UN agricultural agency forecasts slight drop in cereal trade

World trade in cereals is set to decline slightly in the 2005-06 marketing season, according to the first forecast of the United Nations agricultural agency released today, while production remains at near-record levels except in North Africa, where it has fallen due to drought.

In the June issue of its periodical, Food Outlook, the UN Food and Agricultural Agency (FAO) puts global cereal trade for the coming season at 230 million tones, or 1.3 per cent below the previous season, mainly due to lower demand for wheat imports.

“The bulk of the decrease is expected in coarse grains production in the United States and Europe where yields are expected to return closer to average after record levels last year,” the report says.

With prospects for the 2005 global cereal crop remaining favourable, FAO now forecasts world production in 2005 at 1,996 million tones, just 2.8 per cent below the record 2004 crop. Pulse production is also expected to decline just slightly in 2005 to 61 million tonnes.

Among the developing countries, the report forecasts a marginal increase in the 2005 cereal output, mostly on account of better prospects in parts of Asia.

Production in Africa, however, may fall for the second consecutive year due to drought in the north of the continent, canceling out a slight increase expected in sub-Saharan Africa. In the group of Low-Income Food-Deficit Countries, the 2005 cereal production is also forecast only marginally up from 2004.

Regarding world cereal consumption, Food Outlook projects a modest growth of just 0.3 percent in 2005-06, compared to 2.3 percent in the previous year. However, if production forecasts hold, world cereal demand in 2005 would outpace production.

Despite the tighter supply and demand outlook for the coming season, cereal prices currently remain well below their levels a year ago, mainly reflecting the large tonnage available for export.