FAO's first world cereal supply and demand outlook for 2017/18 points to another season of relative market tranquillity, with global production declining only slightly. Combined with prospects of relatively weak growth in utilization, another large output is set to keep world cereal stocks at near-record levels.

World cereal production to decrease slightly in 2017

World cereal production in 2017 is projected at 2 597 million tonnes, only 0.3 percent (9.0 million tonnes) below the 2016 record and still above the five-year average. However, with some major crops yet to be planted, much will still hinge on climatic conditions in the coming months, but also on farmers' return prospects, which influence planting decisions.

Nearly all of the decrease in world cereal production from last year reflects an anticipated fall in the wheat output to 740 million tonnes, representing a 2.7 percent (20.3 million tonnes) decline from 2016. Smaller projected outputs in Australia, Canada and the United States, due mainly to price-induced planting cuts, account for most of this decline. While smaller harvests are also anticipated in Kazakhstan, the Russian Federation and Ukraine, a strong rebound in production is projected for the EU and Morocco. By contrast, total production of coarse grains in 2017 is provisionally put at a new record level of 1 353 million tonnes, up 0.5 percent (6.4 million tonnes) year-on-year. Most of the anticipated increase would reflect a higher maize output, which, at 1 051 million tonnes, would stand 1.2 percent (12.8 million tonnes) above last year's record. The increase would mostly stem from a surge in production in Brazil as well as Argentina, coupled with a significant rebound in South Africa's production from the drought-reduced level of 2016. However, a large proportion of this increase is expected to be negated by a downturn in the United Sates, where maize production is expected to fall sharply from the record high of 2016. Assuming normal weather conditions during the northern hemisphere summer, when the bulk of crops will be cultivated, FAO's first forecast of world rice production in 2017 is set at 504 million tonnes. This level would imply a 1.0 percent output expansion from 2016, while also suggesting a likely slowdown in the 2017 pace of production growth. At a country level, area expansions facilitated by sustained government support are expected to underpin gains in India and Indonesia, while more conducive weather should support yield-driven recoveries in Brazil and China (Mainland). By contrast, large output reductions are forecast to concern drought-stricken Sri Lanka, but also the United States, where producers are likely react to more attractive prices for competing crops by curbing rice plantings.

Global cereal utilization to expand at a slow pace in 2017/18

After expanding by a relatively strong 2.2 percent in 2016/17, world cereal utilization is seen growing by a modest 0.8 percent in 2017/18 to 2 597 million tonnes. World food consumption of cereals is expected to continue on its gradual upward trend to reach 1 118 million tonnes in 2017/18, keeping average global per caput consumption of cereals stable at around 149kg per person. Total feed usage is projected at 927 million tonnes, up only 0.6 percent from the 2016/17 forecast, indicating a significantly slower expansion than the 3.0 percent growth anticipated for 2016/17. Lower feed grain outputs in the United States and some of the leading producers in the Commonwealth of Independent States are expected to contribute to this deceleration, while overall weak economic prospects are also envisaged to weigh on feed demand. Industrial usage of cereals could also experience a more subdued expansion in 2017/18 compared to 2016/17, largely on account of a weaker advance in ethanol production.

Total utilization of coarse grains in 2017/18 is set to increase to a record 1 356 million tonnes, up 1.3 percent from 2016/17, mostly sustained by modest expansions in feed and industrial use of maize. By contrast, wheat utilization is set to reach 735 million tonnes in 2017/18, representing a marginal decline (0.4 percent) from 2016/17. Reduced usage of wheat for animal feed is the main factor behind this expected decrease, given abundant supplies of cheaper coarse grains in several important markets. World rice utilization in 2017/18 is preliminarily put at 506 million tonnes, 1.2 percent above current 2016/17 expectations. Of this volume, 406 million tonnes are predicted to be destined to food, up 1.1 percent year-on-year and in line with projected population growth.

Cereal inventories in 2017/18 to fall marginally below the 2016/17 record

Amid expectation of a modest rise in consumption, a good 2017 cereal output is likely to preclude a significant decline in cereal inventories relative to this season's record level. Accordingly, FAO's first projection puts world cereal stocks at the close of 2017/18 at 680 million tonnes, down just 2.0 million tonnes year-on-year. If confirmed, this level would position the global stock-to-utilization ratio in 2017/18 at 25.4 percent, marginally below the 26.2 percent ratio expected in 2016/17, but comfortably above the 20.5 percent low registered in 2007/08.

