Global Cereal Stocks Forecast To Drop

Global Cereal Stocks Forecast To Drop For Fifth Straight Year, UN Agency Says

Global cereal stocks are expected to drop for the fifth consecutive year despite an increase in production in 2004, leading to the possibility of higher and more volatile prices in the coming marketing year, the United Nations Food and Agriculture Organization (FAO) said today.

According to Food Outlook, an FAO quarterly publication that forecasts global crop, food and trade prospects, cereal production is expected to reach 1,956 million tons in 2004, a substantial increase from the previous year.

While production prospects are good, they are not up to expected total levels of utilization, said Henri Josserand, Chief of FAO's Global Information and Early Warning System. “The downward trend in global cereal stocks continues, narrowing the buffer available to absorb large unexpected shocks. In view of already tight stocks, the possibility of higher and more volatile prices in 2004-2005 should not be ruled out,” he said.

The first forecast for global cereal trade stands at 229.7 million tons, down 3.4 per cent from 2003-2004. The decline mostly reflects good crop prospects in traditional importing countries, as well as a strong production recovery in Europe. Tighter rice supplies in major exporting countries also will reduce tradable volumes in rice.

After rising for several months, international prices of most cereals eased back in recent weeks, according to the Food Outlook, reflecting “generally favourable prospects for 2004 crops.” Prices also eased for rice as China and Thailand released rice stocks onto tight domestic markets.

In related news, the report also says that outbreaks of animal disease in major meat exporting countries and resulting bans on imports from the affected areas are reducing exportable supplies and causing international meat prices to surge.

International prices for dairy products were well above average during the first-half of 2004 because of sustained import demand and limited availability of export supplies. Food Outlook forecasts that milk prices will be at or near their current high levels for the remainder of the year.

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