ACKNOWLEDGEMENTS

The Food Outlook report is a product of the FAO Trade and Markets Division. This report is prepared under the overall guidance of Boubaker Ben-Belhassen, Director, and Abdolreza Abbassian, Senior Economist. It is written by a team of economists, whose names and email contacts appear under their respective market summary contributions. The report benefited from research support by many staff, namely, David Bedford, Erin Collier, Julie Claro, Harout Dekermendjian, Alice Fortuna, Lavinia Lucarelli, Emanuele Marocco, Marco Milo, Di Yang and the fisheries statistical team.

Special thanks go to David Bedford and Lavinia Lucarelli for preparing the charts and statistical tables and to Valentina Banti for her administrative support. Additionally, the team is grateful to Ettore Vecchione for the desktop publishing and to Claire Pedrick for her valuable editorial assistance.

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HIGHLIGHTS

Food markets in 2019/20 are bracing for some additional uncertainties beyond their own fundamentals. A fast-changing trade environment and the rapid spread of African Swine Fever constitute important challenges to overcome. However, prospects point to generally well supplied markets, which is seen to contribute to a lower food import bill in 2019.

WHEAT

Given the expectations of a strong rebound in world wheat production and a less buoyant growth in overall demand, global wheat markets should remain adequately supplied in 2019/20, with inventories rising – especially among the major exporters – and prices expected to remain under pressure.

COARSE GRAINS

Despite a forecast rebound in world coarse grain production in 2019, global inventories have to decline to meet projected total utilization in 2019/20. However, export availabilities should remain sufficient amid less vibrant trade prospects.

RICE

Less attractive margins and adverse weather are tentatively forecast to constrain world rice production in 2019 from expanding beyond the 2018 all-time high. Despite the forecast stagnation, world rice supplies should remain ample in 2019/20, bolstering expectations of global rice utilization expanding further.

OILCROPS

FAO’s latest forecasts for 2018/19 point towards a balanced supply-demand situation for oils/fats, while meals/cakes are characterized by a sizeable production surplus. Preliminary projections for 2019/20 suggest that production of both oils and meals could fall short of demand, possibly triggering stock releases.

SUGAR

World sugar production is forecast to drop in 2018/19 from last season’s record level, but to remain slightly above global consumption. Expectations of lower production has not eased the downward pressure on prices. World sugar trade is forecast to contract marginally on higher availabilities in importing countries.

MEAT

World meat output is forecast to decline due to a fall in pig meat output, primarily in China, more than offsetting expansions in bovine, poultry and ovine meat categories. Trade is forecast to expand, fueled by an expected sharp rise in imports by China.

DAIRY

World milk production is heading for an increase in 2019, underpinned by rising dairy herd numbers and milk yields, although warm and dry weather conditions may pose a threat. Trade is forecast to expand for a fourth successive year, but at a slower pace than in 2018.

FISHERIES

Growth in global fish production in 2019 is expected to remain flat, with low catches for several wild-caught species and steady aquaculture expansion. Demand growth is positive but slowing as well, in part on trade tensions and weaker economic growth.

SPECIAL FEATURES

African Swine Fever: Challenge for some, opportunites for others?

The outbreak of African Swine Fever in East Asia is likely to have a noticeable effect on meat and feed markets worldwide. This article reviews the current extent of the spread, examines potential changes in production and consumption patterns while discussing the implications for trade flows.

Bananas and major tropical fruits in Latin America and the Caribbean

This article represents an introductory background note to the medium-term outlook for bananas and major tropical fruits in Latin America and the Caribbean, which will be published in July 2019 in the forthcoming edition of the OECD-FAO Agricultural Outlook 2019-2028.

MARKET SUMMARIES

MARKET ASSESSMENTS

Wheat

Coarse grains

Rice

Oilcrops, oils and meals

Sugar

Meat and meat products

Milk and milk products

Fish and fishery products

SPECIAL FEATURES

African Swine Fever: Challenges for some, opportunities for others?

Bananas and major tropical fruits in Latin America and the Caribbean: The significance of the region to world supply

MAJOR POLICY DEVELOPMENTS

Grains

Rice

Oilcrops, oils and meals

Meat

Dairy

STATISTICAL TABLES

MARKET INDICATORS

Futures markets

Ocean freight rates

Food import bills

The FAO price indices

CEREALS

Early prospects point to a likely rebound of 2.7 percent in global cereal production in 2019, following a decline registered in 2018. Based on the conditions of crops already in the ground and on planting intentions for those still to be sown, and assuming normal weather for the remainder of the season, world cereal output is forecast to reach a new record level of 2 722 million tonnes (including rice in milled equivalent), that is 71 million tonnes higher than in 2018. Among the major cereals, wheat, maize and barley would account for most of the rise in cereal production, with projected year-on-year increases of 5.0 percent, 2.3 percent and 5.4 percent, respectively. Global rice production is likely to remain close to the 2018 all-time high.

World cereal utilization is set to increase by 1.5 percent in 2019/20, and reach a high of 2 722 million tonnes, precisely matching the forecast production. The expansion would be most pronounced for coarse grains, with their utilization expected to be up 1.7 percent from 2018/19, largely driven by strong demand for animal feed and industrial applications. Global food consumption of cereals is also expected to increase, by at least 1.1 percent, due to the continued rise in world population. Food consumption of rice and wheat, the two leading staples, is projected to increase by 1.7 percent and 1.0 percent, respectively.

Based on FAO’s first forecasts for cereal production in 2019 and total utilization in 2019/20, world cereal stocks would need to be drawn down marginally, by 0.7 percent, to 847 million tonnes, the lowest volume since 2016/17. Lower coarse grains and, to a lesser extent, rice inventories would account for most of the anticipated contraction in world cereal reserves. By contrast, wheat stocks are set to increase, to their second highest level on record. However, the decline in cereal stocks would only result in a small drop in the global cereal stock-to-use ratio, to a four-year low of 30.1 percent.

World trade in cereals in 2019/20 is forecast at 413 million tonnes, up just 0.5 percent (2.0 million tonnes) from the estimate for 2018/19, but still 1.9 percent (8 million tonnes) below the 2017/18 high. Most of the anticipated decline is associated with a likely drop in maize trade; whereas trade prospects for most of the other cereals are positive, especially for wheat and rice. Against a backdrop of overall comfortable supply and demand balances for nearly all the cereals, their international prices are likely to remain under pressure, at least through the first half of the 2019/20 season.

WHEAT

Following some tightening in 2018/19, global wheat markets are expected to benefit from a likely significant rebound in supplies in the new season (2019/20), on the back of anticipated production recoveries in many countries. Total wheat output in 2019 is pegged at 767 million tonnes, up 5.0 percent from 2018 and, if confirmed, would mark a new record. Most of the growth is expected to result from production increases in the European Union (EU), the Russian Federation and Australia.

Global wheat utilization in 2019/20 is forecast to grow by 1.3 percent, to 757 million tonnes. Despite the rise, total utilization would still fall short of the 10-year trend value for the third consecutive season. While food consumption of wheat is foreseen to keep pace with the overall population growth, reaching 519 million tonnes, feed utilization of wheat in 2019/20 is pegged at nearly 144 million tonnes, up 1.5 percent from the 2018/19 estimated level, with most of the increase expected to take place in China, the EU and the Russian Federation.

Based on the preliminary forecasts for 2019 production and 2019/20 utilization, world wheat stocks are set to increase by 3.7 percent to 278 million tonnes by the close of seasons in 2020, still below the record level of 282 million tonnes registered in 2017/18. Expected higher stocks in China and replenishing inventories in several wheat exporting countries are behind the anticipated rise in global wheat stocks.

The preliminary forecast for world trade in wheat (including wheat flour in wheat equivalent) in 2019/20 (July/June) stands at 173.5 million tonnes, some 1.6 percent higher than the 2018/19 level. The rebound mainly stems from anticipated larger wheat purchases by several countries in Asia and North Africa. The expected increase in wheat world import demand in 2019/20 is likely to be easily met by larger surpluses in major exporting countries, with the Russian Federation maintaining its position as the world’s leading exporter for the third consecutive season.

International wheat markets have already started to react to the ample supply prospects in 2019/20, with export prices generally under downward pressure in recent weeks. However, much of the market’s developments rest on the final outcome of this year’s major harvests, which are still a few months away.

Contact:

Jonathan.Pound@fao.org (Production)

COARSE GRAINS

FAO’s first assessment of supply and demand prospects for coarse grains in 2019/20 points towards yet another comfortable season ahead. World production of coarse grains in 2019 is forecast to increase by 2.4 percent from the 2018 reduced level, to reach 1 438 million tonnes. Much of the increase will most likely stem from higher production of maize and, to a lesser extent, barley. The increase in maize output reflects expectations of a strong production recovery in Argentina and Brazil, while given the likelihood of increased plantings compared to last year, maize production in the United States of America could rebound to the second highest level on record. World production of barley is also set to rise from the 2018 level, with most of the increase expected in Canada, the European Union (EU) and the Russian Federation.

Global trade in coarse grains in 2019/20 could decline by 1.4 percent, to nearly 191 million tonnes, with expectations of reduced import demand for maize and sorghum. The predicted contraction in maize trade - the first in nearly two decades, would be mainly on account of a sharp anticipated fall in imports by the EU, after record purchases in 2018/19. Similarly, sorghum trade is seen to contract, primarily because of reduced import demand by the EU. Trade in barley is likely to benefit from stronger demand by Saudi Arabia but still remain similar to the 2018/19 level because of the anticipated smaller purchases by China. Regarding exporters, reductions in overall sales of coarse grains from Canada, South Africa, the United States of America and Ukraine are likely to be largely offset by bigger shipments from Argentina, Brazil, the EU and the Russian Federation.

World utilization of coarse grains is forecast to reach a new record of 1 447 million tonnes, a 1.7 percent increase from 2018/19, primarily driven by a faster increase in feed use, especially in Asia and North America. Against a backdrop of rising global utilization, world stocks of coarse grains should decline by 3.4 percent to 390.5 million tonnes, with most of the decrease expected in China and the United States of America. The projected decline would lead to a lower world stocks-to-use ratio, as well a decrease in the ratio of major exporters’ closing stocks to their total disappearance (domestic demand plus exports), an outlook that could provide some support to international prices in 2019/20, especially if demand were to accelerate faster than currently envisaged.

Contact:

Jonathan.Pound@fao.org (Production)

RICE

World rice production is tentatively forecast to amount to 516.8 million tonnes (milled basis) in 2019, virtually unchanged from the 2018 all-time high. Amid climatic uncertainties associated with the ongoing El Niño phenomenon and prospects of another decline in China’s production, early expectations point to output growth decelerating in Asia. By contrast, with the exception of Europe, all other regions appear to be heading towards smaller harvests, as poor producer margins and less ideal growing conditions are anticipated to curtail plantings.

After stabilizing at a fresh peak in 2018, international trade in rice is forecast to contract by 3.1 percent in 2019 to 46.8 million tonnes, pressured by waning import demand from Bangladesh and Indonesia, as well as from China, Nepal, Sri Lanka and various West African countries. Against a backdrop of ample global exportable availabilities and intensifying competition for markets, a supply shortfall could cause Thailand to shoulder much of the expected trade fall. However, smaller crop harvests are also expected to undermine exports by Australia, Argentina, Brazil, Egypt and Uruguay, while Cambodia, China, India, the United States of America and Viet Nam are anticipated to export more. Trade in 2020, although tentative, is projected to rebound by 4.5 percent.

Under current prospects of stagnating world production and another food-driven expansion in total use, rice stocks at the close of 2019/20 are forecast to fall 1.0 percent below their record opening levels to 178.7 million tonnes. An expected drawdown in China would account for much of this reduction, eclipsing anticipated stock replenishments in the rest of the world. These would be driven by another stock build-up in the major rice exporting countries, in particular India.

Firming Japonica and fragrant prices have underpinned a 3.5 percent recovery in international rice prices since November 2018, as reflected by the FAO All Rice Price Index, which averaged 222.2 points in April 2019. Still, at this level, the Index remained below its year-earlier value, reflecting persistently thin international demand for Indica rice.

Contact:

Shirley.Mustafa@fao.org
Cristina.Coslet@fao.org (Production)

OILCROPS

In 2018/19, growth in global oilseed production is set to resume, with soybeans accounting for much of the expected increase, led by a strong production rebound in Argentina and a bumper crop in the United States of America. While higher soybean output would facilitate a rise in global meal production, growth in protein meal demand is forecast to come to a halt in 2018/19 - largely due to a decline in China’s soymeal uptake following the outbreak of African Swine Fever (ASF). Tied to the unexpected contraction in China’s domestic demand, as well as continued repercussions of the United States of America-China trade tensions, global trade in soybeans is expected to contract, while soybean/soymeal inventories are poised to rise sharply, notably in the United States of America. With global meal stocks heading towards unprecedented levels, international meals/cakes prices have continued trending downward.

For oils/fats, subdued expansion in palm oil output due to continued production challenges in Southeast Asia is weighing on global production growth in 2018/19. By contrast, consumption growth could accelerate compared with last season, underpinned by attractive prices and more dynamic demand from the biodiesel industry. Nonetheless, global production is anticipated to exceed demand, likely resulting in a fresh rise in international oils/fats reserves. Accordingly, international oils/fats prices have continued to linger at multi-year low levels.

Highly tentative projections for 2019/20 suggest that global oilseeds production could fall short of the current season’s level. Assuming a continuation of recent utilization trends, global demand for both vegetable oils and oilmeals could surpass forecast production levels, possibly triggering inventory releases and a retreat in stocks-touse ratios, especially in the oils/fats market. Overall, given the current season’s massive carry-over stocks, the market for oilseeds and their derived products should continue to be characterized by a comfortable supply and demand situation in 2019/20 - barring unusual weather events and major policy changes, notably with regard to trade policies.

Contact:

Peter.Thoenes@fao.org

SUGAR

FAO foresees world sugar production to decline in 2018/19 (October/September), but to remain above total consumption, with the anticipated surplus likely to be smaller than last year’s record level. Expected decreases in sugar output in Brazil, the European Union (EU) and Thailand will likely be offset by expansions in China, Mexico, Australia and Egypt. On the demand side, world sugar consumption is set to rise, reflecting predicted increases in several developing countries, prompted by lower domestic sugar prices. Sugar consumption growth is expected to be particularly marked in Africa, Asia and Central America and the Caribbean.

Sufficient domestic supplies in traditional importing countries should lead to a contraction in global import demand relative to the last marketing season. The implementation of import restriction measures in some major markets could also limit global import demand. Exports are set to fall for Brazil, the world’s largest sugar exporter, but to rise for Thailand, the second largest sugar exporter, prompted by abundant sugar stocks. A key feature in the current season is India maintaining its status as the world’s largest sugar producer for the second consecutive season, surpassing Brazil.

International sugar prices have followed a declining trend since the beginning of 2019, extending the steady price fall that has characterized the market since mid-2017. The price slide is mainly associated with prospects of ample sugar availabilities, following large accumulated inventories in both importing and exporting countries. Policy measures to curb imports, or boost exports, as well as the strength of the US dollar against currencies of key sugar exporters, particularly during the last quarter of 2018, have further exacerbated the price weakness. On the other hand, the recent firming of international crude oil prices will likely play an indirect role in sustaining sugar values, as more sugar crops are used to produce ethanol instead of sugar. In addition, a possible production setback in 2019/20 may provide further support to prices.

Contact:

Elmamoun.Amrouk@fao.org

MEAT AND MEAT PRODUCTS

Global meat production is forecast to hover around 337 million tonnes in 2019 - slightly lower than in 2018. If confirmed, the 0.2 percent anticipated decline would represent the first output fall since 1996, marking a reversal shift from the slow but stable growth trend witnessed over the past two decades. Despite a likely sharp fall in pig meat output, largely as a result of the African Swine Fever (ASF), especially in China, 2019 global meat production is only expected to drop slightly, as current prospects point to a solid worldwide expansion for poultry meat production and a steady progress in bovine and ovine meat outputs. As a result of ASF, which is likely to depress pig meat output in China by at least 10 percent, the country’s overall meat sector may record a 5 percent (4.3 million tonnes) contraction in 2019. Elsewhere, meat output is predicted to expand in the United States of America, Brazil, Mexico, India, the European Union (EU) and the Russian Federation, while a small production decline is anticipated in Australia.

World trade in meat and meat products is forecast to surpass 35 million tonnes in 2019, up 4.8 percent from last year. Much of the expansion is projected to stem from an expected increase of 19-20 percent in overall meat imports by China, which could reach 26 percent for pig, 23 percent for poultry and 15 percent for bovine meat. Japan, Mexico, the Philippines, Viet Nam and the Russian Federation are also expected to step up their meat purchases, while Saudi Arabia, Angola, Cuba and the Republic of Korea may import less. The expected expansion in world import demand is forecast to be met largely by increased exports from Brazil, the EU, the United States of America, Thailand, India and Argentina, while limited supplies may depress meat foreign sales by Australia, New Zealand, China and Uruguay.

Despite large export availabilities in major supplying countries, international meat prices, measured by the FAO Meat Price Index, have firmed up since January, underpinned by increased demand for pig, bovine and poultry meats, especially by China. By contrast, ovine meat prices retreated on large export supplies, mostly from Australia, where dry weather continues to induce slaughtering.

Contact:

Upali.GalketiAratchilage@fao.org

MILK AND MILK PRODUCTS

World milk production is predicted to expand by 1.9 percent (16 million tonnes) to 859 million tonnes in 2019. All major regions are anticipated to see growth, albeit at slower rates than last year. India, Pakistan, the European Union (EU), the United States of America, New Zealand and Brazil are expected to be the principal contributors to the global expansion, whereas significant contractions are foreseen for Australia, China, Argentina and Ukraine. Unusually warm and dry weather conditions continue to affect milk production in Australia, while there is concern in Europe about a repetition, this summer, of the abnormally high temperatures and drought conditions that prevailed in 2018. While the presence of an El Niño weather pattern has been confirmed in South America, its impact has so far been mild. A restructuring of the dairy sector, mainly in China, Argentina and the Russian Federation, is fostering a retreat of smallholders. This, together with rising feed costs, may result in an overall production decline in China this year. Moreover, uncertainties arising from the China-United States of America trade dispute, and delays in ratification of the Mexico-United States of America-Canada Agreement, are making it difficult for farmers and processors to make production decisions, and for traders to identify alternative market options.

World dairy exports (in milk equivalent) are forecast to grow by 1.8 percent (1.3 million tonnes) to 76 million tonnes in 2019, stimulated by a sharp increase in import demand by China, as well as by Mexico, Malaysia, Egypt and Brazil. Advances in production and restrictions on imports may instead depress deliveries to the Russian Federation, Oman and Algeria. Most of the increased dairy trade is forecast to be met by supplies from New Zealand, Mexico, the EU and Argentina. Dairy exports by India, which more than doubled in 2018, are anticipated to make further inroads this year. By contrast, tight availabilities are expected to depress deliveries from Australia, while trade tensions are likely to restrain United States of America dairy exports.

International dairy prices, measured by the FAO Dairy Price Index, have firmed since January, interrupting a seven-month streak of continuous declines that began in June 2018. The recent recovery of dairy product prices partly reflects increased import demand in anticipation of a seasonal tightening of supplies from Oceania, but also concerns about relatively short availabilities in other major suppliers, in particular the EU, where butter and skim milk powder (SMP) stocks have virtually disappeared.

Contact:

Upali.GalketiAratchilage@fao.org

FISH AND FISHERY PRODUCTS

Global fish[1] production in 2019 is expected to reach 177.8 million tonnes[2], which is around the same level as in 2018, while demand growth is positive but slowing. Total capture fisheries production is expected to decline by around 3.4 percent in 2019, as anchoveta production will decrease after exceptionally good production in 2018, and catches will be low for some other key wild-caught species, including cod, mackerel, other small pelagics and octopus. For aquaculture, continued growth of around 4 percent is forecast for 2019, but overall the supply picture remains mixed. The market balance is tight for some important farmed species such as salmon and bivalves, but in other markets, such as shrimp, seabass and seabream, plentiful supply is pushing prices down.

Global trade of fish and fish products in 2017 and 2018 was buoyed by high prices and good demand worldwide, but these previously positive conditions have worsened somewhat in 2019. The negative effects of the United States of America-China trade disputes will persist throughout 2019, with the additional threat of an escalation in transatlantic trade tensions between the United States of America and the EU. Compounding these uncertainties are further Brexit delays and slower overall global economic growth which will make 2019 a more challenging year for the seafood^3 industry.

Multiple major seafood exporters, particularly in Asia, are expected to see decreases in exports following positive performances in 2018. China, the world’s leading seafood exporter, will feel the impact of trade tensions and demand headwinds. On the import side, Japan, the EU and the United States of America have all seen declines in the total value of seafood imports so far in 2019, while import growth in developing countries is set to slow, but remain positive. Overall, demand is still expected to be strong enough to support prices at a relatively elevated level, given that catches remain low for several highly traded wild-caught species. For aquaculture producers, while several species are well supplied at present, recognition of long-term demand trends will continue to drive investment and research into alternative means of farmed fish production.

Contact:

Audun.Lem@fao.org
Stefania.Vannuccini@fao.org

[1] Unless otherwise specified, throughout this publication, the terms ‘fish’ or “seafood “indicate fish, crustaceans, molluscs and other aquatic animals, but exclude aquatic mammals, reptiles, seaweeds and other aquatic plants. They can originate from marine capture fisheries, freshwater capture fisheries, or all forms of aquaculture.

[2] Recently, China revised its aquaculture and capture fishery production statistics as a result of a new census that was carried out in the country. These new production statistics report from 2009 to 2016 and reflect a major downward revision, thereby resulting in lower global volumes as well.

WHEAT

PRICES

Large supplies to weigh on international wheat prices

A generally upward movement in international prices of wheat in 2018 has given way to a declining trend since March 2019. At the start of this year, wheat prices were framed by less than ideal weather during harvesting in Argentina and Australia, followed by reports of historically low winter wheat seeding in the United States of America and growing concerns over tightening exportable supplies in the Russian Federation - conditions that combined to push February prices up to their highest level since October 2018. However, in March wheat prices started to drift lower, influenced primarily by continued large sales from the Russian Federation and a favourable outlook for crops to be harvested this year, especially among the major exporters. The benchmark US wheat, No.2 Hard Red Winter, f.o.b. Gulf, averaged USD 213 per tonne in April, over 10 percent below its level at the start of the current year and also the same period last year.

Similarly, wheat futures at the Chicago Mercantile Exchange (CME) for nearby delivery fell in recent months on favourable growing conditions, boosting yield prospects, particularly in the EU and the Black Sea region, and expectations of larger export availabilities than in the current marketing season. In April, the September CBOT soft red winter futures averaged USD 170 per tonne, down almost 14 percent from the start of this year and 9 percent lower than the same month last year. The price pressure extended to higher quality (protein) wheat, traded at the Kansas City Board of Trade, which also experienced a downward trend (a more detailed analysis of the futures markets can be found in the Market Indicators section of this report).

