboiled rice continue at a strong pace. The 1998 Indian rice export forecast was also revised upward, to 1.75 million tons.
The 1998 import forecast for Indonesia was raised to 1.5 million tons this month as extremely dry weather has delayed planting of the main crop. As a result, imports will be likely in early 1998 to supplement stocks prior to harvest. For the remainder of 1997, however, it appears that additional imports are unlikely. Therefore, the 1997 import forecast was revised downward to 600,000 tons.
The Philippines also appears unlikely to import significant additional quantities before 1998. As a result, the 1997 Philippine import forecast was lowered 150,000 tons, to 750,000 tons.
The 1997 import forecast for Malaysia was raised 50,000 tons, to 600,000 tons on continued strong import demand.
The 1997 import forecast for Sri Lanka was also raised 50,000 tons this month, to 200,000 tons, based on increased shipments from India.
WORLD COARSE GRAINS SITUATION AND OUTLOOK
Despite recent lackluster export sales, U.S. corn export prices have risen steadily the past three months, averaging $117 in September, $122 in October, and $124 through the first week of November. However, this upward price movement will likely come under pressure over the near term, largely due to continued strong Chinese export competition, and reduced global import demand.
World coarse grains trade is now expected to decline slightly in 1997/98, falling nearly one million tons from 92.6 million in 1996/97. Despite this decline in trade, global consumption is forecast to reach a record 899 million tons, exceeding forecast world production of 883 million tons. Global ending stocks of coarse grains are forecast to decline 16 million tons to 103 million, resulting in a stocks-to-use ratio of 11.4 percent, the second lowest ever.
World corn trade is now forecast at 65.4 million tons, down from 66 million tons last year and one million tons below last month's estimate. Continued heavy sales and shipments have resulted in a 1.5 million ton increase in China's corn exports to 4.0 million tons. Increased competition and lower demand for corn in Asia has reduced marketing opportunities for U.S. corn in that region and spurred this month's three million ton reduction in forecast 1997/98 U.S. corn exports.
World trade in barley is forecast to increase 500,000 tons to 16.7 million. Increases in barley exports, primarily of feed quality barley, by the United States and Australia, among others are expected to offset lower exports by the EU.
The forecast of 1997/98 corn exports by China was increased this month from 2.5 to 4.0 million tons as sales and shipments to Asian importers continue strong. Despite indications that sales of Chinese corn for 1997/98 delivery may now exceed 4.0 million tons, new contracts increasingly include options for sourcing from alternate origins, subject to price conditions. China is still forecast to import 250,000 tons of corn in 1997/98 while ending stocks are forecast to fall by more than 50% to 20.0 million tons.
Forecast 1997/98 corn exports by the United States were lowered this month from 51.5 to 48.5 million tons. The combination of decreased regional demand in Asia and stepped up shipments from China are expected to constrain U.S. exports. Meanwhile, U.S. barley exports are now projected to reach 1.35 million tons in 1997/98, an increase of 350,000 tons over the previous forecast. The forecast of total U.S. coarse grains exports in 1997/98 was lowered this month from 57.9 to 55.1 million tons.
Due to anticipated continuation of heavy feed wheat purchases from Eastern Europe, the forecast of 1997/98 corn imports by South Korea was lowered this month from 8.75 million tons to 7.5 million, the lowest level in four years.
As a result of an economic slowdown in Southeast Asia, recent growth in corn consumption in Thailand, Malaysia, the Philippines and Indonesia is expected to stall in 1997/98. As a result, the 1997/98 import forecasts for Malaysia and Indonesia were reduced from last month's estimates ( 300,000 tons to 2.4 million for Malaysia and 250,000 tons to 750,000 for Indonesia). The forecast for corn imports by Thailand remains unchanged at 750,000 tons.
ENDNOTES TO GRAIN: WORLD MARKETS AND TRADE
1) Includes Canada, Mexico, and the United States.
2) Includes Central America, the Caribbean, and South America.
3) Includes Azores, Cyprus, Iceland, Malta & Gozo, Norway, and Switzerland
4) Includes Albania, Bulgaria, Czechia, Hungary, Poland, Romania, Slovakia, and former Yugoslavia.
5) Includes Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, Turkey, United Arab Emirates, and Yemen.
6) Includes Algeria, Egypt, Libya, Morocco, and Tunisia.
7) Includes all other African countries except North Africa.
8) Includes Afghanistan, Bangladesh, Bhutan, India, Nepal, Pakistan, and Sri Lanka.
9) Includes all other Asian countries except South Asia.
10) Includes Australia, Fiji, New Zealand, and Papua New Guinea.
Unless otherwise stated, stock data are based on an aggregate of differing local marketing years and should not be construed as representing world stock levels at a fixed point in time.
Current and historical data on the European Union in this issue refers to the EU-15.
Consumption statistics reflect total utilization, including food, feed, seed, and differences in marketing year imports and marketing year exports.
This circular was prepared by the Grain and Feed Division, Commodity and Marketing Programs, Foreign Agricultural Service, USDA, Washington DC 20250. Information is gathered from official statistics of foreign governments and other foreign source materials, reports of U.S. agricultural attaches and Foreign Service officers, results of office research, and related information. Further information may be obtained by writing the division or telephoning (202) 720-6219.
Note: The previous report in this series was the Grain: World Markets and Trade Foreign Agricultural Service Circular FG 10-97 October 1997. For further details on the world grain production see World Agricultural Production, Foreign Agricultural Service Circular WAP 11-97 November 1997.