Bumper crop for global cereal stocks
ingredients, may turn the corner this year as a new report from the
UN food agency predicts world cereal production will hit a record
2.04 billion tonnes in 2004, an increase in inventories for the
first time in five years.
Their cautious optimism squares against recent data from the US government and investment analysts that suggest wheat and corn stocks are still exceptionally low.
Last month the US department of agriculture forecast global wheat stocks-to-use ratio would rise by just four days to 86 days of cover in 2004/05 - the second lowest global inventory in 30 years. This figure compares to 1999/00 when cover hit 131 days.
The Food and Agriculture Organisation said world cereal stocks - wheat, maize, rice, soya - are forecast to rise to 441 million tonnes by the close of the 2004/05 season, with the bulk of the increase in corn. Wheat reserves are forecast to augment slightly.
By contrast, the FAO report predicts rice inventories will fall again pushing firmer prices as a result of reduced production in several major exporting countries.
Wheat, along with corn and soy, are the starting point for a range of food ingredients, from starch to gluten, used widely in food applications. But food makers and ingredients firms across the world have been affected by rising prices for basic food commodities.
In each of the last four years world grain production has fallen short of consumption, forcing a draw-down of global stocks for wheat, rice, corn and soybeans. Soybean prices recently hit 15-year highs and wheat and corn seven-year highs.
While global cereal trade is forecast to decline in 2004/05, mostly reflecting reduced demand in the EU, which the FAO forecasts would more than offset an expected increase in imports by developing countries, China in particular.
A massive pull on global stocks from China in recent years has played a key role in depleting world stocks and pushing up prices.
But the Rome-based body predicts this could improve due to "the expected slowdown in the rate of depletion of China's reserves, mainly due to a strong rebound in production."
The bulk of the latest upward revision to the world cereal production forecast results from a substantial increase for coarse grains, particularly in the US, where the report says an 'exceptional' maize crop has been gathered.
This, along with several other upward adjustments for the 2004 coarse grains crops still being gathered around the globe, including China, has added almost 48 million tonnes to the forecast since September, pushing the annual global increase to 8.5 per cent.
World cereal demand in 2004/05 is forecast to rise by 2.4 per cent from the previous season. Most of the increase will come from feed usage of cereals.