PRODUCTION

World wheat production set to hit a new record in 2019

FAO’s forecast for global wheat production in 2019 is pegged at 767 million tonnes, nearly 37 million tonnes (5.0 percent) above last year’s output and, if confirmed, it would set a new record. Most of this year’s growth is expected to result from anticipated production increases in the EU, the Russian Federation and Australia.

In Europe, the aggregate wheat output is projected to rise in 2019. A large proportion of this increase is attributed to a favourable outlook in the EU, where wheat production is forecast to rebound by 8.7 percent to 149.5 million tonnes. The positive prospects are engendered by a foreseen upturn in yields, reflecting generally beneficial weather and an estimated 2 percent expansion in total wheat plantings, driven by expectations of better profitability. Wheat production is also forecast to rise in the Russian Federation to at least 82 million tonnes, almost 14 percent higher year-on-year, based on larger plantings and good yield prospects following favourable winter weather conditions and sufficient soil moisture in spring. Ukraine has a similarly positive production outlook, and the country’s wheat harvest is forecast at 26.5 million tonnes - 7.7 percent higher than the preceding year’s output.

In North America, wheat plantings in the United States of America are forecast to fall to their lowest level on record, instigated by wet weather during the winter planting period and comparatively lower profitability prospects for spring wheat crops. However, and in consideration of an expected upturn in yields, total wheat production in the United States of America is projected at 51 million tonnes, nearly unchanged from 2018. In Canada, an expansion in plantings for the main spring season is expected to boost total wheat production to over 33 million tonnes in 2019, a 4.2 percent year-on year increase.

In Asia, the wheat harvest is underway and prospects indicate a moderate production upturn in 2019. In China (Mainland)[1], the region’s major producer, the area planted to wheat is estimated at 23.8 million hectares, close to the five-year average. This reflects the continued attractive margins earned by wheat producers, in spite of the reduction in the minimum state purchase price for the second consecutive year -- a policy intended to steer farmers away from wheat production and consequently help in reducing stocks. Assuming average yields, China’s wheat output in 2019 is forecast at a near average level of 132 million tonnes. In India, harvesting of the rabi (main season) crop began in March, and latest official reports estimate the country’s total wheat output at 99.6 million tonnes, close to last year’s record. In Pakistan, wheat production in 2019 is forecast at 26.2 million tonnes, moderately above the harvest of 2018. The current outlook is in contrast to earlier subdued prospects, as beneficial rainfall in February and March alleviated early seasonal water deficits and boosted yield prospects. In the minor wheat producing countries of the Far East Asia subregion, including Bangladesh, Mongolia and Nepal, harvest prospects are generally positive, as strong domestic demand has sustained above average plantings, while generally favourable weather conditions are expected to support an upturn in yields.

In the Near East, favourable weather is anticipated to foster a production increase in Turkey, where the wheat harvest is predicted to reach 21 million tonnes, 5 percent higher on a yearly basis. In Iraq and Iran, production forecasts were recently trimmed due to the impact of floods in late March and early April, but outputs are nevertheless expected to attain good levels, due to the exceptionally beneficial weather in the preceding months. In North Africa, higher production is forecast for Egypt but in Algeria and Morocco, the 2019 harvests are expected to revert to a near average level.

Sowing of the 2019 wheat crop in Australia is underway, and despite lingering dry conditions in the eastern parts that adversely affected the 2018 crop, the area sown this year is expected to increase by 20 percent. Given the expected enlarged planted area, combined with an anticipated weather-driven increase in yields, production could rebound to almost 24 million tonnes, up over 38 percent from the drought-stricken harvest of 2018.

In Latin America and the Caribbean, planting of the 2019 wheat crop started in May in Argentina, and based on the prevailing elevated prices, the area sown is forecast to expand. As a result, wheat production is foreseen to remain above the five-year average for a second consecutive year. In Mexico, harvesting of the wheat crop is underway, and based on a 13 percent year-on-year expansion in the area sown, production is forecast to increase, though likely to remain slightly below the five-year average.

TRADE

Wheat trade to rebound in 2019/20

FAO’s first forecast for world trade in wheat (including wheat flour in wheat equivalent) in 2019/20 (July/June) stands at 173.5 million tonnes, up by 2.8 million tonnes (1.6 percent) from the current season’s reduced level, but below the 2017/18 record of almost 177 million tonnes. The rebound in world trade in 2019/20 largely stems from an anticipated rise in wheat purchases by several countries in Asia and North Africa.

In Asia, aggregate wheat imports in 2019/20 are forecast to reach just over 86 million tonnes, 1.3 percent higher than the current marketing season’s estimated volume. Higher wheat purchases by several Asian countries, in particular China, Indonesia, the Republic of Korea, the Philippines and Thailand are expected to more than offset lower imports by Iraq, Turkey, Saudi Arabia and several Central Asian Commonwealth of Independent States (CIS) countries.

In Africa, total wheat imports in 2019/20 are forecast to rise to an all-time high of 49.3 million tonnes, up 5.2 percent from the current season. However, nearly all of the projected increase is concentrated in Algeria and Morocco - the two northern African countries that are facing reduced production prospects this year. Imports by Algeria are forecast to rise by 10 percent to 7.7 million tonnes. However, at this level, imports would still remain below the five-year average and the country’s record purchases of nearly 8.5 million tonnes in 2016/17. In Morocco, imports could surge by as much as 42 percent to reach 4.7 million tonnes, given the anticipated 25 percent drop in domestic production. Wheat imports by Egypt, the world’s largest wheat importer, are expected to increase slightly, to 12.6 million tonnes, amid growing demand from the rising population. Wheat shipments to most other major destinations in Africa are likely to remain steady at around the 2018/19 levels.

In Europe, total wheat imports in 2019/20 are forecast at around 8.5 million tonnes, similar to 2018/19, with purchases by the EU remaining steady at 6 million tonnes. In Latin America and the Caribbean (LAC), aggregate imports in 2019/20 are pegged at around 25 million tonnes, also unchanged from 2018/19. Anticipated slightly higher purchases by Brazil are expected to nearly offset a likely decline in imports by Mexico, where production is forecast to increase this year. In March 2019, Brazil, the largest wheat importer in the LAC region, entered into an agreement with the United States of America to implement a duty-free tariff rate quota (TRQ) for wheat. This allows the importation of 750 000 tonnes of wheat under TRQ on an annual basis. By contrast, wheat purchases by Mexico from the United States of America, its traditional wheat supplier, have declined since last year due to trade disputes, a situation that has prompted Mexico to seek alternative suppliers, from both nearby countries in Latin America and also the Russian Federation and Ukraine.

World wheat export supplies in 2019/20 are expected to be even more abundant than in the current season, with major exporters expecting similar, if not larger, production this year. Consequently, competition for market share among exporters is set to intensify even further in 2019/20. For the third season in a row, the Russian Federation is expected to lead the global wheat trade as the largest exporter, projected to ship at least as much wheat as in 2018/19, or around 35 million tonnes. This would be supported by the projected rebound in domestic production combined with favourable prospects for market expansion beyond its traditional markets in North Africa and the Middle East. The United States of America, at 27 million tonnes and just slightly below the estimated shipments in 2018/19, will likely maintain its position as the world’s second largest wheat exporter in 2019/20. However, a larger EU crop this year is expected to drive up exports from this region by nearly 7 percent, to 23.5 million tonnes. Should the current projection for a production recovery in Australia materialize, its wheat exports could rebound to 14 million tonnes, up 32 percent from the low of 2018/19, though still below the five-year average. By contrast, in Canada, although total wheat production is heading towards a strong increase over last year’s output, exports could decline by some 4 percent, to 23 million tonnes. This reflects not only stiffer overall competition from other exporters, but also the issue surrounding durum wheat sales to Italy, traditionally a leading market for the Canadian product. Since last year, the demand for Canadian durum has suffered a serious setback in Italy - a major market for high-protein durum - following the implementation of a new labeling rule for pasta, requiring indication of the country of origin.

UTILIZATION

Wheat utilization rising in 2019/20, but at a slower pace

Early forecasts for world wheat utilization in 2019/20 point to a likely increase of 1.3 percent from 2018/19, to 757 million tonnes. Nonetheless, this anticipated growth would still fall short of the 10-year trend value for the third consecutive season. Slowing population growth, especially in some of the more important wheat consuming countries, coupled with a slower increase in feed consumption of wheat due to large availabilities of cheaper alternatives and less demand for industrial uses, have all contributed to a slower expansion in total wheat utilization compared with earlier years. Global utilization of wheat for direct human consumption, which accounts for 80 percent of total wheat United States of Americage, is forecast at 519 million tonnes, up by just 1.0 percent from 2018/19. This would yield an average annual consumption on per caput basis at 67.3 kg globally, very close to the 2018/19 level. Per caput wheat consumption in the world’s two most populated countries, China and India, is projected to reach around 65 kg and 60 kg, respectively, in 2019/20, up by nearly 1 kg over the last decade in both cases.

Total feed utilization of wheat is forecast to approach 144 million tonnes in 2019/20, up 1.5 percent from 2018/19. Most of the projected increase is expected in China, the EU (which is the world’s largest market for feed wheat) and the Russian Federation. Feed utilization of wheat is also seen heading for increases in the Republic of Korea, Thailand and the Philippines. Other uses of wheat, which include the industrial sector, seeds and post-harvest losses, are forecast to approach 94 million tonnes in 2019/20, up almost 2 percent from 2018/19. Seeds and post-harvest losses account for the bulk of the other uses category. However, industrial use of wheat, which has expanded rapidly over the past decade, is expected to experience slower growth, mostly due to weaker intake from the biofuel sector. According to a recent report by the International Grain Council, in 2018/19 wheat destined for the production of ethanol (excluding non-fuel uses) fell by almost 10 percent to just over 6 million tonnes, with most of the decline in the EU, where levels dipped by more than 18 percent to 3.6 million tonnes. The anticipated rebound in this year’s EU wheat output could encourage some increases in its use for ethanol production in 2019/20. However, at around 12 million tonnes, starch manufacturing still accounts for the biggest industrial use of wheat, and this category is also the most vibrant, especially in the EU, China and Canada.

STOCKS

Wheat inventories seen increasing in 2019/20

Based on the preliminary forecasts for 2019 production and 2019/20 utilization, world wheat stocks are tentatively predicted to reach 278 million tonnes by the close of seasons in 2020, nearly 10 million tonnes (3.7 percent) higher than their opening levels and only slightly below the record (282 million tonnes) registered in 2017/18. This increase in 2019/20 follows a rise of nearly 5 percent in the size of world inventories estimated for the current marketing season (2018/19), on the back of significant drawdowns in the EU and the Russian Federation. The anticipated increase in the overall level of wheat stocks in 2019/20 would be mostly on account of an expected 7-percent increase in China, where inventories are projected to set a new record at 129 million tonnes.

At the current forecast levels, the world wheat stocks-to-use ratio in 2019/20 is set to reach 36.2 percent, up from 35.4 percent expected for the current season and well above the historic low of 23.5 percent registered in 2008/09. When China is taken out from this calculation, the ratio remains steadier on a year-on-year basis, at 23.2 percent but still significantly above the low of 19.2 percent registered in 2007/08. In fact, the ratio of major exporters’ closing stocks to their total disappearance (defined as domestic utilization plus exports), which is considered a better measure of availability in global markets, is heading for an increase from 17.6 percent in 2018/19 to 18.7 percent in 2019/20. This reflects expectations of notable inventory buildups in the Russian Federation (40 percent), Australia (36.5 percent), Canada (16.7 percent) and the EU (7.4 percent), more than offsetting a likely sharp (10.4 percent) decrease in the United States of America. Elsewhere, in India, with another bumper crop expected this year, wheat inventories are likely to remain stable, at around 20 million tonnes.

[1] All references to China are to Mainland China unless otherwise specified.

COARSE GRAINS*

PRICES

Prices remain generally subdued on large export supplies

Despite a decline in global production in 2018 and some tightening of the supply and demand balance during the 2018/19 season, international prices of major coarse grains remained generally under downward pressure. Large export availabilities and strong competition for markets in the face of declining import demand kept world prices particularly subdued between June and November 2018. While maize export price quotations rebounded considerably between late 2018 and February 2019, in reaction to adverse weather in South America and some weather-related shipping disruptions in the United States of America, the gain proved short-lived. In April, the benchmark US maize prices (yellow, No. 2, f.o.b.) averaged nearly USD 161 per tonne, down by almost 8 percent from April 2018.

Pressured by good production prospects, the year-on-year declines in the prices of Argentina-(up River, f.o.b.) and Brazil-(Paranagua) origin maize were even more significant, at closer to 20 percent. International prices of barley and sorghum also remained generally below last year’s levels.

Prospects for continued large export availabilities in the 2019/20 season, underpinned by ample supplies in South America and a slow pace in trade, have kept futures prices under downward pressure. The Chicago Mercantile Exchange (CME) maize futures for delivery in December 2019, which is the benchmark delivery month for the new United States of America crop, averaged USD 152 per tonne in April, down nearly 7 percent from the previous year’s level. More detailed analysis of the futures markets can be found in the Market Indicators section of this report.

PRODUCTION

World production of coarse grains to rebound in 2019/20

FAO’s first forecast of global coarse grains production in 2019 stands at 1 438 million tonnes, 2.4 percent (34 million tonnes) higher than in 2018. The projected increase is principally based on an expected rise in maize production, while expectation of a higher barley output reinforces the buoyant outlook.

World maize production in 2019 is forecast to increase year-on-year by 2.3 percent (25.2 million tonnes) to 1 140 million tonnes. The increase is largely tied to an expected production rebound in Latin America and the Caribbean. Specifically, outputs by leading producers Argentina and Brazil are forecast to increase, respectively, to 49.7 million tonnes (14.4 percent higher on a yearly basis) and 94 million tonnes (16.5 percent higher), driven by a price-induced expansion in the area sown. In addition, mostly favourable weather conditions, particularly compared with the below-average rainfall experienced the previous year, are expected to result in an upturn in yields, further supporting this year’s positive outlook.

In North America, maize production in the United States of America, the world’s largest maize producer, is forecast to reach 375 million tonnes, 2.4 percent up year-on-year. Assuming trend yields, the projected increase mainly rests on an expected enlargement in acreage, reflecting favourable profitability prospects relative to both soybeans and spring wheat crops, as well as the employment of crop rotation practices. However, excessively wet weather conditions prior to the planting period could limit the increase in sowings relative to initial intentions. Production of maize in Canada is also expected to rise on account of larger plantings and a small upturn in yields. Forecast at 14.7 million tonnes, the harvest would be nearly 6 percent higher year-on-year.

In Europe, maize production in the EU in 2019 is predicted to remain virtually unchanged from 2018 at 68.5 million tonnes, with a likely decline in yields offset by an expansion in the area sown. The Russian Federation is expected to harvest a maize output of 13.5 million tonnes in 2019, up 18 percent from the previous year. The increase is mainly the result of a 15 percent expansion in the area sown. By contrast, Ukraine is forecast to produce a smaller maize harvest in 2019, projected at 29 million tonnes, down by 19 percent, as yields are predicted to revert to average levels following last years’ record highs.

In Africa, maize production is forecast to fall in 2019, mostly due to a second consecutive year of anticipated reduced outputs in Southern Africa. Production in South Africa, the continent’s largest maize producer, is forecast at about 11 million tonnes, down 12 percent, as dry weather conditions lowered yield prospects and cut the area planted compared to the previous year. Similarly unfavourable dry weather conditions, as well as recent cyclone-induced flooding, have sharply lowered production prospects in most countries in the subregion. In West Africa - although still early in the season - based on a generally favourable rainfall outlook, maize production is forecast to remain at average to above-average levels in 2019.

In Asia, planting of the main season maize crop is under way in China, and the early production outlook indicates a small increase in production to 260 million tonnes. Similarly, in India and Indonesia, which are both relatively large maize producing countries, outputs in 2019 are projected to rise slightly compared to the previous year.

FAO’s forecast for global barley production in 2019 stands at 147 million tonnes, 5.4 percent (7.5 million tonnes) above the preceding year’s output. Most of the foreseen upturn concerns an expected rebound in the EU’s harvest, despite some recent dry weather that curtailed prospects compared with initial expectations. Notable production gains are also forecast in Canada, where higher prices are anticipated to drive up the sown area by 14 percent, and in the Russian Federation, due to a forecast recovery in yields on account of mostly conducive weather conditions.

World sorghum production is forecast at nearly 59 million tonnes, virtually unchanged from 2018. This mainly reflects lower expected outputs in Australia and the United States of America, which are foreseen to offset production increases anticipated in several West African countries, including Nigeria and Mali.

TRADE

World trade in coarse grains to contract in 2019/20

FAO’s first forecast for world trade in coarse grains in 2019/20 (July/ June) is pegged at almost 191 million tonnes, down 1.4 percent from 2018/19. Global trade of all coarse grains is heading to a decline in 2019/20, in particular maize, barley and sorghum.

Global maize trade in 2019/20 (July/June) is expected to total 157.5 million tonnes, down 2.5 million tonnes from 2018/19. The anticipated contraction, the first since 2004/05, would be mostly on account of a likely reduction in imports by the EU, outweighing expected higher imports by several countries. After record purchases in 2018/19, total maize imports by the EU in 2019/20 could fall by at least 4 million tonnes (19 percent) to 17 million tonnes. This decline would be largely due to substantial carry-over stocks from the current season, sustaining ample domestic supplies. By contrast, in Asia, total maize imports are set to rise for the third consecutive season, reaching an all-time high of 77 million tonnes in 2019/20. Maize imports by the Islamic Republic of Iran, Turkey and Viet Nam are forecast to increase, reflecting growing feed demand in those countries. Predicted at almost 23 million tonnes, aggregate maize imports in Africa would also be higher than in 2018/19, approaching the record registered in 2016/17. The largest year-on-year increase in maize imports is expected in Southern Africa, where maize is the primary staple. Falling production in Zambia and Zimbabwe should result in both countries importing more maize in 2019/20 than in 2018/19.

In Latin America and the Caribbean, maize imports by Mexico, the world’s largest importer, could reach 17.4 million tonnes, up 400 000 tonnes from the estimated imports in 2018/19, despite a probable rise in this year’s production. Strong feed sector demand continues to underpin large purchases by Mexico. For the region as a whole, however, aggregate maize imports are expected to be broadly in line with 2018/19, with higher purchases by Mexico and Peru offset by somewhat lower imports by several other countries, including Brazil, El Salvador, Guatemala and Honduras.

Early indications regarding maize exports point to a sharp increase in sales from Argentina, Brazil and, to a lesser extent, the Russian Federation, but this will most likely be outweighed by probable declines in exports from Ukraine, the United States of America and South Africa. The biggest year-on-year fall in exports is forecast for Ukraine where, due to the anticipated decline in domestic production this year, exports in 2019/20 could drop to 21 million tonnes, down 25 percent from the 2018/19 record of 28 million tonnes. Similarly, maize shipments from the United States of America, the world’s largest maize exporter, are set to decline to 58 million tonnes, down by more 7 percent from 2018/19.

World trade in barley (excluding malt) in 2019/20 is pegged at 25.7 million tonnes, close to the estimated trade in 2018/19. Imports by Saudi Arabia, the world’s leading barley importer, are forecast to rebound by at least 23 percent from the 2018/19 reduced level and reach 8 million tonnes. Barley imports by Morocco are also forecast to increase to 800 000 tonnes, up 95 percent from 2018/19, primarily due to the anticipated reduction in this year’s domestic production. By contrast, imports by China could decline for the second consecutive season, reaching 5 million tonnes, down 1 million tonnes from 2018/19. Regarding exports, higher shipments are projected primarily from the EU, Ukraine and, to a lesser extent, Australia and the Russian Federation, offsetting possible declines in sales from Argentina and Canada.

Global trade in sorghum is forecast to fall further in 2019/20, reaching 4 million tonnes, down 11 percent from 2018/19 and well below the record trade volume of 12 million tonnes registered in 2015/16. The projected year-on-year decrease is mainly driven by reduced purchases by the EU, mostly due to higher domestic feed supplies compared with 2018/19. On the export front, sales from both Australia and the United States of America could decline given the prospect for smaller trade.

UTILIZATION

Total utilization of coarse grains to peak in 2019/20

World utilization of coarse grains in 2019/20 could reach 1 447 million tonnes, 1.7 percent higher than in 2018/19 and marking a new record. A greater than previously expected feed use, especially in Asia and North America, is the primary factor behind the total utilization increase in 2019/20. Among the major coarse grains, total use of maize is projected to reach 1 154 million tonnes, up just 1.7 percent from 2018/19, while barley utilization is set to reach around 143 million tonnes, 3.6 percent above the 2018/19 level. Total utilization of sorghum is projected to rise marginally to nearly 59 million tonnes.

Total feed utilization of coarse grains in 2019/20 is foreseen to increase by 1.9 percent to 812 million tonnes, with maize feed use alone anticipated to surpass the 2018/19 level by 1.5 percent and reach 656 million tonnes. Much of the expected increase in maize feed use reflects higher utilization in the United States of America which, at the current projected level of around 138 million tonnes, would represent an increase of nearly 3 percent from 2018/19. At 167 million tonnes, China is also anticipated to use more maize for feeding in 2019/20. However, the increase is expected to remain small and that after the 2018/19 stagnated level. Feed use of maize in China has slowed considerably following the rapid spread of African Swine Fever since August 2018 (when the outbreak was first detected). In view of reduced import prospects of other feed grains, as well as soybeans, the maize intake for feed in China could still increase, but by only 1.2 percent, underpinned by a rapidly expanding poultry sector. More on the recent dynamic of the feed sector in China is discussed in the Special Feature of this report. Feed use of maize is seen to increase significantly (up 11 percent) in the Russian Federation, as well as in Mexico (up 6.8 percent), supported by large domestic supplies and a strong demand from the livestock sector. In the EU, growth in the feed use of coarse grains would be mostly driven by greater utilization of barley, given the anticipated production recovery this year. The EU’s barley feed use is projected to reach 38 million tonnes in 2019/20, up nearly 9 percent from 2018/19.

Box: Trends in Brazilian maize exports

New maize varieties, expansion of production to higher-yielding regions of Mato Grosso, the country’s climatic ability to produce two crops in the same year, geographical shifts in livestock feeding and targeted government support are among the key factors that have contributed to a rapid rise in Brazil’s maize production over the past decade.

With production increasingly exceeding domestic demand, Brazil has emerged as one of the world’s largest maize exporters. Total maize production in Brazil has increased from just under 52 million tonnes in 2007/08 to nearly 98 million tonnes in 2017/18. This growth in output has enabled the country to increase almost continuously its maize exports, reaching 36 million tonnes in 2015/16 (July/June), and capture almost 26 percent of global market share. This compares with just 6 million tonnes exported a decade earlier, which represented less than 1 percent of the global total. Indeed, Brazil became the world’s largest maize exporter in 2012/13, when severe drought damaged the maize crop in the United States of America - the world’s largest maize producer and traditionally largest maize exporter.