The slight contraction in world cereal inventories anticipated for 2017/18 mainly reflects expectations of an 8.0-million-tonne drop in coarse grain stocks to 262 million tonnes. Lower maize inventories would account for much of this decrease, falling by 4.0 percent year-on-year to a 4-year low of 207 million tonnes. Large drawdowns in China and the United States would be behind the bulk of this fall, outstripping sharp increases expected in the EU and South America.

By contrast, global wheat closing stocks for marketing years ending in 2018 are expected to increase for a fifth consecutive year, climbing to 246.6 million tonnes, 2.5 percent more than in 2017. The anticipated increase would be mostly on account of a significant build-up of inventories in China, although a rebound in wheat carryovers in India would also contribute to the rise.

With sizeable drawdowns mostly confined to the United States and Thailand, global rice inventories in 2018 are forecast to remain ample and in the order of 170 million tonnes. This level would be just 0.3 percent short of stock expectations for 2017, with the relative stability mirroring to a large extend prospects of continued build-ups in China, due to abundant domestic production and substantial purchases from abroad.

World cereal trade to contract in 2017/18

FAO's first forecast of world cereal trade in 2017/18 stands at around 386 million tonnes, down 1.7 percent (6.7 million tonnes) from the 2016/17 estimate, mostly on account of lower shipments of wheat and major coarse grains.

World wheat trade in the new season is set to fall by 2.3 percent (4 million tonnes) to 169 million tonnes, reflecting a reduction in imports by China and India, as well as several countries in North Africa that are headed towards larger local crops relative to last year. On the export side, wheat shipments from Australia and the United States are projected to decline significantly from 2016/17, whereas higher sales are expected by Argentina and the EU. Exports by other leading wheat exporters are likely to remain close to the 2016/17 levels.

Prospects for trade in coarse grains and rice in the new season are subject to significant uncertainties at this early stage, with plantings in key producers still months away. However, based on early expectations regarding 2017 harvests, world trade in coarse grains in 2017/18 is tentatively projected at nearly 173 million tonnes, down 2 percent (3.5 million tonnes) from the estimate for 2016/17. Among the major coarse grains, world maize trade in the new season is forecast to reach 134 million tonnes, some 2.1 percent (2.9 million tonnes) below 2016/17, with most of the reduction driven by import cuts by several southern African countries following this year's recovery in their production. On the export side, a sharp fall in maize shipments from the United States would more than offset projected larger exports by Argentina and Brazil. Trade in other coarse grains is expected to be slightly below 2016/17 levels, with barley at 25.6 million tonnes and sorghum at 8.2 million tonnes. World trade in rice in calendar 2018 is tentatively put at 44.2 million tonnes. This level would compare to a revised forecast of 43.5 million tonnes for 2017, which would represent a 4 percent upturn from 2016, driven by rekindling demand, particularly in China, the Philippines and Sri Lanka.

