FAO: Global cereal supplies are adequate amid COVID-19 shocks to economic growth and energy markets May 7, 2020
FAO’s estimate for 2019 world cereal production still stands at around 2 720 million tonnes, rebounding from the reduced 2018 level by 65.3 million tonnes (2.5 percent), mostly on increases in wheat, maize, and barley outputs. However, the forecast for world cereal utilization for 2019/20 has been reduced by 24.7 million tonnes since the previous report (April), as a result of COVID-19 impacts on economic growth, energy markets, and, to a lesser extent, feed demand. The reduction stems mainly from a 22.4 million tonne downward revision to the 2019/20 maize utilization, mostly in the United States of America and China, reflecting a sudden slowdown in feed and industrial demand. Global maize utilization in 2019/20 is now forecast to shrink from the 2018/19 level by almost 9 million tonnes (0.8 percent), bringing the total utilization of coarse grains to slightly below 2018/19 levels. The forecast for total wheat utilization in 2019/20 has also been subject to a downward revision, with cuts to industrial use, especially in the European Union, more than offsetting upward revisions for Canada. Nonetheless, world wheat utilization in 2019/20 is expected to exceed the previous season’s level by 9 million tonnes (1.2 percent), supported by anticipations of rising food consumption. Lowered food intake forecasts for Nigeria, combined with expected reduced industrial use in China, have resulted in a 1.5 million tonnes cut in the forecast for world rice utilization in 2019/20. Despite the revision, world rice total use would still exceed the 2018/19 record by 0.7 percent, largely on the back of an expansion in food intake in Asia.
As a result of expectations of reduced utilization, FAO’s forecast for world cereal stocks by the close of the 2020 seasons has been revised upwards by 22.6 million tonnes to 884 million tonnes, now pointing to a likely increase of 13.6 million tonnes (1.6 percent) from their opening levels and a global cereals stocks-to-use ratio of 31.6 percent, up from 30.7 percent published last month. The forecast for global coarse grain stocks has been increased by 22.4 million tonnes (5.5 percent) from last month’s report to a new record level of 428 million tonnes, almost exclusively on upward revisions for maize stocks in the United States and China. The anticipated COVID-19 induced contraction in industrial and feed uses could push US maize stocks to a record 62 million tonnes, which would be 5.6 million tonnes (10 percent) above their opening levels. World wheat inventories are still forecast to remain above their opening level, by 1 million tonnes (0.4 percent), as downward revisions in the European Union are offset by predicted increases in the Russian Federation and Turkey. World rice stocks are expected to approach an all-time high of 183 million tonnes. India is foreseen to account for much of the anticipated rise in the major rice exporters’ inventories in 2019/20, compensating for expected drawdowns in the United States of America and Viet Nam, as well as in Bangladesh, China, Indonesia and Nigeria.
World trade in cereals in 2019/20 is still expected to rebound from 2018/19, by as much as 11.4 millon tonnes (2.8 percent), to 422 million tonnes. The forecast for global coarse grains trade in 2019/20 (July/June) has been raised slightly since last month, on upward revisions to sorghum trade reflecting foreseen larger purchases by China. The forecast for global wheat trade in 2019/20 (July/June) has also been lifted, by 1.5 million tonnes , to 175 million tonnes, representing a 7 million tonnes (4.1 percent) increase from 2018/19. Reflecting much faster pace in sales, exports by the European Union and Ukraine in 2019/20 are now expected to reach higher levels than anticipated earlier. Although some COVID-19 related export restrictions were put into place in March, namely in the Black Sea region, they did not affect the 2019/20 export commitments or expectations and, in most cases, have already been lifted. World 2020 (January-December) rice trade forecast is down 600 000 tonnes from last month, and now points to only a minimal (0.9 percent) recovery from the 2019 depressed level. The revision stems from lower export expectations for Myanmar, Pakistan and Viet Nam, along with cuts in imports, mostly in Africa, which now appear headed towards a third year of little, if not negative, growth.
Wheat Outlook: FAO’s first forecasts for global supply and demand in 2020/21
FAO’s forecast for 2020 world wheat production points to an output of roughly 762.6 million tonnes, a comparable level to the 2019 production which, if materialized, would be the second highest on record. Smaller harvests are expected in the European Union, North Africa, Ukraine and the United States of America. These declines will likely be compensated by production rebounds foreseen in Australia and Kazakhstan as well as bigger harvests in the Russian Federation and several countries in Asia, in particular India.
Global wheat utilization in the 2020/21 marketing season will likely stagnante at around 759.4 million tonnes, with anticipated increases in food consumption outweighing expected reductions in feed and industrial uses, especially in the European Union, the United States of America and Canada, primarily on expectations of depressed demand due to the severe COVID-19 pandemic economic contractions.
Based on the current production prospects for 2020 and the projected utilization in 2020/21, FAO’s first forecast of world wheat stocks by the close of crop seasons in 2021 stands at 274.5 million tonnes, up 0.6 percent from their opening levels and would be the second highest on record. A forecast rise of around 8 million tonnes in China’s wheat inventories is the main driver behind the anticipated increase in global wheat stocks, more than compensating for the anticipated declines in the United States of America and North Africa. Excluding China, global stocks are heading to a year-on-year decline of nearly 5 percent, to their lowest level since 2013.
As the current 2019/20 (July/June) season for wheat is drawing to a close, FAO’s preliminary forecast for wheat trade in 2020/21 stands at 176.3 million tonnes, representing a slight (0.7 percent) increase over the 2019/20 estimated volume. However, it should be noted that this increase is mostly triggered by the addition of trade statistics between the United Kingdom and the European Union to the world numbers, starting from 2020/21 (EU28 until 2019/20 and EU27 from 2020/21). While early indications for most countries suggest that in 2020/21 imports will remain close to the 2019/20 levels, several countries in North Africa are likely to increase their wheat purchases due to likely domestic production shortfalls, while smaller imports are foreseen for Turkey in view of more favourable domestic crop prospects this year. Regarding exports, expected larger shipments from Australia and Canada are seen to offset likely reductions in exports from Ukraine and the European Union, mostly bacuase of lower production.
Prospects for 2020 Coarse Grains Production
For coarse grains, harvesting of the 2020 crops will soon commence in southern hemisphere countries. In South America, similar sized harvests to the previous year’s bumper levels are expected in Argentina and Brazil, primarily owing to above-average maize sowings. In South Africa, maize production is forecast to recover strongly from the 2019 drought-reduced level, exceeding 15 million tonnes and representing the second highest on record. In the northern hemisphere, plantings of coarse grain crops is either imminent or has just started.