Developments in currency markets also contributed to the robust expansion of maize exports from Brazil. Continued weakening of the national currency (Real) helped exporters to remain competitive and expand their markets well beyond neighbouring Latin American countries to Asia and Africa.

Maize shipments from Brazil to Asia jumped from 1.5 million tonnes in 2007/08 to a peak of 27 million tonnes in 2015/16, making notable inroads into important markets such as the Islamic Republic of Iran, Japan, the Republic of Korea, Viet Nam and Malaysia. In Africa, where Brazil’s maize exports expanded from zero to just under 5 million tonnes in less than a decade, some 30 countries have become customers of Brazilian maize, led by Egypt, Morocco and Algeria.

Another factor contributing to Brazil’s emerging role as a leading world exporter of maize is the strong government-backed investment strategy to develop ports and transportation infrastructure. These two areas have been key government priorities since 2010. Changes in the country’s regulatory framework have favoured public-private partnerships in road and rail expansion, as well as in port capacity improvements. In particular, new developments in the centre-west agricultural frontier, where more than two-thirds of the country’s soybeans and maize are produced, have boosted the transport of commodities to the north (involving a much shorter distance than to southern ports), thereby lowering export costs and delivery times.

In recent years, new terminals have become operational in the so-called Northern Arc port area. This has boosted the region’s share of grains transportation. In 2017/18, shipments from these ports reached 10 million tonnes, representing a sharp rise from less than 0.5 million tonnes registered in 2011/12. Indeed, while the northern terminals transported 9 percent of total maize exported from Brazil that year, this share rose to 34 percent in 2017/18.

The new terminals in the north provide much better market opportunities for buyers in Central America, Asia and Africa, reducing shipping costs and increasing the competitiveness of maize produced in Mato Grosso, Tocantins and Pará, all important producing areas in the north and northeast of the country.

Brazil’s maize exports have also shifted their seasonal pattern. Initially, maize shipments remained small, and generally took place during the early months of the season. However, since 2010 an increasing share of maize has been exported from August to January, which coincides with the months when harvesting of the second-crop maize (safrinha) begins, when supplies are normally at their peak in the northern hemisphere – a development that has generated stiffer competition with other major exporters, in particular the United States of America. In fact, March-July shipments from Brazil remain relatively small (representing just over 2 percent of annual exports), while the period from August to January now accounts for the largest share of country’s trade activity, with monthly exports making up more than 12 percent of the total during this period.

Early indications for the 2019/20 trade season (July/June) point to maize exports from Brazil rising to 29.5 million tonnes, some 15 percent higher than in 2018/19. This would place Brazil as the second largest maize exporting country in the world, after the United States of America.

Contact:

Lavinia.Lucarelli@fao.org

World food consumption of coarse grains in 2019/20 is expected to remain steady at close to 217 million tonnes, with anticipated increases in Africa and Latin America to compensate for a small decline foreseen in Asia. At the current forecast level, food consumption of coarse grains represents about 15 percent of total utilization. Within coarse grains, maize food consumption accounts for the biggest share and is expected to increase by around 1 percent in 2019/20 to reach 140 million tonnes. This would be sufficient to maintain a steady level of per caput consumption, most notably in Southern Africa and several countries in the Latin America and the Caribbean region, where maize is a leading staple. By contrast, food consumption of sorghum is projected to contract by 1.4 percent in 2019/20 to 28.6 million tonnes, mostly on expectations of reduced intakes in India and in several African countries.

Total industrial use of coarse grains is likely to increase further in 2019/20, surpassing the 2018/19 record of 350 million. Based on early forecasts, largely derived from recently published data by the International Grains Council, the increase in 2019/20 would be mostly driven by continued growth in maize-based starch production in China and further rises in the use of maize to produce biofuels in the United States of America, with the latter forecast to exceed 140 million tonnes.

World inventories of coarse grains to decline further in 2019/20

Based on the current forecasts for production in 2019 and utilization in 2019/20, world stocks of coarse grains will likely decline to a four-year low of 390 million tonnes, down 14 million tonnes, or 3.4 percent, from their opening levels. Consequently, the world stocks-to-use ratio of coarse grains in 2019/20 is set to decline - down around 2 percentage points to 25.7 percent, the lowest level since 2013/14. In addition, the ratio of major exporters’ closing stocks to their total disappearance (defined as domestic utilization plus exports), which is a more accurate indicator of global availabilities from a trade perspective, is also set to decrease, from 14.6 percent in 2018/19 to 14.2 percent in 2019/20.

Nearly all the anticipated declines in world inventories of coarse grains would be due to drawdowns in maize stocks, which are expected to fall to 332 million tonnes, representing a decrease of almost 19 million tonnes, or 5.3 percent, from their opening levels. A continued drawdown of maize inventories in China accounts for the bulk of this decrease. China’s maize stocks are forecast to approach almost 185 million tonnes, down almost 12 million tonnes, or 6 percent, from their opening levels, and the lowest since 2014/15. Despite this projected decline, maize stocks in China remain elevated. As a reminder, in recent months, FAO’s historical maize inventory estimates for China were scaled up significantly, due to sharp upward adjustments made by China to its domestic maize production figures since 2007. Maize inventories in the United States of America could also be heading for a decline in 2019/20. Despite the anticipated rise in domestic production, stronger prospects for exports combined with higher domestic utilization could bring United States of America maize stocks down to 47 million tonnes, declining by nearly 5 million tonnes, or 9 percent, below their opening levels. Among other notable declines, smaller maize inventories are forecast for South Africa, where end-season volumes could reach 1.2 million tonnes, a reduction of 60 percent compared to the start of the season level, mostly reflecting lower domestic production.

Among other major coarse grains, global sorghum inventories could increase by 4.8 percent, to 9.4 million tonnes, with most of the increase concentrated in Australia and the United States of America. Global inventories of barley in 2019/20 are also projected to increase, up 10 percent from their opening levels, to 30 million tonnes, which would be the highest level in nearly a decade. Greater barley production in 2019 is expected to boost end-season inventories, particularly in Canada, the EU, Kazakhstan, and the Russian Federation, more than offsetting a likely decline in China.

RICE

PRICES

International prices recover, but increases capped by subdued Indica demand

Since hitting a 14-month low in November 2018, international rice prices have tended to move up. This has been reflected by the FAO All Rice Price Index (2002-2004=100), which averaged 222.2 points in April 2019, 3.5 percent higher than in November 2018. The increase was driven by a rebound in medium/short grain quotations, sustained by the launch of a series of Asian import tenders, undertaken in the context of poor supply prospects for drought-stricken Australia and Egypt’s shift from a supplier to a net importer of rice. Although this bullish Japonica sentiment tended to subside during April, the Japonica Index still stood 8.4 percent above November levels that month, at an average of 264.1 points. A stronger Thai baht and general inflationary pressure in Pakistan have likewise underpinned a 5.2 percent rebound in the Aromatic Index to 217.2 points, but these increases have contrasted with continued declines in the prices of the most widely traded Indica varieties. In this segment, persistently thin import demand from important buyers, such as Bangladesh, China,[1] Indonesia and Nigeria, outweighed support provided by currency appreciations in India and Thailand, along with concerns over the impact of short water availabilities to irrigate secondary crops in both countries. Largely as a result of the bearish undertone lingering in the Indica market, the January-April 2019 average of the Indica index remained 2.2 percent below its value in the corresponding period in 2018, at 221.9 points.

PRODUCTION

Production in 2019 seen unchanged year-on-year

The 2019 paddy season is well advanced in countries along and south of the Equator, while in Northern Hemisphere countries, planting operations of the main season are about to start. Based on available information on crops already harvested, and assuming average weather conditions during the critical Northern Hemisphere summer months, FAO forecasts the 2019 global rice production at 516.8 million tonnes (milled basis), unchanged from the previous year’s record level.

In Asia, the aggregate rice output is predicted to rise in 2019. A large proportion of this year-on-year increase is expected to come from India, where remunerative producer prices and large Government purchases are likely to boost plantings. Similarly, the outputs are expected to increase in Bangladesh, Indonesia, Sri Lanka and Thailand. In China, the 2019 rice production is expected to decrease for the second consecutive year, reflecting expectations of area contractions as farmers replace some paddy cultivation with more profitable crops, including soybeans.

In Latin America and the Caribbean, the 2019 aggregate rice production is pegged at 17.4 million tonnes, down 7 percent from the previous year’s output and well-below the past five-year average. This is the result of an expected sharp contraction in area planted in Brazil, the subregion’s main rice producer, as farmers shift paddy areas to other crops that are more remunerative. Similarly, in Argentina, Bolivia, Colombia, Peru, Uruguay and Venezuela, low producer margins are expected to instigate a contraction in paddy plantings, resulting in a year-on-year decline in output. In the remaining countries, including Cuba, Dominican Republic, Ecuador, Guyana and Paraguay, prospects for the 2019 rice production are favourable.

In Africa, the aggregate 2019 rice output is forecast at 20.6 million tonnes, 6 percent below the previous year’s above-average level. The year-on-year decline is the result of expectations of outputs returning to more normal levels in Nigeria and Mali and a drop in Egypt due to water constraints. By contrast, prospects are favourable in Côte d’Ivoire, Ghana, Burkina Faso and Mauritania, where the production is expected to remain similar or slightly surpass the five-year-average level. Madagascar, the largest rice producer in Southern Africa, is likely to attain a harvest similar to the previous year, resting on generally conducive weather in the main rice-producing regions. Rest of the countries in the subregion, production is expected to decline, due to a combination of dry weather conditions and cyclone-induced floods, which notably impacted Mozambique (second largest rice producer). In the United Republic of Tanzania, the main rice producer in East Africa, reduced precipitations since February in some northern and northeastern rainfed lowland growing areas are expected to result in localized production shortfalls.

In the other regions, the 2019 rice production outlook is negative for the United States of America, where poor price prospects are anticipated to result in output falling by 2.5 percent to 6.9 million tonnes. In Australia, the 2019 harvest is officially estimated at just 69 000 tonnes, down 84 percent year-on-year, as short supplies for irrigation caused plantings to slump to a decade-low. By contrast, production is seen as hardly varied in the Russian Federation, while a price-driven area increase in Italy and more conducive weather in Portugal should sustain a modest (0.5 percent) output increase in the European Union (EU) to 1.7 million tonnes.

TRADE

Reduced Far Eastern demand to depress world rice trade in 2019

At a forecast 46.8 million tonnes, international trade in rice in calendar year 2019 is predicted to fall 1.5 million tonnes below the 2018 record level. The contraction is expected to be demand-driven and concentrated in the Far East, where aggregate deliveries will likely fall by 18.2 percent year-on-year to 13.2 million tonnes. Individually, Bangladesh and Indonesia would be responsible for much of the region’s import decline, as ample local inventories should preclude the need for both countries to resort to large imports, as in 2018. Combined with expected import declines in China, Nepal and Sri Lanka, this would offset expected increases elsewhere, namely in the Republic of Korea, Malaysia and Singapore, but also in the Philippines. Indeed, the latter could overtake Nigeria as the world’s second largest rice importer once more, raising 2019 purchases by another 6 percent to an all-time high of 2.5 million tonnes. This volume would mostly comprise private sector purchases, facilitated by the recent replacement of longstanding quantitative restrictions on rice imports with tariffs.

Prospects of subdued demand in the Far East overshadow expectations of purchases accelerating in most other regions. For instance, greater import needs by Afghanistan, the Islamic Republic of Iran, Iraq and Saudi Arabia could drive a 7.9 percent increase in deliveries to the Asian Near East to a fresh peak of 7.4 million tonnes. Aggregate imports by Africa are also anticipated to stage a 3.5 percent annual increase in 2019, to 17.3 million tonnes. Within the region, a 450 000 tonne purchase by Egypt, traditionally a rice exporter, would contribute towards consolidating the country’s position as a net importer of rice, a move resulting from government promoted output cuts aimed at conserving scarce water resources. In the case of Mozambique, expectations of greater purchases follow storm-related output losses, which would increase import needs resulting from diminished stockpiles. Angola, Cameroon, Kenya, Mali and Niger are also predicted to import more. On the other hand, a bumper 2018 crop could allow Nigeria to keep purchases close to the 2018 reduced level of 2.3 million tonnes, while comfortable supply situations are likely to enable Benin, Côte d’Ivoire, Ethiopia, Guinea and Senegal to meet consumption needs, while reducing imports.

Imports by Latin America and the Caribbean are forecast to expand by 3.4 percent in 2019, to a total of 4.4 million tonnes. A 46 percent rebound in purchases by Brazil to 840 000 tonnes is envisaged to underpin the regional increase, with increased imports required to cover consumption needs and maintain a presence in export markets, in the face of a sizeable output reduction. Combined with greater imports by Colombia and Haiti, these are likely to outweigh anticipated lower purchases by Cuba, Mexico and Venezuela. Elsewhere, import demand, primarily for fragrant varieties, is expected to remain strong in the United States of America and the EU, even if in the latter, higher tariffs on selected classes of imports from Cambodia and Myanmar and on non-basmati husked rice could cause 2019 purchases to subside by 3 percent to 1.9 million tonnes.

Among suppliers, prospects of subdued global demand are anticipated to dampen export prospects for Thailand more than any other country, as this would compound a second successive season of fragrant rice output shortfalls, a stronger currency and intense competition for markets. On this basis, Thai shipments are seen sliding by 1.9 million tonnes in 2019, to 9.2 million tonnes. Poor harvests also look set to undermine the competitive capacity of Australia, Brazil and Uruguay, whereas for Myanmar, an expected reduction would be linked to Chinese steps to thwart cross-border deliveries. By contrast, Argentina, Cambodia, China, Paraguay and the United States of America could all see their shipments rise, while Pakistan replicates its robust 2018 export performance. A competitive edge in the parboiled and aromatic segments could likewise help shipments from India to recover by 2.3 percent to 12.1 million tonnes. This, however, assumes that the announced United States of America withdrawal of sanction waivers for buyers of Iranian oil do not undermine the rupee payment mechanism, through which transactions with Iran, one of India’s largest basmati destinations, are being settled. The export outlook is also positive for Viet Nam, given competitive prices and expectations of further forays into the Japonica and aromatic segments. Combined with greater access to markets offered by the entry into force of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and possibly also a trade accord with the EU, these could compensate for smaller deliveries to key Far Eastern destinations and raise Vietnamese rice exports by 3.1 percent year-on-year to 7.1 million tonnes.

Although still highly tentative, based on preliminary expectations of 2019 crops in the northern hemisphere and of supplies south of the Equator in 2020, world trade in rice in calendar year 2020 is pegged at 48.9 million tonnes. This level would stand 4.5 percent above current expectations for 2019 and imply a fresh historical peak. Although purchases by the Philippines are also expected to continue growing in 2020, African imports are forecast to be the main factor underpinning the increase. Indeed, faced with output reductions, countries such as Egypt, Guinea, Senegal, and especially Nigeria, would need to resort to greater supplies from abroad to meet the needs of their expanding populations. On the export side, ample availabilities would best place India to meet much of the forecast global trade expansion, although shipments by China, Myanmar and Viet Nam are also predicted to grow.

UTILIZATION

Food demand to continue driving growth in world rice use

Global rice utilization is forecast to reach an all-time high of 518.5 million tonnes (milled basis) in 2019/20, up 7.2 million tonnes, or 1.4 percent, from 2018/19.

The expansion is anticipated to result from a 1.7 percent expected increase in food use to 418.7 million tonnes. Taking population growth into account, this level would be sufficient to lift rice per capita food use globally to 54.3 kg, up from 53.9 kg the previous season. From a regional perspective, the increase would reflect expectations of a somewhat more buoyant pace of food intake growth in Asia, where prospects point to abundant availabilities. These add to continued official efforts in the region to stabilize prices and ensure affordable supplies for vulnerable groups through measures such as price controls, imports or subsidized distribution programmes. This is the case of Bangladesh, Indonesia, the Philippines and Sri Lanka, but also of India, where officials could accelerate rice releases through the country’s public distribution system next season, in an effort to trim the size of state inventories. Such a move could contribute to Asian per capita rice use rising by 0.5 kg in 2019/20 to 78.0 kg. Food demand is also anticipated to remain strong in Africa, where intake could rise by a further 1.0 percent to 26.8 kg, while it is foreseen to stay close to 2018/19 levels in all other regions. On the other hand, volumes destined for animal feed are predicted to drop by 2.6 percent year-on-year to 15.9 million tonnes, while seeds, post-harvest losses and industrial uses would together absorb another 83.9 million tonnes.

STOCKS

China to drive a 1.0 percent reduction in world rice stocks

Based on preliminary expectations of stagnating global production and continued growth in use, FAO tentatively forecasts world rice stocks at the close of 2019/20 marketing seasons to fall 1.0 percent below the record high of 2018/19 to 178.7 million tonnes (milled basis). This volume would still represent the second highest reserve level on record, sufficient to keep the global stocks-to-use ratio at 34.0 percent, just 0.8 percentage points short of the 2018/19 level. Much of the forecast decline in global carry-overs is anticipated to be concentrated in China, where, in the context of agricultural supply-side reforms, officials have signalled their intention to intensify steps to address the supply overhang caused by successive large crops and imports. On this basis, rice reserves in the country are seen dropping from a record 106.5 million tonnes in 2018/19 to 104.0 million tonnes in 2019/20. If confirmed, this would mark the first stock drawdown to take place in the country since 2007/08.

Nevertheless, expectations of stock reductions in China contrast with prospects of rice carry-overs edging up for the second successive season in the rest of the world. Largely, this mirrors expectations of another accumulation taking place in the five major rice exporters,[2] particularly in India. Bolstered by another record domestic crop and large public carry-ins, reserves in India are seen expanding by 7.2 percent in 2019/20, to 27.6 million tonnes. Within the group, lower exports could also sustain a 3.7 percent rise in stocks held by Thailand to 5.6 million tonnes, while forecast production reductions should drive moderate cuts in Viet Nam and the United States of America, as should do an upbeat pace of exports in Pakistan. These tendencies would result in another small (0.4 percentage point) increase in the major exporters’ stocks-to-disappearance ratio in 2019/20, which would nonetheless place it at a five-year high of 21.1 percent.

Carry-over prospects are less buoyant for other traditional rice suppliers. For instance, in the wake of large 2019 output shortfalls, Argentina, Australia, Brazil and Egypt could all see significant stock reductions, outweighing expected increases in Cambodia and Myanmar. Among importers, reserves held by Bangladesh and Indonesia are similarly anticipated to return to more normal levels, after the highs reached the previous season as a result of good crops and imports. This would offset anticipated accumulations in Sri Lanka and Japan, but also the Philippines, where record-breaking imports combined with efforts to reconstitute state reserves through local procurement could boost carry-overs to a nine-year high of 2.9 million tonnes.

[1] All references to China are to Mainland China unless otherwise specified.

[2] India, Pakistan, Thailand, the United States of America and Viet Nam.

OILCROPS, OILS AND MEALS[1]

PRICES[2]

Prices of oilseeds and oils stabilise, while those of meal continue to decline

Following the downward trend recorded in the final stretch of the 2017/18 (October/September) season, international price quotations for oilseeds and derived products lingered at historically low levels during the first half of 2018/19. In April 2019, FAO’s price indices for oilseeds and vegetable oils stood, respectively, 15 percent and 17 percent below their year-earlier levels, while the oilmeal price index was 28 percent down, marking a 20-month low.

The course of the oilseed price index largely reflects developments in the global soybean market. After the sharp decline experienced towards the end of the 2017/18 season, soybean prices stabilized, fluctuating within a relatively narrow range until April 2019. On the one hand, forecasts of record global production, combined with signs of subdued import demand and the ensuing prospects of a massive build-up in inventories, kept prices under pressure. On the other, as the crop season gradually unfolded in the southern hemisphere, reports of unfavourable weather in parts of South America provided sporadic support to soybean prices. In addition, the prolonged United States of America-China trade negotiations affected market sentiment. Notwithstanding the upward momentum provided by the 90-day trade hostility truce announced in December 2018, the lack of an agreement, combined with lower than anticipated Chinese purchases of United States of America soybeans, continued to cause concern. Meanwhile, led by soybean meal, international prices of oilmeals continued trending downward amid signs of a brisk slowdown in meal uptake, notably in China, due to African Swine Fever (ASF).

With regard to oils/fats, world prices continued to fall in the initial months of the 2018/19 season, underpinned by several factors: i) continued growth in palm oil and soyoil output due to, respectively, favourable weather conditions in Southeast Asia and attractive crush margins in the United States of America; ii) sluggish global import demand; and iii) ample palm oil inventories held in key exporting countries. Then, in December 2018, given temporary production slowdowns of palm oil in Southeast Asia and strengthening oils/fats uptake in several countries, notably for biodiesel production, international price quotations for major vegetable oils started somewhat firming up - though, overall, FAO’s price index stayed at multi-year low levels.

As to the Chicago Board of Trade futures price for soybeans, its persistent low level compared with the past two seasons largely confirms concerns over the accumulation of massive soybean stocks, which could weigh on oilseed, meal and oil markets well into the 2019/20 season.

OILSEEDS

Global oilseed production to expand moderately after last season’s slowdown

Global oilseed production is estimated at about 610 million tonnes in 2018/19, up 2.9 percent from 2017/18 and marking a new historic record - reflecting both a recovery in yield levels and fresh rises in area harvested. Marked year-on-year output gains are forecast for soybeans, together with more modest improvements in global sunflower-seed production, whereas contractions are expected for rapeseed, groundnut and cottonseed. Global soybean production is pegged at 364 million tonnes, more than recovering from last season’s decline, and marking an all-time high. In the northern hemisphere, output expanded in all major producing countries except Canada, where a contraction in area planted was followed by yield declines. The crop in the United States of America is forecast at a record 123.7 million tonnes, reaffirming the country’s position as the world’s top soybean producer. Although plantings contracted marginally from the 2017/18 level, mostly favourable weather led to sizeable yield improvements. In China and India, production gains stemmed from a combination of higher plantings and beneficial growing conditions, while in Ukraine, record yields compensated a contraction in sowings. In the southern hemisphere, latest reports point to a full recovery of production in Argentina, where crops benefited from mostly favourable weather conditions. By contrast, Brazil’s output is estimated to decline by 6 percent, reflecting a return to average yield levels and only modest area increases - though, at around 115 million tonnes, production would still be the second highest on record.

After last season’s marked gains in both area harvested and yields, global rapeseed production is estimated to retreat to 73 million tonnes in 2018/19. Production increases in India, the Russian Federation, Ukraine and the United States of America would not be sufficient to compensate for sharp declines in the world’s three leading producers: the EU, Canada and Australia, all of which incurred production losses due to unfavourable weather conditions. China reported a further slight contraction in production, linked to cuts in plantings.