WORLD CEREAL MARKET
Production 1/Supply 2/UtilizationTrade 3/Ending stocks 4/World stock-to-use ratioMajor exporters' stock-to-disappearance ratio 5/
( . . . . . . . . . . . . . . . . . . . . . . . . million tonnes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . )( . . . . . . . . . . . percent . . . . . . . . . . . . . )
2006/072,012.12,483.52,057.3247.6433.220.713.9
2007/082,124.22,554.62,121.5277.8438.720.514.4
2008/092,281.72,720.32,181.2293.2521.823.819.3
2009/102,258.72,780.52,216.3278.6562.524.920.4
2010/112,248.62,811.12,274.5288.5531.222.818.0
2011/122,343.42,874.72,317.3322.5550.123.718.2
2012/132,295.32,845.42,324.9305.0528.621.716.8
2013/142,520.63,050.62,430.9381.1590.323.618.0
2014/152,567.03,157.32,499.6382.2654.326.018.2
2015/162,535.63,190.02,520.4400.0661.925.716.0
2016/172,605.83,267.62,577.2397.3681.926.217.2
2017/182,596.83,278.62,597.2388.5679.825.416.7
WORLD WHEAT MARKET
Production 1/Supply 2/UtilizationTrade 3/Ending stocks 4/World stock-to-use ratioMajor exporters' stock-to-disappearance ratio 5/
( . . . . . . . . . . . . . . . . . . . . . . . . million tonnes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . )( . . . . . . . . . . . percent . . . . . . . . . . . . . )
2006/07600.9779.0622.5110.2158.925.215.3
2007/08611.6770.6619.5115.4149.222.714.3
2008/09681.3830.6644.0141.4178.426.519.2
2009/10684.0862.5654.7131.5207.630.622.9
2010/11651.5859.1661.7129.2198.328.521.4
2011/12697.1895.5694.2150.0195.528.818.4
2012/13654.6850.1684.2135.9170.924.614.3
2013/14711.2882.1693.5161.1181.525.714.6
2014/15731.0912.5706.5160.1206.929.016.8
2015/16735.3942.2713.8166.4225.130.517.0
2016/17760.1985.2737.6177.2240.532.719.3
2017/18739.9980.3734.7168.5246.532.718.8
WORLD COARSE GRAIN MARKET
Production 1/Supply 2/UtilizationTrade 3/Ending stocks 4/World stock-to-use ratioMajor exporters' stock-to-disappearance ratio 5/
( . . . . . . . . . . . . . . . . . . . . . . . . million tonnes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . )( . . . . . . . . . . . percent . . . . . . . . . . . . . )
2006/07985.81,184.21,012.0107.3178.816.512.7
2007/081,076.81,252.71,070.1129.3189.717.013.1
2008/091,143.01,332.61,094.8124.8225.119.916.5
2009/101,121.01,346.11,115.0116.3230.519.616.3
2010/111,130.31,360.71,153.2125.2202.717.411.2
2011/121,163.01,365.71,156.0132.6208.117.810.9
2012/131,152.61,360.71,167.5128.3196.415.68.2
2013/141,314.91,512.71,254.8178.1236.218.110.5
2014/151,341.11,577.31,301.6175.7272.520.813.4
2015/161,308.71,581.21,311.3189.3265.419.811.7
2016/171,346.61,612.01,339.2178.4270.119.913.5
2017/181,353.01,623.01,356.1177.0262.418.714.5
WORLD RICE MARKET
Production 1/Supply 2/UtilizationTrade 3/Ending stocks 4/World stock-to-use ratioMajor exporters' stock-to-disappearance ratio 5/
( . . . . . . . . . . . . . . . . . . . . . . . . million tonnes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . )( . . . . . . . . . . . percent . . . . . . . . . . . . . )
2006/07425.4520.3422.730.195.524.813.7
2007/08435.8531.3431.933.199.822.615.8
2008/09457.3557.1442.327.0118.326.522.4
2009/10453.7571.9446.630.7124.527.121.9
2010/11466.9591.3459.634.1130.227.921.2
2011/12483.3613.5467.039.9146.531.025.1
2012/13488.1634.6473.140.8161.433.427.8
2013/14494.4655.8482.641.9172.735.129.0
2014/15494.8667.5491.646.4174.935.324.3
2015/16491.6666.6495.344.3171.434.219.2
2016/17499.1670.5500.441.7171.333.818.7
2017/18504.0675.3506.543.0170.833.216.9
1/ Production data refer to the calendar year of the first year shown. Rice production is expressed in milled terms.
2/ Production plus opening stocks.
3/ Trade data refer to exports based on a July/June marketing season for wheat and coarse grains and on a January/December marketing season for rice (second year shown).
4/ May not equal the difference between supply and utilization due to differences in individual country marketing years.
5/ Major wheat exporters are Argentina, Australia, Canada, the EU, Kazakhstan, Russian Federation, Ukraine and the United States; major coarse grain exporters are Argentina, Australia, Brazil, Canada, the EU, Russian Federation, Ukraine and the United States; major rice exporters are India, Pakistan, Thailand, the United States, and Viet Nam. Disappearance is defined as domestic utilization plus exports for any given season.