With respect to sunflower seed, global production is seen surging to an all-time high of 53.5 million tonnes, resting on record crops in Ukraine, the Russian Federation and Argentina, with production rising on account of favourable weather conditions (in the Black Sea region) and higher plantings (in Argentina and the Russian Federation). In the EU, a repeat of last season’s high yields resulted in a near-record crop. By contrast, in China and Turkey, reduced sowings led to production contractions.

Global groundnut production is pegged at 40.4 million tonnes - a three-year low. The anticipated year-on-year contraction mainly reflects output reductions in India and the United States of America, fuelled, respectively, by lower yields and lower plantings. Conversely, a near-record crop has been harvested in China, the world’s top producer, while in Argentina, production is estimated to more than recover from last season’s fall.

OILS AND FATS[3]

World oils/fats production poised to increase modestly in 2018/19

The above crop forecasts translate into a modest year-on-year rise in oils/fats production (+2.4 percent). With regard to individual oils, sizeable gains in soybean, palm and, to a lesser extent, sunflowerseed and palm kernel oils are expected to outweigh declines in rapeseed, groundnut and olive oil production. As for palm oil, output is forecast to rise considerably less than during the past two seasons, as the world’s two largest producing countries, Indonesia and Malaysia, continue to face production challenges. Factors constraining growth in 2019 include slower expansion in mature area (due to ongoing replanting efforts) and lower yields as producers reduced fertilizer applications and harvesting frequencies in response to low market prices. Moreover, a mild El Niño event could lead to below average rainfall in Southeast Asia, contributing to reduced oil palm productivity in the region.

Global oils/fats supplies, which comprise 2017/18 carryover stocks, are forecast to increase by almost 3 percent year-on-year. Aided by increased crop harvests, domestic availability should climb to record levels in Indonesia, Malaysia, the Russian Federation, Ukraine and the United States of America, while in Argentina, supplies are set to rebound after falling for two consecutive years.By contrast, supply contractions are likely in a number of countries, notably Brazil, China and the EU - generally reflecting reduced crop harvests, with the exception of Brazil, where low opening stocks are expected to contribute to the drop in supplies.

Growth in oils/fats consumption could accelerate in 2018/19

Stimulated by low international prices, global oils/fats consumption is forecast to expand by about 4-4.5 percent year-on-year. Growth is expected to be driven by palm oil and, to a lesser extent, soybean oil, resulting in palm oil further increasing its share in total oils/fats uptake. Meanwhile, rapeseed oil consumption could fall on the back of reduced availabilities.

As a group, developing nations in Asia would continue to drive the expansion in global oils/fats uptake. While consumption growth could decelerate in China, mirroring slower economic growth, stable growth is envisaged in India. At the same time, a marked acceleration in uptake is expected in Indonesia, which could account for one-third of global consumption growth. Sizeable gains are also anticipated in Brazil and the United States of America, whereas consumption may contract in the EU.

While population and income growth remain key drivers of demand for food and other traditional uses, robust demand from the biodiesel sector is bound to play an important role in 2018/19. Linked to both higher national consumption mandates and more dynamic discretionary blending, global biodiesel production - and with it the uptake of vegetable oils - is estimated to expand by 10-12 percent annually in both 2018 and 2019. National consumption targets or biodiesel blending rates have been raised in several countries, including Brazil, Colombia, Indonesia, the Republic of Korea, Malaysia, Thailand and the United States of America, while plans to raise mandatory use are under consideration in Argentina and India. In the United States of America, Brazil and, in particular, Indonesia, higher biodiesel output would be the main driver behind domestic consumption growth. In Indonesia, the biodiesel sector is estimated to account for about 65 percent of total palm oil uptake. In general, mandatory biodiesel production and discretionary blending have been stirred by a narrowing in the price gap between vegetable oils/animal fats and mineral oils, which has made biodiesel more competitive. Additionally, national programmes in support of biodiesel production are driven by government efforts to reduce supply pressure on domestic oils/fats markets and stabilize prices.

Global inventories of oils/fats poised to rise further

In 2018/19, a modest surplus in global production relative to demand is expected to lead to a fresh rise in inventories. Ending stocks (including the oil contained in stored oilseeds) are tentatively pegged at 39.2 million tonnes, marking a 4-year high. Commodity wise, soybean oil reserves could climb to near-record levels, while palm oil inventories would remain at historic highs.

Among the main stockholding countries, massive accumulations are expected in the United States of America, along with more contained increases in Indonesia and Canada - all resulting in unprecedented inventory levels. The surge in United States of America reserves would stem from both production gains and subdued exports. By contrast, fresh stock drawdowns are expected in China and, to a lesser extent, India.

Based on the above forecasts, the global stocks-to-use ratio for oils/fats should remain flat in 2018/19, whereas the stocks-to-disappearance ratio for the major exporting countries[4] would increase significantly, explaining why international oils/fats prices are lingering at multi-year lows.

Global oils/fats trade likely to gain momentum in 2018/19

After last season’s minimal growth, international oils/fats trade transactions are forecast to expand by 3 percent in 2018/19, likely reaching 129 million tonnes (including the oil contained in traded oilseeds). Much of the anticipated rise would be on account of record-high sales of palm oil, the leading traded oil, which, due to its competitive price, could see its market share rise to above 40 percent. By contrast, global soybean oil transactions would remain close to the levels recorded in the past two years - despite the anticipated production gains. Trade in soyoil (which comprises oil contained in traded soybeans) is bound to stagnate due to an exceptional contraction observed in China’s soybean imports. Global trade in sunflower-seed oil could expand, while rapeseed oil transactions are expected to remain unchanged, given the anticipated drop in production. Meanwhile, the pattern of global rapeseed/rapeseed oil trade could be affected by China’s recently raised concerns over shipments from Canada, which could lead China to look for alternative suppliers or search for rapeseed substitutes, while Canada might seek new export destinations.

On the import side, attractive prices are stimulating oils/ fats purchases in numerous countries, especially in Asia - with the exception of China, the world’s leading importer, whose purchases are poised to remain flat based on the reported decline in soybean imports. In the EU, the world’s second largest oils/fats buyer, import growth is expected to resume following higher feedstock demand from the biofuel industry. Meanwhile, India’s purchases should remain close to last season’s level, due to adequate domestic supplies.

Regarding exports, anticipated higher shipments by Indonesia, Argentina and, to a lesser extent, Malaysia, Ukraine and the Russian Federation, are expected to outweigh contractions foreseen in Brazil, the United States of America and a few other countries. Backed by higher domestic supplies, Indonesia and Malaysia are seen expanding their palm oil exports, owing to the oil’s competitive price. In Argentina, shipments are expected to recover on the back of higher domestic soybean production. Increased sales by Ukraine and the Russian Federation could raise the two countries’ combined market share to 10 percent in 2018/19. By contrast, Brazil’s shipments are expected to retract from the record level reached last season, when China hiked its purchases of Brazilian soybeans due to its trade tensions with the United States of America. Given that United States of America-China trade negotiations are still ongoing, total United States of America exports are currently forecast to contract for the second consecutive year. Similarly, Canada’s shipments may fall, hinging on its newly emerged differences with China.

MEALS AND CAKES[5]

Growth in global meal production to resume in 2018/19

Following last season’s stagnation, global meal production in 2018/19 is expected to expand by about 3.5 percent, reaching a record 369 million tonnes (expressed in product weight). Soymeal would account for much of the expansion, fuelled primarily by the prospective rebound of soybean production in Argentina.

Notwithstanding the anticipated rise in production, growth in global supplies is pegged at only 1.4 percent, reflecting relatively low 2018/19 opening stocks, especially of soymeal. Low carry-in stocks are expected to weigh, in particular, on Brazil’s meal supplies. Availabilities would also be limited in Australia, the EU, Paraguay and China, mostly because of lower domestic harvests. By contrast, Argentina’s good soybean harvest should allow domestic supplies to recover. Improved harvests should also lead to fresh supply gains in India, the Russian Federation and Ukraine. Meanwhile, in the United States of America, exceptionally high carry-over stocks would bolster the country’s domestic availabilities.

Expansion in world meal/cake consumption poised to come to a halt

After expanding by nearly 5 percent annually during the past three seasons, meal consumption in 2018/19 is forecast to remain virtually unchanged - despite the anticipated bounty in global meal production and the related, steady downward trend in international prices.

The looming slowdown in global utilization essentially rests on reduced forecasts for one single country, China, the world’s leading oilmeal consumer. China’s consumption of oilmeals is tentatively forecast to contract by about 3 percent in 2018/19 - as opposed to the customary vigorous growth (of 6-7 percent) linked to the constant expansion of the livestock sector, especially the pork industry, which is a major user of protein meals. The anticipated drop in China’s meal demand primarily stems from the outbreak of ASF, a deadly disease that is leading to massive losses in the country’s pig herd. Furthermore, prompted by the United States of America-China trade tensions, China’s feed producers embarked on measures to lower protein inclusion rates in feed formulations, further affecting meal demand. Ultimately, China’s meal uptake will also depend on contingent demand increases in non-pig livestock sectors and aquaculture, as consumers shift to different sources of animal protein.

While estimates for China remain subject to revision, at the global level the envisaged drop in China’s meal consumption is likely to be offset by continued demand growth in other parts of the world, notably in other Asian nations, Europe and South America.

Global meal inventories (including the meal contained in seed stocks) set to swell to unprecedented levels

Contrary to last season, when a deficit in global production led to inventory drawdowns, in 2018/19 a sizeable production surplus points to a replenishment in end-of-season stocks. Global reserves are currently pegged at 70.1 million tonnes, up 12 percent from last season, and marking a new record. In particular, reserves of the world’s leading protein meal - soymeal - are bound to rise, along with more modest gains in rapeseed meal. Much of the accumulation is expected to occur in the United States of America, where meal inventories are anticipated to almost double compared with last season. The concurrence of large carry-in stocks, increased domestic production and depressed exports is forecast to push United States of America ending stocks beyond 20 million tonnes - by far the highest level on record. Elsewhere, stock replenishments are expected in Argentina, as well as, to a lesser extent, in Canada, whereas fresh drawdowns are anticipated in China and Brazil.

Based on the above forecasts, the global stocks-touse ratio and, to an even greater extent, the stocks-to-disappearance ratio for the major exporters[6] would surge from last season’s levels, which tallies with the observed decline in international meal prices.

Growth in global meal/cake transactions expected to slow significantly

In 2018/19, trade in meals (including the meal contained in traded oilseeds) is forecast to expand by less than 1 percent - well below the pace recorded in recent years. The slowdown primarily concerns soybean meal, the most widely traded meal, which, rather than driving global growth could experience a slight contraction in sales. Trade in all other meals is expected to grow, notably sunflower meal shipments.

The prospective deceleration in global import demand essentially concerns China, which is by far the largest buyer of meals in the world. As mentioned above, due to the expected contraction in domestic demand and adjustments triggered by trade tensions with the United States of America, China’s 2018/19 purchases are tentatively estimated at 75 million tonnes - down significantly from last season and, if confirmed, marking the first year-on-year contraction in more than 10 years. Meanwhile, imports by countries other than China would continue to expand at average or above-average rates, stimulated by attractive prices. Most importantly, in the EU, the world’s second largest import market, purchases are forecast to reach 44 million tonnes, up 4 percent from 2017/18.

On the export side, both Brazil and the United States of America are forecast to ship 4-5 million tonnes less than last year, because of China’s anticipated reduced import demand and a likely rebound in Argentina’s exports. Based on current forecasts, the shares of Brazil and the United States of America in the global market would stand, respectively, at 32 and 24 percent - confirming Brazil’s lead, while Argentina’s share could return to 17 percent. As for other exporters, Ukraine and India are expected to scale up their sales, drawing on larger domestic supplies, hence consolidating their respective positions as regional suppliers, while Paraguay will likely reduce its shipments, hand-in-hand with its lower soybean crop.

The trade estimates for 2018/19 and 2017/18 also reflect multiple adjustments in trade flows triggered by developments in the trade relation between the United States of America and China, which affected the global pattern of trade in soybeans as well as substitute products. Further adjustments may occur, depending on the outcome of the ongoing trade negotiations.

2019/20 PRODUCTION OUTLOOK

With the 2018/19 season still ongoing, it is too early to make concrete world supply and demand projections for 2019/20. Currently, only limited information about planting intentions or planting progress is available for selected northern hemisphere countries, whereas in the southern hemisphere, sowings will only commence during the last quarter of this year.

Against the backdrop of generally subdued oilseed prices, total area planted could remain flat in 2019/20, which, combined with the assumption of normal growing conditions, would point towards a slight drop in global oilseed production next season.

With regard to individual crops, modest increases in groundnut, cottonseed, palm kernel and copra output could be offset by contractions in soybean, sunflowerseed and rapeseed. Global soybean production may retreat from the current season’s level, led by a possible drop in United States of America production - linked to ample inventories and uncertain import demand in key export destinations. According to official surveys, United States of America farmers could reduce plantings by as much as 5 percent. While Brazil and Paraguay offer scope for production gains based on yield improvements, Argentina’s output could remain unchanged, with likely marginal area expansions probably offset by a return to average yield levels. In China, modest area-driven growth may continue, as producer support payments remain in place. World rapeseed output may contract again in 2019/20, as a contraction in Canada’s plantings, linked to uncertain export prospects, could outweigh fresh production gains in the Black Sea region and a recovery in Australia’s output, while in the EU, unfavourable weather conditions at the start of the season have reduced the possibilities of a production rebound. Global sunflower-seed production may fall, following reduced sowings in the Black Sea region and the anticipated return to average yield levels in the EU. Global groundnut, cottonseed and copra production, on the other hand, could post slight increases, facilitated by yield improvements.

If confirmed, the new season crop forecasts would translate into a slight year-on-year drop in meals/cakes output, while oils/fats output would remain about unchanged. Assuming a continuation of recent utilization trends, global demand for both vegetable oils and oilmeals could exceed anticipated production, possibly triggering stock releases, especially in the oils/fats market, and, with it, a retreat in stock-to-use ratios, which could lend some support to international prices.

Overall, due to the expected large 2018/19 carry-over stocks, the markets for oilcrops and derived products should continue to present a comfortable supply and demand situation in 2019/20. Of course, the outlook remains subject to a number of uncertainties with regard to not only weather developments, evolving price relationships between oilseeds and competing crops and changes in biofuel and other policies, but also concerning i) the outcome of ongoing bilateral trade negotiations of relevance to the oilcrops complex, and ii) the spread of ASF and its repercussions on feedstuff markets.

[1] Almost the entire volume of oilcrops harvested worldwide is crushed to obtain oils and fats for human nutrition or industrial purposes, and to obtain cakes and meals that are used as feed ingredients. Therefore, rather than referring to oilseeds, the analysis of the market situation is mainly undertaken in terms of oils/fats and cakes/meals. Production data for oils and meals are derived from domestic production of the relevant oilseeds in a specific year, i.e. they do not reflect the outcome of actual oilseed crushing in a given country and period. Regarding oilseed trade, situations where oilseeds are produced in one country but crushed in another are reflected in national oil/meal consumption figures. It is important to note that data on trade in oils (meals) refer to the sum of trade in oils (meals) plus the oil (meal) equivalent of oilseeds traded. Similarly, stock figures for oils (meals) refer to the sum of oil (meal) stocks plus the oil (meal) equivalent of oilseed inventories.

[2] For details on prices and corresponding indices, see statistical appendix, table 24

[3] This section refers to oils from all origins, which - in addition to products derived from the oilcrops discussed under the section on oilseeds - includes palm oil, marine oils and animal fats.

[4] Argentina, Brazil, Canada, Indonesia, Malaysia, Ukraine and the United States of America.

[5] This section refers to meals from all origins. In addition to products derived from the oilcrops discussed under the section on oilseeds, fish meal and meals of animal origin are included.

[6] Argentina, Brazil, Canada, India, Indonesia, Malaysia, Paraguay, the Russian Federation, Ukraine, United States of America and Uruguay.

SUGAR

PRICES

Ample supplies to weigh on international sugar price quotations

Since the release of the last issue of the Food Outlook report in November 2018, international sugar prices, as measured by the International Sugar Agreement’s (ISA) daily prices for raw sugar, have been moving within a narrow price band, ranging between US 12.71 cents per pound (lb)[1] and US 12.90 cents/lb.[2] Overall, the ISA daily prices averaged US 12.52 cents/lb in 2018, which is down by about 22 percent from 2017. The slide is attributed to large expansions in production capacity, notably in India and Thailand, boosted by remunerative returns that prevailed between 2011 and 2016. After averaging US 12.90 cents/lb in November 2018, sugar quotations increased for two successive months, before retreating in March 2019 to US 12.71 cents/lb, and increasing to US 12.81 cents /lb in April 2019. Consequently, over the period January-April 2019, prices were down 3.2 percent compared to the same period in 2018. Reports of large exportable surpluses in India and Thailand, coupled with greater production in traditional sugar importing countries, have put further downward pressure on international prices so far in 2019. Firmer estimates indicating a reduction in sugar production in Brazil in 2018/19, as well as expectations of higher imports by China, were not sufficient to reverse the tendency of falling prices.

At these current levels, international sugar prices are below production costs for the vast majority of world producers, including Brazil, where cost of production hovers around US 13.5 cents/lb and US 15 cents/lb. At the same time, the rate of consumption growth that could lift prices is not happening, due to the structural changes taking place on the demand side of the market. These are evidenced by slower population growth and a shift in the attitude of consumers and governments towards sugar consumption. The supply side of the market will therefore have to adjust quite markedly for prices to return to more remunerative levels. Given the perennial nature of sugarcane crops, the shift in supply will take some time to materialize. Nonetheless, preliminary indications for the 2019/2020 season suggest that world sugar consumption will surpass production, though by a relatively small margin, after two consecutive years of a production surplus. This could help to bring about a more balanced market from the start of next season.

PRODUCTION[3]

World sugar production to expand significantly in 2017/18

World sugar production is estimated by FAO to reach 179.3 million tonnes in 2018/19 (October/September), a 2.0 percent decline from the 2017/18 record crop. Unfavourable weather conditions, coupled with a decline in planted areas, spurred by shifts to other alternative crops, are expected to lead to lower output in some of the key producing countries, the most notable case being Brazil. The expected fall in world sugar output would mean that production could surpass consumption by 2.6 million tonnes, compared to a 9.8 million tonne production surplus recorded in 2017/2018, the largest in history. The bulk of the decline in world output in 2018/19 is anticipated to occur in the developed countries, where production is forecast to retract by about 3.8 million tonnes, while in the developing countries it is predicted to increase by 100 000 tonnes with respect to the previous season.

In South America, the latest estimates show that production is expected to decline in 2018/19, amid generally unfavourable weather conditions and a higher share of the sugarcane harvest being used to produce ethanol (Brazil). In fact, sugar output in Brazil is forecast to decrease, following dry weather conditions that affected the country’s centre-south main producing region. A decline in the rate of renewal of sugarcane fields, coupled with reduced use of pesticides and fertilizers due to financial constraints, had further contributed to a contraction in sugarcane output. Brazil’s production is now estimated at 30.5 million tonnes, down 1.3 million tonnes from the volume realized in 2017/18. About 65 percent of the sugarcane harvest is expected to be used to produce ethanol - more than last season, when sugar mills converted about 53.1 percent of the crop into ethanol. Brazil’s sugar output is influenced by changes in the ethanol parity-price, which is the raw sugar price below which it becomes more profitable to convert cane into ethanol. For 2018/19, and given current market conditions, FAO estimates the parity-price to hover around US 14 cents/ lb. Unless, crude oil prices fall below their current trading range (i.e. USD 60/barrel to USD 70/barrel), it is unlikely that more cane is used for sugar for the remainder of the season, or well into the next season. Elsewhere in South America, sugar production is anticipated to increase in Colombia, the region’s second largest producer, and in Peru, as a result of favourable growing conditions that prevailed at the onset of the season in the main producing regions. On the other hand, sugar output is anticipated to remain relatively stable in Argentina, amid extreme dry conditions during the early stages of the season.

In Central America and the Caribbean, 2018/19 estimates indicate that sugar production in Mexico will increase, following a relatively marked expansion of planted area to sugar cane (+5 percent). In Guatemala, despite strong competition from alternative crops, notably bananas, which led to a reduction in area harvested in recent years, sugar output in 2018/19 is foreseen to remain at about the same level as in the previous season, on the back of gains in sugar extraction rates. In Cuba, sugar production is set to increase by 43 percent in 2018/19, compared to 2017/18, reaching 1.5 million tonnes, as the sugar subsector recovers from the damage caused by Hurricane Irma in 2017. Better sugar recovery rates, coupled with a larger harvested area, account for the increase in 2018/19, as the restructuring of the subsector continues to attract new investments. As part of an ambitious objective to increase the use of bioenergy, the Government of Cuba has developed a plan to expand the country’s capacity to produce electricity from sugarcane residues.

In Africa, 2018/19 sugar production is set to rise, prompted by continued area expansion and improved processing capacities. Egypt, South Africa, Ethiopia and Mozambique are anticipated to harvest larger crops, while output is expected to fall in Mauritius due to less than ideal weather conditions. The significant boost in sugar output in Ethiopia is the result of substantial expansion projects undertaken by the Government, with a declared strategy of achieving self-sufficiency. A total of six sugar mills are now operational in the country, with plans to expand their current capacity and also build new factories in the near future. Sugar output in South Africa has recently been expanding, but at a moderate rate, as labour disputes and land reform challenges have limited any significant increase. In Mozambique, sugar production has expanded by an annual average rate of 10 percent over the past 10 years, driven by investment in irrigation and price incentives offered by trade opportunities in the region. Sugar production is forecast to increase further in 2018/19.

In Asia, output forecasts for 2018/19 have been revised a number of times since November 2018, and now point to a decline of 1.2 percent compared to the 2017/18 marketing season. The cutbacks in sugar output are attributed to Japan (-8.7 percent), Pakistan (-7.8 percent) and Thailand (-6.3 percent). By contrast, production is set to remain stable in Turkey, and to expand in China, Indonesia, the Philippines and Viet Nam. In India, the world’s largest sugar producer for the second consecutive season, production is expected to be 400 000 tonnes above last season, as late rains did not end up delaying the start of the harvesting season. However, considerable uncertainties still persist regarding the final numbers. To address the supply glut situation that characterizes the domestic market in India, and to help sugar factories reduce their financial obligations towards farmers, the Government increased the minimum price for white sugar at the mill gate. Large cane arrears have been a recurrent feature of the Indian sugar subsector, resulting from a misalignment between the administered sugarcane prices and wholesale white sugar prices. Looking ahead, the greatest uncertainty concerns whether the significant surge in sugar output recorded in recent years represents a permanent shift or a short-lived phenomenon, mostly reflecting the effects of the recent subsidy measures. In Thailand, unfavourable weather conditions throughout the growing season are expected to lead to a 6.3-percent reduction in the country’s sugar output compared to the 2017/18 level. The decline is also underpinned by some shifts to other cultivations, notably rice, in the northeastern part of the country, in response to low sugarcane prices. For the moment, the temporary deregulation of the domestic sugar market, implemented on 15 January 2018 by the Government of Thailand, is not expected to have a negative impact on the sugar subsector. The deregulation calls for the elimination of the sugar price control and the sugar sales administration.

Sugar production in China is expected to increase in 2018/19, due to expansion in both sugarcane and beet planted areas, prompted by profitable returns. Favourable weather conditions also helped to boost cane yields, while direct subsidies provided by local governments should sustain additional gains in farm productivity. Production is foreseen to contract in Pakistan, amid an estimated 10 percent decline in planted area, as farmers shifted to alternative crops such as cotton and maize. During 2017/18, the Government of Pakistan introduced a freight subsidy of USD 97 per tonne in an effort to move excess production into the world market. By contrast, Indonesia’s sugar output is forecast to rise from the 2017/18 level, with planted area and yields both set to increase. The area expansion over the past years occurred mainly in Central Java, Lampung and South Sulawesi. The expansion is largely attributed to remunerative domestic prices, sustained by buoyant demand for sugar by the food and beverage industries. In Turkey, the world’s fifth largest sugar beet producer, production is not expected to surpass the level of last season. In 2017/18, sugar output rose to 2.7 million tonnes, following a 3-percent growth in cultivated beet area, driven by higher procurement beet prices.

In Europe, FAO’s latest estimates for the EU point to a significant cutback in sugar production, amid dry weather conditions during the growing season, which had a negative impact on beet yields. However, the area planted to sugar beet is estimated to remain at about the same level as last season. With the elimination of production quotas, the EU is predicted to become self-sufficient in sugar in the medium term, while the price gap between EU white sugar and world white sugar is anticipated to tighten, as witnessed so far during the 2018/19 season. Nevertheless, there are two main downside risks for the subsector. First, the significant decline in profitability at the mill level has renewed expectations of consolidation in the sector, as economies of scale become critical. Indeed, the average price for white sugar fell by 18.5 percent between February 2018 and February 2019. Second, the ban on certain neonicotinoids is set to create significant challenges at farm level, as producers will have to look for alternative insecticides to maintain remunerative yield levels. Sugar production in the Russian Federation in 2018/19 is expected to fall by 8.6 percent year-on-year, on the back of reduced planted area and lower beet yields. The beet sugar enterprise has been relatively profitable in recent years, yet growth remains hampered by high input costs. Likewise, sugar production in Ukraine is expected to decline from last season’s level, as planted area has shrunk and yields are reduced due to low soil moisture. The sugar value chain in Ukraine is highly integrated, with large agribusinesses controlling the entire production process from farm to retail sales. By contrast, sugar production is anticipated to increase in Australia, as favourable weather conditions and higher sucrose content are set to boost output. In the rest of the world, production in the United States of America is forecast to retract from its 2017/2018 record level, on the back of lower beet production due to cold temperature that hit the growing region of the northern Midwest. The expected output increase from cane sugar is unlikely to offset the declines in beet sugar, and this should result in a substantial reduction in the stock-to-use ratio.

UTILIZATION

Per capita sugar consumption to increase in 2018/19

Global sugar consumption is forecast to reach 176.1 million tonnes in 2018/19, up around 3 million tonnes, or 1.7 percent, from 2017/18 and slightly above the 10-year trend. Large supply availabilities and lower domestic sugar prices are foreseen to underpin increases in per capita sugar intake in 2018/19. Domestic prices are already falling in several countries, particularly in the EU, China, the Russian Federation, Mexico and India, although in the latter case, the Government recently announced an increase in the minimum white sugar prices. One noticeable exception is Brazil, where domestic prices have been rising over the past year in both local currency (Real) and US dollar terms. Under current prospects, world per capita sugar consumption is set to rise slightly, from 22.9 kg in 2017/18 to 23.1 kg in 2018/19. In developing countries, aggregate sugar use is estimated to expand from 131.3 million tonnes to 133.5 million tonnes, equivalent to 75.8 percent of the world total use, underpinned by expansion in Africa, Asia and the Caribbean. In the generally saturated markets of the developed countries, both total and per capita consumption are estimated to remain relatively unchanged.

Three elements of uncertainty underpin the outlook on the consumption side. First, should the economic outlook for 2019 deteriorate further, current forecasts for sugar consumption growth may turn out to be lower than anticipated. Strong economic growth usually leads to dynamic derived demand for sugar, as beverages and food processing sectors - which account for the bulk of aggregate sugar use - are positively influenced by positive economic conditions. Second, a number of countries have introduced legislation to tax sugar-sweetened beverages. At this point, the impact of these taxes on consumer demand for beverages, and hence sugar, remains ambiguous, as manufactures can decide either to absorb the tax or modify their product formulas to retain consumers. Nonetheless, both Thailand and South Africa have reported a decline in the use of sugar by the beverages subsector since the introduction of the sugar excise tax. More evidence on this will become apparent over time. Finally, movements in the value of currencies of major sugar net importing countries with respect to the US dollar can alter the cost of sugar imports, and hence overall consumption.

TRADE

Sugar trade to contract in 2018/19

The forecast for world trade in sugar in 2018/19 (October/ September) is pegged at 55.1 million tonnes, slightly down from the previous season. A key feature of international sugar trade in 2018/19 is the greater availability of supplies in the traditional largest importers, including China, Indonesia and the United States of America. Occasional large importers, such as India, are also expected to produce substantial quantities of sugar. Brazil, although not expected to export more than in 2017/18 given the cutbacks in sugar production, is set to supply about 35 percent of world exports in 2018/19. The bulk of Brazilian exports is in raw form and mainly shipped to the markets of Algeria, Bangladesh and Egypt. However, the final volume that Brazil will export will depend on the quantity of sugarcane processed into ethanol, especially given the tighter relationship between gasoline and hydrous ethanol domestic prices. In addition, any further appreciation of the Brazilian Real against the US dollar could limit Brazil’s exports beyond current estimates.

Propelled by large accumulated inventories, Thailand, the world’s second largest sugar exporter, is expected to consolidate its position and raise its foreign sales from about 7.1 million tonnes in 2017/18 to 10 million tonnes in 2018/19. Around 60 percent of the country’s exports are forecast to be shipped in raw form to neighbouring countries, including Indonesia, Cambodia, China and Japan. Thai exports to the Association of Southeast Asian Nations (ASEAN) countries benefit from duty free access, with the exception of Indonesia, Myanmar and the Philippines, where a tariff of 5 percent is charged. Likewise, as a result of relatively elevated stocks, as well as recently approved measures to cut the export duty on sugar (from 20 percent to 0 percent), shipments from India are foreseen to rise by over 46 percent. The objective of the support measures, most notably a transportation subsidy, is to provide sugar millers with additional cash flow through export revenues, which can help to address accumulating sugarcane arrears. India’s exports are composed of raw sugar and geared towards markets in Africa and Asia. Brazil and Australia recently asked the World Trade Organization (WTO) to begin a consultation with India regarding its subsidy programme, claiming it distorts world sugar trade. Deliveries from Australia, the world’s third largest raw sugar exporter, are forecast to decline to 3.1 million tonnes in 2018/19, down 16.8 percent from the previous season. The country is able to supply the world market with sugar throughout the year, supported by a vast network of bulk port terminals. The recently concluded free trade agreement between Australia and Peru provides Australia with a sugar duty-free quota access of 30 000 tonnes per year, increasing to 90 000 tonnes after 18 years. Australia and Indonesia signed a similar agreement, which could provide new trade opportunities for the Australian sugar industry.

After surging to 3.1 million tonnes in 2017/18, corresponding to a 136 percent increase from 2016/17, the EU sugar exports will likely retreat by 28.4 percent in 2018/19, on the back of the anticipated decline in production and low world sugar prices. On the other hand, sales by Mexico are anticipated to expand, underpinned by greater production and the market opportunities offered under the assigned maximum quota allotment of sugar to be exported to the United States of America. Exports by Guatemala, the second largest sugar exporter in Latin America and the Caribbean, are foreseen to remain about the same level as in 2017/18, supported by ample stock availabilities and competitive pricing. Sugar has become a key source of foreign exchange earnings for the country, which has increasingly focused on gaining market shares in the refined sugar segment. Deliveries from Cuba are also forecast to increase, following the bumper crop expected for 2018/19. The bulk of export sales are directed to China, as part of an export agreement between the two countries.

Imports by Asian countries are estimated to remain stable compared with 2017/18, given larger domestic availabilities, notably in India. Despite a larger sugar crop in 2018/19, greater sugar purchases are foreseen for China, where demand for sugar remains robust. Imports do not account for informal trade, which, as in the past, can constitute a sizeable volume. For 2018/19, China is expected to retain its rank as the world’s largest sugar importer. Likewise, sugar imports by Indonesia are set to remain strong, underpinned by robust domestic demand, especially from the beverage and food processing industries. The Government of Indonesia regulates the level of sugar imports by allocating permits at the beginning of each year.

In Europe, imports by the EU are forecast to decline by 5.5 percent from the previous season, as the domestic market has become well supplied, following the abolition of the sugar production quota regime. With lower imports by the EU, duty-free preferential imports from Everything but Arms (EBA) countries are expected to be halved, while the WTO’s CXL quotas[4] are most likely to remain unused. In the Russian Federation, as a result of declining domestic production, imports are anticipated to grow in 2018/19. However, any depreciation of the Russian Ruble against the US dollar (beyond current levels) could limit purchases. Belarus and Australia are the main suppliers to the Russian Federation. Imports by Kenya and Morocco are expected to fall, contrary to those by the Sudan, which are set to increase. Consignments to the Islamic Republic of Iran might go up, in view of the recent flooding that caused severe damage to sugarcane crops and sugar factories. The Government has already signalled its intention of importing up to 800 000 tonnes of sugar. In the rest of the world, imports by the United States of America, about half of which are managed through a tariff-rate quota system of 1.56 million tonnes for 2018/19, are set to contract, while African countries are expected to import less than last season, owing to anticipated gains in their sugar production.

[1] Equivalent to USD 280.2 per metric tonne.

[2] Equivalent to USD 284.4 per metric tonne.

[3] Sugar production figures refer to centrifugal sugar derived from sugarcane or beet, expressed in raw equivalents. Data relate to the October/September season.

[4] CXL quotas result from a compensation agreement following the 1995 EU enlargement to account for traditional sugar imports from Austria, Finland and Sweden. The countries of origin of the sugar are mainly Brazil and Cuba.

MEAT AND MEAT PRODUCTS

PRICES

Notwithstanding increased export availabilities in all major supplying countries, international meat prices, measured by the FAO Meat Price Index, have firmed up since January, underpinned by strong import demand for pig, bovine and poultry meats, especially by China. The price increase concerned all meat categories except ovine meat, which saw prices retreat on large export supplies, mostly from Australia, where dry weather continues to encourage slaughtering.

OVERALL PRODUCTION AND TRADE

World meat output[1] in 2019 is forecast to drop by 0.2 percent to nearly 337 million tonnes, breaking the pattern of slow but steady growth witnessed by the sector for almost two decades. The decline in global meat production fundamentally reflects expectations of a 5 percent output contraction in China, along with a small decrease in Australia, which are likely to outweigh expansions anticipated in all the major meat producing countries, especially the United States of America, Brazil, Mexico, India, the European Union (EU), the Russian Federation and Pakistan. The spread of African Swine Fever (ASF) in China, with its impacts on production, consumption and trade, represents the most significant factor currently shaping the world meat market outlook for 2019. Spread of the disease is largely behind the foreseen contraction of 4 percent in world pig meat output; although, through the substitution effect on demand, it is also expected to contribute to the 2.8 percent anticipated increase in global poultry meat output. The impact of ASF on the production of bovine and ovine meats is likely to be more limited, with both forecast to expand by less than 1 percent, reflecting industry specific circumstances, including the fact that major global producers are in distinct stages of their herd cycles.

World trade in meat and meat products is forecast to surpass 35 million tonnes in 2019, up 4.8 percent from last year. Much of the momentum is expected to stem from a 19-20 percent surge in overall meat imports by China, partly because of the ASF spread. Elsewhere, Japan, Mexico, the Philippines, Viet Nam and the Russian Federation are also expected to step up their meat purchases, while Saudi Arabia, Angola, Cuba and the Republic of Korea may import less. The expected expansion in world import demand is forecast to be largely met by increased exports from Brazil, the EU, the United States of America, Thailand, India and Argentina, while limited supplies may depress meat sales by Australia, New Zealand, China and Uruguay. Across the various meat types, world trade is forecast to expand by more than 8 percent in the case of pig meat (to 9.1 million tonnes), and by close to 4 percent in the case of poultry (to 13.8 million tonnes) and 4 percent for bovine meat (to 11.3 million tonnes). On the other hand, trade in ovine meat may decline slightly (to 1.0 million tonnes).

BOVINE MEAT PRODUCTION AND TRADE

Production to expand modestly on reduced cattle numbers

World bovine meat production is forecast to hover around 72 million tonnes in 2019, only 0.7 percent more than last year. Expansions are expected in Brazil and the United States of America, but also in China, Mexico, India, Pakistan, South Africa and the Russian Federation. By contrast, production is anticipated to fall in the EU and Australia, as well as in Uruguay, Argentina and New Zealand.

In Brazil, production could rise by 3 percent in 2019, surpassing the 10 million tonnes threshold, in view of a generally positive economic and financial outlook, the availability of a large cattle inventory, more affordable feed costs and a promising export environment. In the United States of America, bovine meat production is predicted to reach 12.4 million tonnes, up 1.5 percent from 2018. The relatively modest output growth reflects a slowdown in calf crop growth last year, signalling an end to the herd growth phase of the cattle cycle. China’s beef production is forecast to increase by 1.5 percent to 6.5 million tonnes, with expansions in large-scale operations moderated by limited smallholders’ contribution, as rising costs of rearing cattle continue to push less efficient producers out of the industry. Mexico is forecast to expand its beef production by about 2 percent, building on recent success in expanding feedlot production and federally inspected slaughter and improved meat processing technology. For India, although the factors affecting the outlook are relatively mixed, production is expected to rise by just 1 percent. While the emerging favourable external trading environment may offer opportunities to increase production, laws restricting the transport and slaughter of cows, effective in 23 out of the 29 states, are likely to hinder growth. Although production is set to rise somewhat in South Africa, the country’s sector continues to face challenges, especially poor rainfall and dryness. Moreover, recent detection of food-and-mouth disease in the country has led to temporary import bans of its products by some countries such as Botswana and Namibia, dimming production prospects. The Russian Federation may see an increase in beef production on improved prospects for exports and state support.

Notwithstanding increased import demand, some of the world’s leading beef suppliers may face production contractions in 2019. These include the EU, where the cattle herd has shrunk - both due to the structural decline seen in recent years and to the high slaughter induced by dry weather last summer - which may result in a 1.3 percent contraction in output. Following the recent drought-induced slaughter, Australia’s beef production may fall by almost 5 percent. Moreover, Australia may begin its next phase of herd rebuilding, which would further reduce animals available for slaughter. In Uruguay, limited availability of animals for slaughter may also reduce production by 5 percent, despite strong import demand - the primary driver of production given the near saturation of the domestic market. Although Argentina realized a 7.3 percent expansion in 2018, bovine meat production prospects are not as positive this year; production could fall by 1 percent, given the limited availability of cattle with the minimum slaughter-weight. Likewise, given the need to reconstitute its cattle herd, following elevated beef production in 2018, New Zealand may be obliged to cut production by almost 2 percent in 2019.

Trade expansion is likely

World bovine meat exports are forecast to reach 11.3 million tonnes in 2019, up 4.0 percent from last year. China’s imports are predicted to increase by almost 15 percent to about 2.3 million tonnes in 2019, equivalent to one-fifth of the global bovine meat trade. In addition, Japan, Canada, Mexico and the Republic of Korea may import more in 2019, mostly on rising demand for more specialized meat types, including processed meat. In the case of Japan, the expansion is likely to be facilitated by a reduction of tariffs on beef imports (effective 30 December 2018) from countries in the Comprehensive and Progressive Agreement for TransPacific Partnership (CPTPP).

Most of the increased import demand will be met by supplies from the Americas and the EU. In the Americas, Brazil’s exports are anticipated to surge by 10 percent, with shipments mostly going to Asia, especially China, and the Middle East. Sales may also receive a boost from the Russian Federation’s lifting of its ban on imports from some Brazilian processors. Argentina is forecast to expand exports by more than 20 percent on rising demand for imports of quality beef, mostly from China, but also the United States of America, under newly gained market access for premium chilled, grass-fed beef cuts. Benefiting from the emerging global meat market tightness, India’s exports could recover from the slump it recorded last year, rebounding by more than 9 percent in 2019. However, increased restraints by the Chinese customs authorities on ‘grey meat’ imports from its neighbouring countries, such as Viet Nam, could limit export growth of bovine meat from India - the country of origin.

PIGMEAT PRODUCTION AND TRADE

Production: New outbreaks of African Swine Fever behind a sharp contraction in output

Global pig meat production is forecast at 115.6 million tonnes, a decline of 4.0 percent from 2018. The contraction principally reflects a sharp fall in China, which is expected to outweigh expansions especially in the United States of America, Brazil and the Russian Federation. Meanwhile, pig meat output in the EU is forecast to remain stable.

In China, official notifications had confirmed 129 ASF outbreaks and the culling of more than 1 million pigs by 23 April 2019. In addition to culling, in an effort to keep the spread in check, the Government is creating separate, self-sufficient zones and ban the cross-regional transport of animals and products. However, the continued relevance of backyard farming and the use of food waste as animal feed make controlling the spread extremely challenging. The transboundary spread of ASF to other countries in the region, with confirmed detections in Viet Nam, Mongolia and Cambodia, will make controlling the spread even harder. According to the Chinese Ministry of Agriculture and Rural Affairs, by March 2019, the hog inventory had declined by 18.8 percent, and that of the breeding sow by 21 percent year-on-year. In view of these developments, China’s pig meat output is anticipated to fall by at least 10 percent in 2019, to 6 million tonnes.

In the EU, pig meat production is forecast to remain stable at about 24 million tonnes. Although sharp increases in import demand from China have brightened the sector’s prospects, with pig meat prices showing a recent upturn, the continued spread of ASF in countries such as Romania, Hungary and Poland is dimming the EU 2019 production outlook. The United States of America is forecast to raise production by 3.8 percent to nearly 12 million tonnes this year, relying on its largest pig herd inventory since 2009. After two years of contraction, Brazil’s production is anticipated to rebound by 5.5 percent, spurred by robust availability of feed supplies following record maize and soybean crops and a strong foreign demand. However, there is concern that feed costs may rise if the Brazilian real depreciates further, as such development would encourage grain exports over supplying to the domestic feed industry. In the Russian Federation, pig meat output is set to expand by 3 percent, underpinned by large-scale investments in new breeding operations, farms and processing facilities. Growing import demand may provide additional support, although depressed domestic prices and escalating costs, in part to meet tighter environmental regulations, could undermine progress. In Mexico, year-on-year growth in pig meat production may reach 4 percent, underpinned by larger herd numbers, attractive producer prices and the prospect of a new trade deal with its northern neighbours that may come into force.

Trade to expand sharply

World pig meat exports are forecast to reach 9.1 million tonnes in 2019, an increase of 8.4 percent from last year. China is expected to boost its pig meat imports by as much as 26 percent, to a total of nearly 2.4 million tonnes, equivalent to nearly 27 percent of world trade. Elsewhere, imports are predicted to increase in the Russian Federation, Japan and Mexico, but decline in the Republic of Korea, the United States of America and Angola. The EU, the United States of America, Canada and Brazil are anticipated to supply 90 percent of total world pig meat exports in 2019, with the balance mostly to be covered by Chile, Mexico, China and the Russian Federation.

The EU will remain a top pig meat exporter, with the bulk of its shipments going to Asia, namely China, Japan, the Republic of Korea and the Philippines. Notwithstanding the stagnation in production, a reliance on accumulated large meat stocks could allow the EU to expand its exports by 10 percent this year. Brazil’s exports are also anticipated to advance in 2019. The country may benefit from abundant export availabilities, improvements in the image of its meat quality, and increased or newly gained market access in the Philippines, the Republic of Korea, Viet Nam and South Africa. Despite retaliatory tariffs in place, China has begun importing significant quantities of pig meat from the United States of America, giving rise to an expectation that United States of America exports may register a 5 percent growth in 2019.

POULTRY MEAT PRODUCTION AND TRADE

Poultry production to regain vigour in 2019 after two years of subdued growth

After two years of sluggish growth, world poultry meat output is forecast to expand by 2.8 percent to 128 million tonnes in 2019, showing signs of regained vigour. This year’s positive outlook is due to the successful containment of the spread of Highly Pathogenic Avian Influenza (HPAI) and the strong potential for poultry meat to be used as a substitute for pig meat. The expected expansion in global poultry meat production would mostly occur in China, the EU, Brazil, the United States of America, India, Pakistan and Mexico, with smaller expansions in Turkey, Colombia and Thailand.

Following two years of near stagnation linked to the prevalence of HPAI, poultry production in China is anticipated to rebound by 7 percent in 2019. The increase is expected amid rising consumer demand for poultry meat, partly as a substitute for pig meat - a factor that is exerting pressure on domestic poultry prices to rise, which should enable producers to increase output, despite costly feeds. Output in the United States of America, the world’s leading producer, is currently anticipated to grow by 1 percent to 22.6 million tonnes, with the expansion resulting from a large bird flock and newly added processing capacities. In Brazil, the sector is expected to recover by 2 percent this year, as the country implements several programmes to solve problems faced by the industry in 2018, which led to the restriction of access to various important markets. Programmes include the application of scientific methods for monitoring slaughterhouses and packing operations, and a self-regulating system. Brazil also aims to overcome technical difficulties in meeting halal food requirements in the Middle East. Overall, the Brazilian poultry sector continues to benefit from its HPAI-free status, a strong internal market and geographically diversified foreign markets. India’s poultry production is forecast to expand by 5 percent this year, mainly to meet the dynamic domestic demand, with the increase facilitated by a growing market for hatcheries. Pakistan’s poultry meat output is set to expand by more than 8 percent, on better market access opportunities in the Middle East and improvements to the production facilities. Elsewhere, a combination of factors is behind the expected slow output growth in several countries, especially some reluctance on the part of smallholders to expand production due to low producer prices (the Russian Federation) and high input costs (Indonesia).

Trade: rising optimism amidst a surge in imports

World exports of poultry meat are predicted to expand by 3.7 percent and reach 13.8 million tonnes in 2019. The market optimism rests principally on expectations of a strong growth in import demand, mainly from China, but also Japan, the Philippines, Mexico and Ghana. Purchases by China, one of the main drivers of the global poultry trade, are currently forecast to surge by nearly 23 percent year-on-year. The Government has granted exemptions from anti-dumping tariffs on imports from 14 Brazilian firms, on the condition of setting a floor price for their exports, which would facilitate more imports. In addition, China also opened its market to poultry meat from the Russian Federation. In Japan, consumer demand for processed, ready-toeat poultry products from reliable suppliers has been rising, a trend that is expected to boost imports by 3 percent this year. Imports are also expected to increase vigorously in the Philippines, Mexico and Ghana, as poultry remains the most affordable meat for the bulk of middle-and low-income populations. By contrast, Saudi Arabia may purchase less this year, as restrictions on imports remain, with further reductions in the number of firms eligible to export poultry from Brazil, one of the largest suppliers in 2018.

Nearly 80 percent of global exports of poultry meat is forecast to originate in Thailand, Brazil, Turkey, Ukraine, the United States of America and the EU.

OVINE MEAT PRODUCTION AND TRADE

Production: continued modest growth

World ovine meat output is forecast at 15.3 million tonnes in 2019, an increase of 0.4 percent from 2018, mostly originating in Asia, especially in China, along with more modest expansions in Africa. By contrast, outputs are forecast to decline in Oceania and Europe.

China’s sheep and goat flock expanded by an average rate of 3.1 percent from 2013 to 2017, but by only 0.8 percent in 2018, reflecting a reduction in breeding ewes. Despite the need to rebuild flocks, meat price increases may encourage Chinese farmers to slaughter animals and increase production by almost 2 percent. Following a decline in 2018, ovine meat output in the EU is forecast to slightly decrease this year, due to high ewe mortality in 2018. Meanwhile, there is a growing concern that a no-deal Brexit will generate supply imbalances across the English Channel, since nearly one-third of ovine meat in the EU is produced in the United Kingdom. Ovine meat output is anticipated to fall by 3.5 percent in Australia, where dry weather conditions continued into 2019, further depleting feedstock and deteriorating pasture. Under current expectations for weather improvements, flock rebuilding in the country is likely to begin from mid-2019, probably reducing export availabilities. New Zealand’s ovine meat production is also forecast to decline, in view of the continued reduction in its sheep numbers, partially moderated by an increase in carcass weight.

Trade: limited availability for exports to depress trade

World trade in ovine meat is forecast to decline by 1.9 percent in 2019, due to reduced export availabilities from Australia and New Zealand, which together historically supply more than 80 percent of the ovine meat traded internationally. Australia is projected to record a 4.5 percent drop in exports, while New Zealand may see a contraction of around 1 percent. In recent years, an increasingly high proportion of exports has been destined for Asia, mainly China

Limited export availabilities in 2019 are forcing global importers, including China, to cut back on their international purchases.

[1] This section refers to meat and meat products, derived from animals in the broad groups of bovines (cows, buffaloes, oxen, etc.), pigs, poultry (chickens, turkeys and ducks) and ovine (goats and sheep).

MILK AND MILK PRODUCTS

PRICES

Rebounding since January after a 7-month slide

The FAO Dairy Price Index stood at 215 points in April 2018, up 5.2 percent from March, and 5.3 percent higher year-on-year. Compared with May 2018 - the month when prices peaked in 2018 - international quotations declined by 21 percent in December 2018, but have begun rising again since January, interrupting a seven-month streak of continuous declines. Compared with January 2019, quotations for all dairy products covered in the index were higher in April: butter by 15.9 percent to USD 5 246 per tonne; cheese by 23.4 percent to USD 4 288 per tonne; whole milk powder (WMP) by 13.8 percent to USD 3 326 per tonne; and skim milk powder (SMP) by 4.9 percent to USD 2 404. The recent price recovery reflects increased import demand in anticipation of a seasonal tightening of supplies from Oceania, as well as concerns about relatively short availabilities in other major suppliers, in particular the European Union (EU), where butter and SMP stocks have virtually disappeared.

PRODUCTION

Milk production to expand, but warm and dry weather may pose a threat

Milk production is forecast to grow by 1.9 percent (16 million tonnes) to 859 million tonnes in 2019. All regions are anticipated to see production expansions, albeit at slower rates than last year. The expansion is led by Asia (+3.5 percent), followed by North America (+1.1 percent), South America (+0.9 percent), Europe (+0.6 percent), Central America and the Caribbean (+0.6 percent), Africa (+0.5 percent) and Oceania (+0.4 percent). The principal contributions to the global milk output expansion are expected to come from India, Pakistan, the EU, the United States of America, New Zealand and Brazil, whereas significant contractions are foreseen for Australia, China, Argentina and Ukraine.

Driven by a large dairy herd and sustained by demand from an increasingly urbanized middle-and upper-middle income population, milk output in India is anticipated to increase by 5.3 percent in 2019, to nearly 196 million tonnes, equivalent to 23 percent of world milk output. Milk output in Pakistan, the world’s fourth largest producer, is expected to sustain a growth rate of about 3 percent, producing nearly 47 million tonnes, backed by increases in dairy herd numbers, despite rising costs of fodder and transport charges. A more modest growth of 0.7 percent (1.2 million tonnes) is anticipated for the EU, the second largest milk producer, to 168 million tonnes, under expectations that improved milk yields will more than compensate for the continued decline in the dairy herd. However, limited availability of fodder and costly feed remain a matter for concern in member countries, which fear a repetition, in the coming months, of the severe heat and drought conditions that prevailed in the summer of 2018. In the United States of America, milk output is expected to expand by about 1 percent (1 million tonnes) to nearly 100 million tonnes, underpinned by increases in milk yields. The outlook is more positive for New Zealand, where milk output is forecast to grow by 3.5 percent (748 000 tonnes) in the 2018/19 season to 22 million tonnes. In the first three months of this year, the country benefited from mild temperatures and good soil moisture, endowing farms with sufficient stock of hay and feed for the rest of the season, raising expectations of heightened milk yields. Higher producer prices announced in February by the New Zealand dairy cooperative group should further contribute to the production increase, amid robust international demand. In Brazil, milk production is forecast to grow by more than 2 percent (744 000 tonnes), to 36 million tonnes in 2019. Despite the presence of an El Niño event in South America, good weather has prevailed in the country, favouring grass growth and grain production. Moreover, a combination of technological innovations, the introduction of more stringent quality requirements for milk producers, and a revival of the cooperative movement, are expected to give a further boost to milk productivity. Producers unable to meet the new rules may opt to leave the sector.By contrast, Australia’s milk production is anticipated to contract by almost 7 percent (632 000 tonnes) to nearly 9 million tonnes, since the dairy herd has declined due to drought-induced cow slaughtering in 2018. Rainfall received by parts of Australia in last March was inadequate to restore pasture and improve feed availability, and this may eventually result in reduced cereal crops and rising feed costs, with negative implications for dairy producer margins.

Continuing the negative trend that started in 2016, China’s milk output is predicted to decline by about 1 percent (299 000 tonnes) in 2019, to 31.3 million tonnes, the lowest level since 2007. Financial pressure due to rising input costs and low milk prices has been forcing smallholders out of the industry over the past few years, reducing the size of the national dairy herd, notwithstanding ongoing structural reforms that have fostered consolidation of the sector into large-scale farms, with a heavy reliance on animal feed. In 2019, feed availabilities, especially of hay and alfalfa, are likely to be limited due to reduced imports of these products from the United States of America - the main supplier in recent years. This is a result of the retaliatory tariffs imposed by China, probably reducing the milk production prospects of these large-scale dairy farms. In sharp contrast with the 4.2 percent expansion recorded in 2018 in the wake of an industry consolidation, increased processing capacity and higher farmgate prices, Argentina’s milk output is forecast to decline by 1.8 percent (194 000 tonnes) to 1.3 million tonnes. This reflects an anticipated decline in milk output by smallholder farms, where high input costs are likely to discourage production. In Ukraine, milk production is likely to decline by 1.7 percent (171 000) to 9.9 million tonnes, as reduced import demand has continued to weaken the country’s milk production system.

TRADE

Dairy trade to expand, but growth rate to slow due to trade frictions and moderate prospects for world economic growth

World dairy product exports (in milk equivalent) are forecast to rise by 1.8 percent (1.3 million tonnes) to 76 million tonnes in 2019, a significant slowdown from the 2.8 percent estimated for 2018. Much of the expansion in world exports is anticipated to be sustained by a surge of deliveries from New Zealand, and more modest increases of exports from Mexico, the EU, Argentina, India and Canada. By contrast, limited supplies are likely to depress shipments from the United States of America and Australia. China is anticipated to lead the expansion in world dairy imports again this year, with Mexico, Malaysia, Egypt and Brazil also forecast to step up purchases. On the other hand, the Russian Federation, Oman and Algeria are anticipated to import lower volumes.

Largely relying on its abundant availabilities, New Zealand’s exports of dairy products are predicted to surge by over 7 percent (1.4 million tonnes) in 2019, to more than 20 million tonnes, mostly on greater sales of WMP, which may account for more than half of the total dairy products delivered, and moderate expansions of butter, cheese and SMP. Shipments from the EU are forecast to increase modestly again in 2019, at a growth rate of about 0.6 percent (125 000 tonnes) to 20.6 million tonnes, mostly in the form of butter, cheese and SMP, though still preserving EU’s primacy among dairy exporters. By contrast, United States of America exports are foreseen to decline by around 4 percent (460 000 tonnes) to 11.3 million tonnes. United States of America deliveries to China, Mexico and Canada, in particular, are likely to retreat, as the United States of America-China trade dispute drags on and the timeline for ratification of the Mexico-United States of America-Canada agreement remains uncertain. Australia’s limited milk supply this year is likely to result in a 3 percent (92 000 tonnes) cut in its overall dairy exports in terms of volume, although probably not in terms of value, as Australia’s deliveries are increasingly concentrated on higher value-added products.

As for imports, dairy purchases by China are predicted to grow by 6 percent (876 000 tonnes) to 15 million tonnes, providing the main impetus to world dairy trade in 2019, a year otherwise overshadowed by trade frictions and moderate world economic growth prospects. WMP is likely to account for 34 percent of China’s dairy imports, most of which will be sourced from New Zealand and the EU. In Mexico, dairy purchases are likely to soar by nearly 4 percent, as rising costs of production are resulting in high domestic prices compared with imports. Mexico’s increased purchases also reflect rising demand for value-added dairy products, manufactured mostly at home using imported raw materials. In view of the increased demand for milk products, Mexico has offered tariff-free access to its market for 25 000 tonnes of milk powder, 4 250 tonnes of cheese, and 1 500 tonnes of butter under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Malaysia and Egypt are also expected to import more dairy products in 2019, as dairy self-sufficiency continues to be low, despite efforts to increase domestic milk production. Argentina’s dairy exports may expand, benefiting from competitive prices and increased import demand, especially from neighbouring countries. India is likely to gain more market access in global dairy markets, with sharper increases in butter and SMP exports. Canada is making inroads in the high value market segments such as casein, enabling its dairy exports to recover from a small dip last year.

By contrast, imports in 2019 are set to decline in a number of countries, with the sharpest contractions anticipated for the Russian Federation, Oman, Algeria and the EU. The Russian Federation, which already cut imports by 18 percent in 2018, is forecast to reduce them by a further 13 percent (some 477 000 tonnes), to 3.2 million tonnes this year. This would confirm that domestic availabilities are improving in the country, with an increasingly sophisticated mix of dairy products produced domestically. Increased domestic supplies may also depress purchases by Oman. After an increase of nearly 12 percent in 2018, Algeria’s dairy imports are expected to fall by about 2 percent, as the Government has suspended imports of certain dairy products under an initiative to better control spending of foreign currency in the wake of falling oil revenues. Dairy imports by the EU may also decline, reflecting increased domestic availabilities. However, this may change, depending on the outcomes of emerging trade flows between the EU and its partners in new trading agreements, namely the member countries of the CPTPP and Mexico. The splitting of dairy tariff quotas between the EU27 and the United Kingdom will also have an impact on the volume of trade, if Brexit materializes in 2019.

Trade performance of key milk products

Global trade in dairy products is expected to expand across all major categories in 2019, with the sharpest expansion projected for whole milk powder (+2.3 percent), followed by butter (+2.0 percent), skim milk powder (+ 2.8 percent) and cheese (+1.7 percent).

Whole milk powder

World exports of WMP are likely to expand for a second year in 2019, growing by 2.3 percent, to 2.5 million tonnes, mostly driven by sharp rises in imports by China and Brazil, and more moderate increases in Bangladesh, Singapore and Viet Nam. By contrast, Oman, the United Arab Emirates and the Russian Federation are all expected to cut their purchases. Following a more than 10 percent surge last year, China’s WMP imports are predicted to grow by 6.5 percent (42 000 tonnes), to nearly 690 000 tonnes, mostly sourced from New Zealand. Brazil is likely to step up imports, as WMP production continues to be short of domestic demand, as much of fresh milk supply is used to fulfil demand for liquid milk products.

Much of the expanded WMP trade in 2019 is expected to be supplied by New Zealand, Argentina, Uruguay and Belarus, while WMP exports from the EU, the United States of America and Australia are likely to be down. Benefiting from its increased export availabilities, WMP shipments from New Zealand are forecast to increase by more than 6 percent to an all-time high of nearly 1.5 million tonnes. Since January this year, international price quotations for WMP from Oceania have been rising, compared with European prices, indicating strong demand for the product. WMP exports by Uruguay, the third largest world supplier, may reach some 150 000 tonnes, as higher profitability relative to other products encourages a shift towards WMP in the dairy production mix, allowing the country to respond to continued import interest from Algeria, China and Brazil. Following a decline of 15 percent in 2018, the EU’s WMP exports may slide by another 8 percent in 2019, on reduced sales, especially to Oman and China. After jumping by over 90 percent in 2018, WMP exports from Argentina are forecast to grow by around 5 percent this year, to 142 000, confirming Argentina as an important global WMP exporter.

Skim milk powder

World SMP exports in 2019 are forecast to grow by 2.8 percent to 2.7 million tonnes, much slower than the average pace of 8.6 percent recorded in the previous two years. Among SMP importers, China, Mexico, the Philippines and Malaysia are anticipated to purchase more SMP in 2019, principally to satisfy emerging demand from food manufacturers, while the Russian Federation is likely to import less, as the expansion of production is allowing the country to satisfy a growing share of its domestic consumption through local output.

Much of the slowdown in world SMP exports can be attributed to expected declines in shipments from the United States of America, the Islamic Republic of Iran, Australia, Belarus and Ukraine. However, a 15 percent rebound of SMP exports expected in New Zealand, combined with sizeable increases in shipments by the EU, Mexico, Canada and Argentina, is expected to partially compensate for the declines. Following the depletion of SMP stocks held in the EU, which weighed on world SMP prices, the global SMP trade is likely to find a new equilibrium with prices adjusting more in line with current or expected supply-demand conditions. In the first three months of this year, international SMP prices strengthened. Although prices slipped slightly since then, the average price for the first four months is 33 percent above the corresponding period last year.

Butter

World butter exports in 2019 are predicted to expand by 2.0 percent (18 300 tonnes) to 939 000 tonnes, a significant slowdown from the more than 7 percent growth recorded in 2018. Following a sharp increase in 2018, China is forecast to step up its butter imports by a further 10 percent (15 200 tonnes), to 161 800 tonnes in 2019. Improving economic conditions and rising tourist arrivals are expected to underpin imports by Egypt, with sizeable increases also predicted for Saudi Arabia, Malaysia and the United Arab Emirates. Reflecting progress in production, butter shipments to Canada and the Russian Federation are predicted to fall, with a contraction also forecast for Mexico, pending the trade agreement renewal with the United States of America and Canada.

In New Zealand, butter accounts for just 16 percent of total dairy exports, but sizeable gains in milk output in the 2018/19 season may give the country an opportunity to expand its butter exports by more than 4 percent, to 477 000 tonnes, still slightly below the volume shipped in 2016. India’s butter exports, which more than doubled in 2018, are expected to advance by a further 16 percent this year, as the country is gaining increased market access in global markets. Belarus may have to accept a smaller growth of exports in 2019, due to limited export availabilities. Overall, butter availabilities for trade are anticipated to remain relatively tight in the first half of 2019, until Oceania’s butter from the 2019/20 season begins to enter markets in the second part of the year. Reflecting this seasonal pattern, international butter prices recovered in the first four months of 2019, still remaining 10.3 percent short of their corresponding levels in 2018.

Cheese

Following a year of virtual stagnation, world exports of cheese are forecast to expand by 1.7 percent in 2019, to more than 2.6 million tonnes. In 2019, Australia, Japan, the Republic of Korea, Canada, the United States of America and Mexico are forecast to increase their purchases, generally underpinned by rising consumer demand, combined with increased interest for a wider range of cheese varieties. On the negative side, demand for imports is predicted to be down, especially by the Russian Federation and by Saudi Arabia - a reflection of rising domestic production combined with trade restrictions.

Much of the anticipated increase in global cheese exports is likely to originate from New Zealand, the EU, Argentina and Belarus, more than offsetting declines from the United States of America. Cheese exports from New Zealand are predicted to rise by more than 9 percent to a record of 354 000 tonnes, spurred by strong demand from its neighbour Australia, but also from Japan, the Republic of Korea, Indonesia, and China. Cheese exports from the EU are forecast to expand by about 1.4 percent, to more than 840 000 tonnes, mostly destined for the United States of America, Japan and Switzerland, confirming the EU’s dominant position among cheese exporters. Despite an anticipated decline or stagnation in milk production, cheese exports from Argentina may expand, benefiting from competitive prices and increased import demand from neighbouring countries, namely Brazil, Chile and Paraguay. Similarly, Belarus may increase its cheese shipments, as demand from the Russian Federation and other Eastern European countries remains strong. By contrast, United States of America cheese exports are likely to fall in 2019, especially if trade disputes with China, Canada and Mexico remain unresolved.

FISH AND FISHERY PRODUCTS

2019 global fish production forecast is flat, with demand growth slowing

Global fish production in 2019 is expected to be on par with that of last year, while demand growth is positive but slowing. Catches are low for anchoveta and some key wild-caught species, with total capture fisheries production expected to fall by around 3.4 percent in 2019, a sharp reversal of the 2.2 percent growth achieved in 2018 on the back of good anchoveta landings. For aquaculture, continued growth of around 4 percent is forecast for 2019, but supply remains limited for some important traded species, such as salmon. Of the estimated 177.8 million tonnes of fish to be produced in 2019, some 89 percent will be utilized for direct human consumption, translating into global apparent per capita fish consumption of some 20.5 kg.

Global trade of fish and fish products in 2017 and 2018 was characterized by high prices and significant growth, but previously positive conditions have deteriorated somewhat in 2019. The negative effects of the United States of America-China trade dispute will persist throughout 2019, with the additional possibility of an escalation in transatlantic trade tensions between the United States of America and the European Union (EU). Adding to the unfavourable trade environment is the extension of the deadline for the UK’s exit from the EU to 31 October 2019, with no consensus as to the most likely outcome of ongoing negotiations, and the possibility of significant tariff implications still very much on the table. Combined with tighter monetary conditions in many large economies, these uncertainties are expected to slow global GDP growth and trade expansion this year, making 2019 a more challenging year for the seafood industry.

Multiple major seafood exporters, particularly in Asia, are expected to see trade contractions following positive performances last year. China’s total seafood exports are likely to be down significantly for the year, while the seafood export revenues of Indonesia, India and the Philippines are also set to take a hit. Norwegian exports should remain steady on good price levels for its most important species, while for Latin American exporters, the combination of a strong salmon market and high fishmeal production is likely to result in a rise in total exports. On the market side, Japan, the EU and the United States of America have all seen declines in the total value of seafood imports in early 2019, giving back some of the gains achieved last year. Meanwhile, in developing countries, import growth is set to slow but remain positive. Total demand is still expected to be sufficient to maintain prices at a relatively high level, considering the ongoing shortages for several highly traded wild-caught species. For aquaculture producers, while several species are currently well supplied, a recognition of long-term demand trends and a need to overcome current restrictions on supply growth will continue to drive investment and research into alternative means of farmed fish production.

TUNA

Early 2019 was marked by rising prices of skipjack tuna, due to low catches in the Pacific and Indian Oceans. In contrast, yellowfin prices have declined somewhat. Tuna fleets in the Western and Central Pacific started the year relatively poorly, as a result of unfavourable weather at the beginning of the year. Fishing in the Eastern Pacific was also poor, and canneries in Manta are now extremely short on raw material. The seasonal fishing restrictions that will take effect in the Western and Eastern Pacific in July this year will compound the already tight supply situation, and prices of both raw material and finished products are likely to be on the higher side in 2019, compared with 2018. This may reverse the positive effect of lower prices on canned tuna demand in 2018. Meanwhile, demand for raw tuna for the sashimi market in Japan will be seasonally low in the summer months, and will improve from autumn onwards. In the United States of America and European markets, meanwhile, demand for tuna fillets and steaks is expected to be strong until the end of summer.

GROUNDFISH

While farmed whitefish supplies will increase slightly in 2019, supplies of wild-caught marine groundfish are expected to be lower than in 2018. Specifically, cod and pollock supplies will decrease and cod prices are expected to stay high, or even rise further. In the processing sector, production costs are rising in China, increasing the incentive for some whitefish processors to relocate to Europe in order to reduce transport costs to major markets. Nevertheless, the experience of the industry and the capacity for consistent quality means that the Chinese processing sector remains competitive. In the Alaska pollock market, producers are beginning to turn away from production of blocks and fillets and move towards producing higher-value consumer products, such as surimi.

SMALL PELAGICS

In 2018, small pelagic landings were the highest since 2011, with anchovy landings increasing by 47 percent. However, in 2019, total pelagic landings are forecast to decline by 11 percent year-on-year, to some 20.5 million tonnes. Anchovy landings in South America are forecast to be somewhat weaker this year, and prices for most species are expected to rise. Mackerel, in particular, will continue to be in short supply, and prices are expected to rise further from already record levels. While herring have been more abundant, with very low prices, some observers expect that this trend will be reversed soon, despite high cold storage holdings and a reasonably positive outlook for catches. Of the other major small pelagic species, blue whiting prices will most likely go up, while capelin will be in extremely short supply, as quotas in the Barents Sea are set at zero.

FISHMEAL AND FISH OIL

In Peru, 2018 was one of the best fishmeal production years in several years. This positive production trend is unlikely to continue in 2019, with anchoveta landings in South America expected to be somewhat weaker overall. While African Swine Fever outbreaks in China may have a negative impact on demand, the market is generally balanced. Fishmeal prices are relatively low after trending downwards over the course of 2018, but are expected to stabilize this year.

SALMON

With the Chilean sector’s performance improving in 2018, the global Atlantic salmon aquaculture industry is matching good profitability with consistent and controlled growth. Despite a 5 percent increase in supply in 2018, production growth continues to lag behind demand, which shows little sign of weakening, and resistance to high prices has largely been temporary. Potential future supply solutions include the development of Atlantic salmon aquaculture in new regions from Iceland to China, innovative technological approaches such as land-based and offshore farming, genetically engineered salmon, and even imitation salmon derived from algae. In 2019, global production of farmed Atlantic salmon is forecast to increase by around 4-5 percent, maintaining a tight market balance that is expected to support prices at current levels. Growth in Chile is expected to slow, and Norway is likely to recover some market share in multiple markets with a 4-5 percent increase in harvests. UK production is set to bounce back strongly, but the major focus of the industry there will be the outcome of Brexit negotiations. Modest but positive economic growth prospects in all major markets, including continued recovery in the Russian Federation and Brazil, will support further strengthening of global demand for salmon over the medium term.

TILAPIA

United States of America buyers’ accelerated purchasing of tilapia from China in late 2018 and early 2019 turned out to be premature, as the tariff hike expected on 1 March never materialized. Future price and market development will be heavily dependent on when and if tariffs on United States of America imports of Chinese tilapia are increased or removed. In the meantime, this added barrier to Chinese access to the United States of America market could prompt something of a reshuffling of trade routes between markets and producers. In Latin America, the Brazil and Colombian tilapia industries are on strong growth trajectories, with Brazilian producers focused primarily on the domestic market, and Colombia looking to develop its export business to the United States of America. Global production of tilapia is expected to increase by around 3 percent to 6.5 million tonnes in 2019, with Chinese growth continuing to lag behind that of other major producers. Demand growth is concentrated in developing countries in Latin America, Africa and Asia, which are all significantly outpacing the sluggish United States of America market.

PANGASIUS

Viet Nam remains by far the dominant producer of traded pangasius, although its share is declining. For the first time, strong price gains saw Viet Nam’s pangasius export revenues exceed USD 2 billion in 2018, and the outlook remains positive due to good conditions in multiple markets. This optimistic forecast comes despite an above-forecasted Vietnamese production target of 1.51 million tonnes for 2019. In the United States of America, the reduction of anti-dumping tariffs and Viet Nam’s success in meeting United States Department of Agriculture market access standards should open up more opportunities for Vietnamese exporters. In the EU, the recent successful negotiation of a Free Trade Agreement between the EU and Viet Nam will eventually lead to tariff reductions. In addition, the combined effect of an expected decline in total whitefish production and the United States of America-China trade war tariffs on key wild-caught species is also likely to strengthen the global market position of pangasius. Viet Nam’s total pangasius export revenue is expected to increase to some USD 2.4 billion in 2019.

SEABASS AND SEABREAM

The Mediterranean seabass and seabream industry suffered from severely depressed prices and challenging market conditions last year, which have persisted into 2019. Demand has been growing, but not fast enough to keep pace with rapid supply expansion led by Turkey, now the world’s leading producer of farmed seabass and seabream. Total supply of farmed seabass and seabream should stabilize in 2019, with flat or slightly negative production growth expected by most analysts. Low prices, slowing economic growth in the EU as a whole, and deteriorating business conditions in Turkey have all contributed to conservative business planning as companies seek to minimize further losses. At the same time, however, cheap and plentiful fish will be easier to market to otherwise hesitant buyers, particularly when prices for many other key whitefish species are now prohibitively high.

SHRIMP

The supply forecast for this year suggests that global farmed shrimp production in 2019 will be plentiful on global markets, similar to last year. However, market prices have been pushed down to damagingly low levels, which represents a considerable challenge for farmers, who remain conservative and generally undecided in their crop planning for 2019. Some farmers in Southeast Asia are shifting from vannamei to black tiger shrimp, which provided better financial returns in 2018. On the market side, United States of America wholesale prices are low and stable compared with a year ago, encouraging promotional campaigns at retail and restaurants, and it is hoped that these efforts will lead to more consumption and reduced stocks on the market in 2019. Meanwhile, imports into the EU are expected to rise as production in Ecuador, which has zero-tariff access to the EU, is forecast to increase its production of farmed shrimp in 2019. In Asia, while no real recovery is in sight in the Japanese market during 2019, a sharp increase in imports into China earlier this year has given a boost to shrimp farmers’ prospects for 2019 as a whole.

CRAB

Prices for king crab and snow crab are expected to rise during 2019 on tight supply. For king crab, supply is very limited, and market participants are concerned that the Alaska red king crab fishery may be suspended altogether in 2019. If this occurs, the fishery would probably remain closed throughout 2020 and 2021. Supplies from the Far East and the Barents Sea have been growing for the past few years, but in 2019 they are expected to stagnate, and the overall supply situation for king crab could be very tight. For snow crab, quotas have been increased in Alaska but cut in Canada, and the overall supply situation will be tighter in 2019. Total supplies on the United States of America market have been declining steadily since 2015, mainly as a result of lower volumes from Canada that have not been sufficiently compensated for by volumes from the Russian Federation.

LOBSTER

Global landings of Homarus lobster fell in 2017, but recovered ever so slightly in 2018, to an estimated 151 000 tonnes, up from 150 500 tonnes in 2017. However, supply is being outpaced by demand and prices continue to rise. With this increase in demand, particularly in China, prices can be expected to keep rising if the supply situation does not improve. Shore prices in Canada in 2018 were reported at CAD 9.00 (USD 6.78) per lb, their highest ever. Rock lobster prices have also risen to high levels, up to USD 70 per kg for live lobster destined for China.

CEPHALOPODS

For 2019, a further supply squeeze for octopus can be expected due to a 48 percent reduction of the Moroccan quota, with raw material scarcity compounded by limited inventories in cold storage. For squid, supplies are improving somewhat as the important Argentine fishery has been more productive this year, but the supply-demand balance still remains relatively tight. Overall, demand for cephalopods is strong, and prices are forecast to continue rising. In particular, the global octopus market is projected to grow at a compounded annual rate of some 3 percent from 2018 through to 2022. This could translate into a total market size of about USD 800 million by 2022. As much as 43 percent of this growth is expected to come from the Asia Pacific region.

BIVALVES

Demand for bivalves has been strong, and prices are increasing for all products. Some product diversification is taking place, as marketers seek to build a consumer base among the younger generation. If these attempts are successful, these new products are likely to dominate markets in the coming years. The established status of oysters means there is significant market potential for this species in particular, although oyster supply this year is expected to be tight due to high mortalities during the summer of 2018 in France, a major exporter. Elsewhere, Chinese farmed scallop production will be impacted over the next two years by the widespread loss of young scallops experienced in early 2018. In the longer term, however, there is no major impediment to increased bivalve production in all main producing countries, as fish farms further away from the coast can come into operation. Some investments and changes in legislation are taking place in the United States of America to facilitate development of the bivalve sector, and the attractive prices of bivalves worldwide will push other countries to follow suit.

AFRICAN SWINE FEVER:

Challenges for some, opportunities for others?

Contributed by:

Josef Schmidhuber

Josef.Schmidhuber@fao.org

The outbreak of African Swine Fever (ASF) in East Asia is likely to have a noticeable impact on meat and feed markets worldwide. The extent and speed of the spread and the number of countries affected are still uncertain. FAO monitors the outbreak, providing regular updates through its Emergency Prevention System for Animal Health (EMPRES-AH). It also provides detailed recommendations on how to curb the outbreak and assists governments in their implementation.

The FAO-EMPRES-AH update of 2 May suggests that ASF continues to spread within China. It is now endemic in the autonomous regions of Tibet (Bayi District, Gongbu Jiangda County and Bomi County of Linzhi City) and Xinjiang Uygur (Yecheng County, Kashgar Prefectur, Shule County in Kashgar Prefecture). Overall, 28 provinces/ autonomous regions/municipalities are affected in China; more than 1 million pigs have been culled in an effort to halt the contagion. The actions taken by the country notwithstanding, ASF continues to spread. The latest FAO update notes that the disease has also extended to other countries, now affecting neighbouring countries, notably Viet Nam, Mongolia and Cambodia.

Figure 1 illustrates the newly affected regions of China. By April 2019, the disease had reached all major regions of the country, most recently also spreading into the northwestern provinces. The unabated spread of ASF poses a number of questions, relevant beyond the confines of East Asia and its pig meat market. These include the impacts on global markets, challenges to maintaining adequate meat supplies in affected countries, impacts on other types and sources of meat and protein, as well as the opportunities arising for pig meat producers in ASF-free areas.

This note attempts to address some of these issues. It looks at the impacts of the proliferation of ASF on global feed markets, focusing on feed grains and protein-rich oilseeds. It attempts to distinguish between macro and micro impacts, and the effects on consumers and producers; it discusses the need to adjust farm structures and the adjustment process required to improve the biosecurity[1] of pig production systems, especially in the affected countries.

The extent of the problem

Official FAO monitoring efforts are undertaken in close cooperation with local authorities and China’s Ministry of Agriculture and Rural Affairs (MARA). While official sources confirm a rapid spread of the disease, both the speed and severity of the spread could prove more pronounced than currently assumed. For instance, reports by government officials, industry sources and news media suggest that around 20 percent of China’s pig inventories had already been culled in the first few months of 2019, amid fears of ASF spreading more rapidly.

In many provinces, cull rates in excess of 20 percent have been reported. In Henan Province, for example, the sow inventory was down 26 percent year-on-year at the end of January 2019. A team of experts from the Ministry’s animal husbandry bureau found considerable cutbacks in herds by backyard farmers, large commercial companies and key provincial nucleus breeding herds. A separate MARA investigation of the ASF situation in seven Chinese provinces also found ‘irrational’ culling of sows on breeding farms in February, reducing the sector’s core production capacity.

In Jilin province, the MARA team found the swine inventory to be down by 28 percent from the previous year, and some reports are pointing to an even higher drop. Likewise, the Veterinary Bureau of Shandong Province reported a 41 percent ‘landslide’ decline in sow numbers between July 2018 and February 2019 at the 33 breeding farms monitored by the bureau. Herds on 1 100 commercial finishing farms were down 18.8 percent between July 2018 and February 2019.

In Guangdong Province, while the impacts of the disease were not very serious until ASF began to spread in the first months of 2019, hog inventories are now reported down by 20 percent from a year earlier. Some of the reduction was due to direct culling after disease outbreaks, with reports that some farmers were liquidating herds to prevent infection and/or in order to wait-and-see how the market develops.

Indirect support from official meat and feed statistics

The above estimates are corroborated by indirect evidence from the industrial output statistics of the National Bureau of Statistics, showing that production of ‘fresh and frozen meat’ by processing plants was down by 17.3 percent in January and February 2019, compared with the same period in 2018. These high cull rates are supported by reported feed sales. In Guangdong Province, for example, pig feed sales were down by 10 to 50 percent. By contrast, poultry feed sales were up by 10 percent, although environmental regulations are forcing chicken and duck farms to close. Likewise, pig feed production in Shandong Province saw an accelerated decline, reaching a level of just 67 percent compared with February 2018. The high cull rates in some of the key producing areas suggest that the extent and the severity of the ASF outbreak in China will pose a major challenge. This is also evidenced by the fact that pig meat prices have begun to soar, increasing up to 50 percent, both domestically and at the Chicago futures exchange (see Figure 2[2]).

Beyond China

While developments in China’s agriculture do not always percolate fully into global markets, ASF impacts are likely to be different. They will be felt more noticeably than other changes. China accounts for about 50 percent of the global pig herd, which means that a massive decline of the country’s pig inventories will inevitably be felt abroad. This is particularly so as the disease spreads into East Asia, and is already endemic in sub-Saharan Africa as well as many countries of Central and Eastern Europe.

The effect of ASF will be felt all the more since pork is the preferred meat in China. For this reason, demand does not always respond directly to changes in prices, which may see a sustained increase as a result. To avoid soaring pork prices, with potential impacts on the overall consumer price level and on general inflation, China may have to turn further to the world market to cover some of its domestic production shortfalls. To what extent is a question that is impossible to answer precisely, but given the size of China’s meat market and the production shortfall now caused by ASF, repercussions for the global meat markets could be significant. Finally, China is the largest importer of soybeans in the world, accounting for about two-thirds of all international purchases. Around half of these imports end up as feed for the country’s domestic pig herds, so lower pig inventories should translate into lower demand for feed grains in general, and lower soybean imports in particular.

What are the impacts on global feed markets?

With the sharp decline in pig inventories, the exponentially rising import trend, especially of soybeans, over the past two decades could come to an abrupt halt. Indeed, the first signs of a slowdown in soybean imports were already evident in 2018 (see Figure 3). Initial estimates for 2019 suggest that this trend would continue (see lower-right pane of Figure 4). The following analysis will first gauge impacts on the global soybean market, before expanding its scope to assess the likely impacts on feed grain markets.

Soybeans

When considering the recent slowdown in China’s soybean imports (see Figure 3), it is important to take into account a number of factors that are behind this change. Firstly, consumption levels of meat have reached high levels of about 55 kg (beef, chicken, pork and sheep/goat) per person per annum. These high levels of meat consumption come on top of high levels of farmed fish and egg consumption, which together with meat add up to about 95 kg per caput per annum. At the same time, growth in meat consumption has been slowing for nearly a decade. Secondly, as a result of slower growth in demand for animal products, feed requirements rose less rapidly. Moreover, feed operations have attained high intensity rates (high shares of compound and concentrate feeds, negligible shares of roughage) and reasonably high efficiency rates, leaving less room for further grain and oil meal feeding. For example, intensity rates for poultry production are estimated to have reached almost 90 percent, and those for pig production around 85 percent. These levels are on a par with those of very advanced feeding systems. Thirdly, soybean feed use and imports have slowed since China embarked on reforms of its maize sector in 2017. Prior to these, the elevated local maize prices attracted not only imports of barley and sorghum into China’s feed grain market (see Figure 5), but also boosted demand for soybean meal. In effect, relatively inexpensive soybeans have not only supplemented maize, but have also substituted some of the energy provided by maize and other feed grains. With lower maize prices setting in 2017, soybeans became relatively expensive and imports slowed. The outbreak of ASF could take a further toll on soybean feed. This is particularly so as the Government decided in October 2018 to reduce the protein requirements for pig feed by 1.5 percent and for poultry feed by 1 percent, in order to suppress domestic demand for soybeans in the wake of the United States of America-China trade tensions.

The second change is a shift in the composition of suppliers selling soybeans to China (see Figure 4). Driven by the ongoing trade dispute with the United States of America, China has sourced a growing amount of its soybean imports from suppliers elsewhere. Its monthly imports shown in Figure 4 illustrate this shift. From November 2018 to March 2019, monthly imports declined from more than 8 million tonnes to less than 6 million tonnes. At the same time, China shifted its imports from the United States of America to Brazil and Argentina, as well as countries subsumed in the Rest-of-the-World (RoW) aggregate of Figure 4.

Whether or not that shift will continue in 2019 remains to be seen. Flows could reverse again as the trade talks between China and the United States of America advance, with United States of America soybeans potentially replacing shipments from Latin America. Against the backdrop of China’s shrinking soybean market, this could result in even stiffer competition with suppliers from Latin America. Eventually, that could lead to their shipments redirected to Europe and other markets instead.

From soybeans to the broader feed market

While the decline in overall feed requirements in China may not be as pronounced as for soybeans, other feed ingredients could also see lower demand. This could affect not only feed grains but also grain substitutes such as cassava. A number of factors support this hypothesis. Firstly, there seems to be ample domestic supply of feed grains. The results of the 2017 agricultural census released by China’s National Bureau of Statistics (NBS) suggest that, over the past 11 years, China has produced a cumulative volume of nearly 309 million tonnes of cereals in excess of the hitherto estimated quantities. Maize accounts for most of the additional cereal production, i.e. some 266 million tonnes. While it is estimated that about half of the additional grain has already been fed, the other half is assumed to have ended up in China’s grain inventories.[3] Higher maize stocks support the prospects of lower import needs, possibly producing further downward pressure on local and global feed grain prices. Secondly, given the prospect for a further significant reduction in China’s pig herd still for some time to come, domestic feed availability, as measured by the size of inventories, could increase further.

The prospect of lower maize imports is supported by the marked fall in barley and sorghum imports towards the end of 2018 (see Figure 5). Lower imports of barley and sorghum could be a harbinger for the future of maize imports. Driven by a lack of domestic demand and lower maize prices, by the end of last year, barley imports had come to a complete halt, and sorghum imports had declined to a token level. As exporters of barley, farmers in Europe stand to lose, and the same holds for Australian producers, whereas the lower sorghum demand will mainly be felt by producers in the United States of America.

ASF starts to encroach on dairy markets

The ramification of ASF on feed markets may not be limited to the grain and oilseeds sector. Also the market for milk powders largely used for animal feed is likely to be affected. China is the world’s largest importer of whey powder, nearly 60 percent of which is used as animal feed, notably to raise piglets and to provide post weaning rations rich in lactose and protein. As ASF takes a toll on China’s pig inventories, it also affects the number of piglets to be fed and the required feedstuffs.

An inspection of the current trade situation suggests that the first impacts on whey powder imports are already becoming visible. Two basic changes stand out. One is a decline in overall imports, reflecting the slowdown in feed needs. Another is a more noticeable decline in imports from the United States of America, reflecting the additional tariffs of 25 percent on United States of America shipments as of July 2018. Both changes mirror the shifts for soybean imports, albeit the amounts at stake for whey powder are much smaller and the impacts observed so far much more muted.

ASF is spreading to other countries in East Asia

ASF is now also making inroads into other Asian countries with significant pig herds, notably Viet Nam, but also Cambodia and Mongolia (EMPRES update of 26 April). While Cambodia’s and Mongolia’s production levels are small by global standards, Viet Nam is the fifth largest pig meat producer worldwide (see Figure 6), exceeding, for example, the production level of Brazil in 2018.

There are also concerns that the current husbandry practices implemented in many East Asian countries fail to provide the required biosecurity standards to contain the disease: pig production is dominated by small, backyard operators, keeping their sows and hogs outside in confined production environments, feeding them with table scraps or uncooked organic refuse (swill). There is also a lack of vertical integration, which means that piglets and sows need to be transported between farms and sometimes even across regions. This is further supporting a rapid and far-reaching spread - either from the introduction of infected or ill animals or the entry of contaminated vehicles and equipment (inanimate objects known as ‘fomites’). And finally, also intra-regional trade could be an important vector for the disease to spread. There is a lively exchange of all sorts of pork products within the region, including sausages, cured meats and other processed pig meat products. They may all contain the ASF virus, which is highly resistant to temperature and other treatments (salting) and can persist for months or years. This means that the chances of ASF to spread far and fast are not only high, but the disease may resurface in the region even years after the initial outbreak.

Good news for pig producers in Europe and the Americas

The unfortunate prospect facing Asian producers could bring opportunities for producers elsewhere, particularly those in Europe, the United States of America and Brazil. It is a rare combination of events that presents pig producers with higher prices, higher export volumes and lower feed prices. But the data available for the spread of ASF so far would indicate that in Europe and the Americas pig producers may be about to enjoy precisely this situation. However, much still depends on how quickly and effectively China will be able to contain the ASF outbreak. The outbreak of ASF in Viet Nam, Cambodia and Mongolia could add to pork production shortfall in Asia, further aggravating feed grain and oil meal requirements of the entire region. Under this scenario, producers from Europe and the Americas stand to benefit the most. They are among the largest exporters of pig meat (see Figure 8) and, at the same time, the leading importers of soybeans.

Poultry exporters worldwide to benefit

While producers in Europe and the Americas could stand to gain the most in terms of pig meat markets, others are poised to benefit in the poultry market. As China may make efforts to supply consumers who normally purchase pig meat with alternative proteins, it will have to resort to other meats, notably poultry meat. The largest poultry producers are Brazil, the United States of America and Thailand (see Figure 9) as well as some EU countries. Within the EU, the Netherlands, Poland and Belgium could benefit from higher exports and higher export prices. They also stand to benefit from lower soybean prices.

Macro versus micro, sector versus farm

In most major exporting countries, farms producing pig and poultry meat are highly specialized. They buy most of their inputs from other farms or countries, and sell their produce at home or abroad. This means that - from the perspective of the individual farm - producers in Europe are unlikely to benefit more than their peers in the Americas or Thailand. Both stand to benefit from higher product prices, lower feed prices and potentially higher sales volumes. However, at a macro level, the farm sector in Europe will see greater benefits than those abroad, as there is practically no internal soybean production, and hence no burden to be borne by soybean or other protein feed producers. By contrast, in the United States of America and Brazil, the sectoral benefits will be limited to the sales side of pig and poultry meat. At the macro level, the lower input costs for meat producers will be offset by the lower revenues of crop producers.

How long will the adjustment process last and how fast will the gaps be filled?

This is no doubt the hardest question to address. Be it in China or any other country, containing the ASF outbreak requires radical changes to pig production systems and stringent adherence to farm biosecurity practices. In the case of China, a country with a sizeable share of backyard production, such requirements may not be easily achieved in the short term. While a rapid structural change in China’s pig meat sector is already evident, the outbreak of ASF may go some way to accelerate the process and that not only for livestock production but also for crops. Just how these changes will affect the future of China’s agriculture, and eventually farming worldwide, is likely to be the subject of intensive analysis and research in the future.

[1] Biosecurity has multiple meanings and is defined differently in different disciplines. Within agriculture, biosecurity includes the implementation of measures that reduce the risk of the introduction and spread of disease agents, pests or other threats. Biosecurity requires the adoption of a set of attitudes and behaviours by people (producers and allied industries) to reduce risks and threats in all their activities from production, marketing, nutrition, vaccination schemes, farm hygiene, occupational safety, building construction, and even disposal of wastes.

[2] The red dot in Figure 2 denotes the official confirmation of ASF in China (August 2018). While prices remained volatile from then onwards, it took markets another six months to fully appreciate the likely impacts on pig meat supplies and to react with a pronounced hike in March 2019.

[3] http://www.amis-outlook.org/amis-monitoring/monthly-report/en/#.XMGHRgzaF4

4 Preliminary estimates, taken from TDM in April 2019

BANANAS AND MAJOR TROPICAL FRUITS IN LATIN AMERICA AND THE CARIBBEAN

The significance of the region to world supply

Contributed by:

Sabine Altendorf

Sabine.Altendorf@fao.org

This special feature represents an introductory background note to the medium-term outlook for bananas and major tropical fruits in Latin America and the Caribbean, which will be published in July 2019 in the forthcoming edition of the OECD-FAO Agricultural Outlook 2019-2028.

Latin America and the Caribbean constitutes the world’s most important exporting region for bananas and the four major tropical fruits - mangoes, pineapples, avocados and papayas - thereby playing a vital role in global fruit supply. Abundantly endowed with land that features highly favourable agro-climatic conditions for the cultivation of tropical products, the region ranks as the second leading producer of bananas and tropical fruits globally, behind Asia. The most prolifically produced and traded fruits in the region in the following order are bananas, pineapples, mangoes, avocados and papayas. On average, approximately 25 percent of total global banana and major tropical fruit production originates in Latin America and the Caribbean, with an annual production volume of roughly 54 million tonnes between 2016 and 2018 (three-year average).[1] With a total combined annual per capita consumption of 55 kg of bananas and major tropical fruits, the region also ranks as one of the major consumers of these fruits globally.

More importantly, shipments of bananas and major tropical fruits from suppliers in Latin America and the Caribbean make up about 75 percent of world exports, with a total annual average volume of 25 million tonnes over the three-year period from 2016 to 2018. Of these, an estimated 80 percent are destined for developed country markets, primarily the United States of America and the European Union (EU). Estimates point to a total combined export value of around USD 11 billion for bananas and major tropical fruits from Latin America and the Caribbean in 2016-2018, of which bananas and avocados accounted for some USD 6 billion and USD 3.5 billion, respectively.[2]

This article examines the key characteristics of exports of bananas and the four major tropical fruits from Latin America and the Caribbean and their role in world fruit supply, and discusses some of the obstacles and opportunities for growth in production and trade.

BANANAS AND PINEAPPLES - HIGH VOLUME MARKETS

Bananas rank as the most prolifically produced and exported fruit in Latin America and the Caribbean. Over 2016-2018, the total production volume of bananas in the region stood at an estimated 30 million tonnes per year, while total exports reached an annual average of 13 million tonnes, representing 80 percent of world banana shipments. Trade statistics reported an average export revenue of USD 5.6 billion per year for the banana industry in Latin America and the Caribbean over the same period.

Meanwhile, pineapple production in the region stood at an estimated annual average of 9.9 million tonnes, of which around 2.3 million tonnes were exported annually. As such, Latin America and the Caribbean account for approximately three-quarters of global pineapple exports. The two leading producers of pineapples, Costa Rica and Brazil, together accounted for an average production volume of 5.3 million tonnes over the 2016-2018 period. Nearly two-thirds of pineapple supplies from Costa Rica are destined for export markets, primarily the United States of America and the EU, while Brazil’s production is almost exclusively destined for the domestic market. Total reported revenue from pineapple exports from the region averaged approximately USD 850 million over 2016-2018.

Given their high production and export volumes, bananas and pineapples play an important role in the region’s food security, as well as in the generation of foreign exchange earnings for the exporting nations. Furthermore, by hosting the majority of the world’s leading exporting countries of bananas and pineapples, the Latin America and the Caribbean region maintains a firm position as the world’s largest exporter of both products and acts as a key determinant of their global supply.

Ecuador ranks firmly as the world’s largest exporter of bananas, accounting for an estimated share of 36 percent of world exports over 2016-2018. Total shipments from Ecuador reached a record high of 6.6 million tonnes in 2018, supported by favourable weather and successful investments in production expansion and yield-improving technologies. Banana supplies from Ecuador are primarily destined to the EU and the Russian Federation, which purchased, respectively, about 1.9 million tonnes and 1.5 million tonnes of Ecuadorian bananas on average between 2016 and 2018. Shipments from Ecuador to the EU continued to benefit from the scheduled tariff reductions under the EU-Andean agreements in 2018, which facilitated entries of Ecuadorian bananas into the EU market at a reduced tariff of EUR 96/tonne throughout the year, compared to the standard tariff of EUR 114/ tonne. The pace of shipments to the Russian Federation, meanwhile, remained subdued by the depreciation of the Russian rouble against the US dollar, as banana transactions are typically denominated in US dollars. Another key destination of Ecuadorian bananas is the United States of America, which imported an average of 780 000 tonnes per year over the same period. Total annual revenues from banana exports in Ecuador averaged USD 2.9 billion between 2016 and 2018.

Guatemala ranked as the second leading exporter of bananas in the world between 2016 and 2018, with an average annual export volume of 2.3 million tonnes. The country mainly focuses on the cultivation of Cavendish bananas, the predominant variety in global trade. Banana production in Guatemala benefited strongly from comparatively lower net returns for sugar cane and coffee in 2018, which led to an expansion in harvested area for the relatively more lucrative banana crops. Supplies from Guatemala are chiefly destined for the United States of America, which received on average 80 percent of its shipments between 2016 and 2018. Bananas are Guatemala’s leading agricultural export product, generating an annual average revenue of USD 770 million over the period 2016-2018 and accounting for 14 percent of the value of the country’s total agricultural export earnings.

Banana exports from Costa Rica averaged 2.2 million tonnes per year between 2016 and 2018, placing the country third among the world’s leading suppliers of bananas, ahead of the Philippines. Approximately half of Costa Rica’s banana exports go to the EU, with the United States of America ranking as the second leading destination, importing an annual average volume of 800 000 tonnes over 2016-2018. Costa Rica’s total revenues from banana exports averaged USD 890 million per year over the same period. The country also ranks firmly as the world’s largest producer and exporter of pineapples, with an annual average production volume of 3 million tonnes and an average export volume of 2 million tonnes between 2016 and 2018. Total reported export revenues of pineapples in Costa Rica amounted to an average of USD 715 million per year over 2016-2018. Supplies were almost exclusively destined to the United States of America and the EU, with each accounting for an equal share of approximately 45 percent of the country’s total shipments. Costa Rica’s total export revenues from bananas and pineapples account for about 34 percent of the country’s total value of agricultural exports.

While Peru plays a comparatively small role in banana exports, supplying an average of some 200 000 tonnes per year over the 2016-2018 period, its role in world supply is nevertheless noteworthy, owing to its position as a key exporter of organic bananas. Given the higher unit values of organic bananas, Peru’s revenues from banana exports amounted to an annual average of some USD 160 million over 2016-2018.

AVOCADOS, MANGOES AND PAPAYAS - INCREASING VOLUMES ON ACCOUNT OF SOARING GLOBAL DEMAND

With avocado being indigenous to the region, production of the tropical fruit in Latin America and the Caribbean accounts for roughly 70 percent of global output, which reached an annual average of 4.3 million tonnes over the 2016-2018 period. Avocado continues to be a highly demanded tropical fruit in import markets, particularly in the United States of America and the EU, where annual per capita availability in 2018 reached 3.1 kg and 1.2 kg, respectively. World import demand for avocados - largely met by supplies from Latin America and the Caribbean - increased at an estimated annual average growth rate of 14 percent between 2009 and 2018, slightly outpacing growth in supply over the same period. Total exports of avocados from Latin America and the Caribbean averaged 1.6 million tonnes per year over 2016-2018, valued at about USD 3.5 billion. The principal importer of avocados from the region is the United States of America, which procured a reported annual average of 930 000 tonnes over 2016-2018. The region also plays a significant role in supplying avocados to the EU, with shipments originating from Peru, Chile, Mexico, Colombia, Brazil and the Dominican Republic. The claimed health benefits of avocados - particularly in relation to their high content of healthy fats - coupled with their unique taste, have also spurred fast growth in demand for the fruit in burgeoning import markets, most prominently in China and Japan.

Production of mangoes in Latin America and the Caribbean reached an estimated annual average of 6 million tonnes during 2016-2018, supported by investments in yield-improving technologies and area expansion. Mexico and Brazil are by far the largest producers in the region, with average volumes of 2 million tonnes and 1.5 million tonnes per year, respectively. In both countries, production primarily caters for the domestic market, as mangoes are a popular fruit in local diets and typically benefit from affordable domestic prices. However, in response to mounting international demand, exports from the region have experienced considerable growth over the past decade, expanding at an annual average rate of 4 percent between 2009 and 2018, though in absolute terms they remained at a relatively low level of approximately 760 000 tonnes per year over 2016-2018. Nevertheless, globally the region ranks as the largest supplier of mangoes, accounting for roughly 50 percent of annual world shipments.

World production of papayas averaged 4 million tonnes per year over the 2016-2018 period, with Brazil, Mexico and the Dominican Republic the leading countries, producing around 1 million tonnes each. In world trade, papayas have a relatively niche market, with exports averaging just 200 000 tonnes per year during 2016-2018, of which about 170 000 tonnes originated from Latin America and the Caribbean. Similar to mangoes, papayas are a widely popular fruit in the region and a staple ingredient in local diets. International trade of papayas is rendered difficult by the fruit’s perishability and limited suitability for long-distance transportation. In addition, a prolonged outbreak of salmonella contamination, which has been affecting supplies from key producing areas in Mexico since mid-2017, and which resulted in large-scale rejections of shipments on phytosanitary grounds, has further hampered the international trade potential of this fruit.

Regarding world supplies of avocados, mangoes and papayas, Mexico plays a pivotal role as a leading producer and exporter, in particular as a key supplier to the United States of America - the largest import market. On average, Mexico exported annually 1 million tonnes of avocados over 2016-2018, at a value of roughly USD 2.5 billion. The country also ranks as the leading exporter of mangoes and papayas, with annual shipments averaging, respectively, 390 000 tonnes and 160 000 tonnes during the same period. Mexico’s total export revenues from bananas and major tropical fruits averaged USD 3.3 billion per year over 2016-2018.

The United States of America is the largest market for major tropical fruits from Mexico, having purchased on average some 820 000 tonnes of avocados, 350 000 tonnes of mangoes and 160 000 tonnes of papayas per year from the Central American country during 2016-2018. Approximately 75 percent of domestically available avocados in the United States of America, 65 percent of mangoes and 80 percent of papayas, originate from Mexico. United States of America wholesale prices of these three fruits, which reflect the intricate supply and demand situation of each commodity, have displayed high levels of both seasonal and supply shock-induced volatility. Shortages in supply, so far mostly caused by seasonal production fluctuations, adverse weather conditions and phytosanitary concerns, have induced rapid and significant upward price swings for all three fruits, and especially avocados.

Opportunities and challenges

In view of flourishing global demand for fruits, especially tropical varieties, there appears to be an ample opportunity for a demand-driven expansion in global trade of bananas and major tropical fruits. Trade volumes of bananas, the world’s number one traded fruit, have reached high levels - leading to near saturated consumption levels in key import regions - and are accordingly expected to display only moderate growth in the medium term. Meanwhile, global production and trade of major tropical fruits are seen facing strong growth prospects, on account of rising incomes and changing consumer preferences in many domestic and import markets, as well as improvements in international transport links and freight technology.

As the world’s largest exporting region, Latin America and the Caribbean is particularly well positioned to benefit from the foreseen growth in international demand for tropical fruits. The region’s geographic location, not only with regard to its large share of land in the tropical belt, but also its proximity to the United States of America - the largest market for major tropical fruits - should translate into robust prospects for export-led production growth. Established industry structures and solid infrastructure, particularly in the largest exporting countries, make it comparatively easier for producers in many parts of the region to operate at economies of scale and thereby to compete strongly with other exporting regions in world markets.

On the downside, the effects of climate change and adverse, and at times highly damaging, weather conditions, loom heavily over the region’s production potential, particularly in the Caribbean, where small island states are especially vulnerable to the destructive effects of increasingly frequent tropical storms. Another non-trivial threat is posed by the increasing prevalence of plant pests and diseases, with industrialized production systems as present in the cultivation of bananas and pineapples being considerably more susceptible to rapid and widespread outbreaks. In particular, the risk of the Fusarium Wilt Tropical Race 4 fungus in banana cultivation - so far confined to plantations in Asia, the Middle East and Africa - is of worrying concern to producers in the Latin America and the Caribbean region.

Trade flows from the region are similarly susceptible to a number of obstacles, which may encumber further growth. Phytosanitary-related restrictions, trade disputes and protectionist measures represent a threat to smooth trade flows and growth potential, thereby obstructing export earnings for local producers and adequate supply in import markets. These factors threaten to fuel unnecessary price volatility, which can have damaging effects on both producers in the region and consumers in import markets. Furthermore, the effect of trade on development hinges on a fair inclusion of smallholder producers and equitable wage levels for workers employed in these industries. To highlight just two examples: some 200 000 rural families are reported to be directly involved in, and benefiting from, banana production in Guatemala, while around 80 percent of avocado production in Mexico is carried out by smallholder farmers. Ensuring remunerative prices and fair wages, improving smallholders’ productivity and their bargaining power, enhancing resilience to climatic disasters and other shocks, and linking remote producing locations to markets, are critical to ensuring inclusive growth and sustainable rural development. Another important factor is the creation of an enabling environment through conducive policies and programmes in order to strengthen the positive results generated by the production and trade of bananas and major tropical fruits in the region.

[1] All figures presented in this article refer to annual average values for the triennium 2016-2018.

[2] As indicated by reported export values from the region.

Statistical appendix tables

Appendix Table 1 (a) & (b) Cereal statistics

Appendix Table 2 (a) & (b) Wheat statistics

Appendix Table 3 (a) & (b) Coarse grains statistics

Appendix Table 4 (a) & (b) Maize statistics

Appendix Table 5 (a) & (b) Barley statistics

Appendix Table 6 (a) & (b) Sorghum statistics

Appendix Table 7 (a) & (b) Other Coarse grains statistics

Appendix Table 8 (a) & (b) Rice statistics

Appendix Table 9 Cereal supply and utilization in main exporting countries

Appendix Table 10 Total oilcrops statistics

Appendix Table 11 Total oils and fats statistics

Appendix Table 12 Total meals and cakes statistics

Appendix Table 13 Sugar statistics

Appendix Table 14 Total meat statistics

Appendix Table 15 Bovine meat statistics

Appendix Table 16 Ovine meat statistics

Appendix Table 17 Pigmeat statistics

Appendix Table 18 Poultry meat statistics

Appendix Table 19 Milk and milk products statistics

Appendix Table 20 Fish and fishery products statistics

Appendix Table 21 Selected international prices for wheat and coarse grains

Appendix Table 22 Wheat and maize futures prices

Appendix Table 23 Selected international prices for rice and price indices

Appendix Table 24 Selected international prices for oilcrop products and price indices

Appendix Table 25 Selected international prices for sugar and sugar price index

Appendix Table 26 Selected international prices for milk products and dairy price indices

Appendix Table 27 Selected international meat prices

Appendix Table 28 Selected international meat prices and FAO meat price index

Appendix Table 29 Fish price indices

Appendix Table 30 Selected international commodity prices

NOTES

General

•FAO estimates and forecasts are based on official and unofficial sources.

•Unless otherwise stated, all charts and tables refer to FAO data as source.

•Estimates of world imports and exports may not always match, mainly because shipments and deliveries do not necessarily occur in the same marketing year.

•Tonnes refer to metric tonnes.

•All totals are computed from unrounded data.

•Regional totals may include estimates for countries not listed. The countries shown in the tables were chosen based on their importance of either production or trade in each region. The totals shown for Central America include countries in the Caribbean.

•In Statistical Appendix tables estimates for China also include those for the Taiwan Province, Hong Kong SAR and Macao SAR, unless otherwise stated.

•Up to 2012/13, the European Union includes 27 member states. From 2013/14, the European Union includes 28 member states.

•‘-’means nil or negligible.

•Cereals include wheat, rice and coarse grains. Coarse grains include maize, barley, sorghum, millet, rye, oats and NES (not elsewhere specified).

Production

•Cereals: Data refer to the calendar year in which the whole harvest or bulk of harvest takes place.

Utilization

•Cereals: Data are on individual country’s marketing year basis.

•Sugar: Figures refer to centrifugal sugar derived from sugarcane or beet, expressed in raw equivalents. Data relate to the October/ September season.

Trade

•Trade between European Union member states is excluded, unless otherwise stated.

•Wheat: Trade data include wheat flour in wheat grain equivalent. The time reference period is July/June, unless otherwise stated.

•Coarse grains: The time reference period is July/June, unless otherwise stated.

•Rice, dairy and meat products: The time reference period is January/ December.

•Oilseeds, oils and fats and meals: The time reference period is October/ September, unless otherwise stated.

Stocks

•Cereals: Data refer to carry-overs at the close of national crop seasons ending in the year shown.

Price indices

•The FAO price indices are calculated using the Laspeyres formula; the weights used are based on the average export value of each commodity for the 2002-2004 period.

COUNTRY CLASSIFICATION

In the presentation of statistical material, countries are subdivided according to geographical location as well as into the following two main economic groupings: “developed countries” (including the developed market economies and the transition markets) and “developing countries” (including the developing market economies and the Asia centrally planned countries). The designation “Developed” and “Developing” economies is intended for statistical convenience and does not necessarily express a judgement about the stage reached by a particular country or area in the development process.

References are also made to special country groupings: Low-Income Food-Deficit Countries (LIFDCs), Least Developed Countries (LDCs). The LIFDCs include 51 countries that are net importers of basic foodstuffs with a per capita gross national income (GNI) below the “historical” ceiling used by the World Bank to determine eligibility for International Development Aid (IDA) support and for 20-year IBRD terms, applied to contries included in the World Bank’s categories I and II. The LDCs group currently includes 47 countries with low income as well as weak human resources and low level of economic diversification. The list is reviewed every three years by the Economic and Social Council of the United Nations.

DISCLAIMER

The designations employed and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.

Futures markets

Contributed by Ann Berg (International Consultant)

Futures prices for wheat, maize and soybeans trended lower from January through April – descending below 2018 price levels for the same period and, except for wheat, below price levels for the same period in 2017 as well. Ample global supplies, large 2018/19 carry-out projections in the United States of America, and protracted trade tensions between the US and China weighed on the price performance of all three commodities. Improved crop ratings for US winter wheat year-on-year (y/y), and mostly favourable weather at the start of maize and soybean planting, also placed pressure on values. Downward revisions to domestic consumption and exports for wheat and maize by the United States Department of Agriculture (USDA) further dampened prices for the two cereals. Conversely, a resumption of US soybean purchases by China lent some support to the oilseed price, which rose above the 10-year low touched during September 2018. However, these small price increases were tempered by analysts’ and traders’ realization that Chinese soybean import demand, which had followed a steep upward trajectory for years, was set to decline for the first time since 2003, as a result of government guidelines to lower protein content in animal feed and the culling of pig herds infected by African Swine Fever. Developments in exogenous markets, such as foreign exchange and energy, were mixed with indeterminate effects on agricultural markets. Exhibiting low volatility, the US dollar index edged higher, possibly providing a constraint on values. On the other hand, the 50 percent price rise in West Texas Intermediate crude oil since the start of 2019 – normally supportive of cereal and oilseed prices – failed to curb their decline. The prospect of abundant supplies, unresolved trade issues and stagnating demand weighed on markets overall.

FORWARD CURVES

Forward curves for wheat, maize and soybeans displayed upward sloping (contango) price configurations extending until July 2020, reflecting ample supplies within a low price environment. The soybean curve showed the greatest y/y change, as the supply and demand fundamentals abruptly shifted following the imposition of Chinese tariffs on US exports in June 2018. The y/y soybean curve (between July 2019 and July 2020) exhibited a USD 20 contango as of 1 May 2019, versus a USD 6 inverse (downward sloping) for the same period the previous year. Despite record crush levels and increased exports to other countries, a projected record US 2018/19 carry-overs weighed heavily on the front end of the curve. The maize and wheat curves exhibited nearly identical configurations to 2017 for the same period, when a large projected old crop carry-overs pressured prices and the front end of each curve.

VOLUMES

Trade volumes, which mostly rose steadily y/y between 2013 and 2018, posted lower levels for all three commodities for the first four months of 2019. Soybean volumes showed the greatest y/y decline – probably due to sharply lower US exports and uncertainties caused by ad hoc trade disputes, which often hamper hedging strategies. The decline is nonetheless surprising, given the continued growth of automated trading, now comprising more than 70 percent of the volume for grains and oilseeds, according to the United States of America Commodity Futures Trading Commission. Using algorithmic programmes, automated trading’s abilities to detect market anomalies and swiftly execute trades across multiple markets have been credited with burgeoning volumes. Similar to trade volumes, open interest (the number of outstanding contracts at a given point in time for a futures contract) declined from last year’s record numbers. Commercial participation, which surged in 2018 as calculated from both open positions and the number of active traders, declined for all three commodities y/y, but was partially offset by an increase in managed money participation. Options volumes were flat except for soybeans, which posted a decline. It remains to be seen whether the slowdown was temporary, or if it marks the end of a secular growth trend.

VOLATILITY

Volatility levels for wheat, maize and soybeans followed the seasonal norm of exhibiting relatively low values, with each displaying a slightly different profile. Supply overhang eclipsed the trade uncertainties of 2018, when speculation over the resolution of the Chinese tariff situation raised volatility throughout the summer. Historical volatility (based on 30 days) for wheat ranged between 17 and 29, while maize ranged between 14 and 20, with both exhibiting rising levels into the approach of the spring sowing season. Conversely, historical volatility for soybeans dropped from 14 to 12, reflecting declining trade interest the oilseed. Implied volatility (calculated by the level of option premiums on underlying futures contracts) exhibited little variation within each commodity, with wheat ranging between 20 and 25, maize between 14 to 16, and soybeans between 14 and 11 (all figures based on monthly averages). The most watched commodity volatility measure, the Crude Oil Volatility Index, surged from the mid-20s last year to above the 60 level at the end of 2018 and beginning of 2019, before falling back to the mid-20s, reacting mostly to global political events.

INVESTMENT FLOWS

Managed money resumed its aggressive bearish posturing pursued in years past, establishing large short positions in wheat and soybeans, and a record net short of approximately 43.7 million tonnes in maize. This contrasts with last year, when at the start of the growing season, fund managers held a negligible short in wheat, and moderate to large net long positions in maize and soybeans, respectively. Spread positioning (the equal holding of long and short contracts of two different maturities within one commodity futures contract), which had grown considerably over the past few years, increased again for all three commodities among money managers. Commercial traders, normally holders of moderate to large net short positions throughout the year, reduced their shorts in wheat and maize to negligible levels, while holding an insignificant net long in soybeans. Swaps dealers (providers of index products that track commodity prices) continued to hold the largest percentage of net long positions, and also raised their holdings of spreads.

Agricultural commodity hedge funds, as tracked by Barclay Hedge, continued to struggle in a low price environment, showing 0.39 percent negative return for 2018, and 0.09 percent positive return year-to-date 2019. The Deutsche Bank Agricultural Index Fund, which tracks 10 agricultural futures markets, including wheat, maize and soybeans, sunk to an all-time low at USD 16.20, versus USD 18.21 for the same period in 2018.

Ocean freight rates

Contributed by the International Grains Council (IGC)
www.igc.int

OCEAN FREIGHT MARKET (OCT 2018-APRIL 2019)

The dry bulk freight market posted sizable losses since late October 2018, mainly attributed to an early-2019 plunge. After a relatively positive end to 2018, values slumped across all vessel segments on disappointing demand and worries about deteriorating prospects for global economic growth. Reflecting this, the Baltic Dry Index (BDI) – a composite benchmark of costs across dry bulk segments – touched its lowest in around two and a half years in mid-February, approaching the all-time low of early-2016.

Despite a subsequent rebound, the Index was still more than one-third lower year-on-year (y/y), highlighting uncertainty about future trade and tonnage oversupply. Due to steep day-to-day swings in freight rates, the market saw much higher than average volatility levels at times.

The costs of ocean transportation of grains and oilseeds also fell sharply over the period. However, weakness was less pronounced compared to the broader market, as evidenced by movements in the IGC Grains and Oilseeds Freight Index (GOFI), which provides a measure of trade-weighted nominal rates on key routes. After retreating to a 17-month low in mid-February, the Index recovered a portion of its losses, but was still 20% below its late-October level, and down 10% y/y.

Capesize earnings recorded the sharpest decline during the period as the market remained volatile. Ample tonnage availability on major routes, coupled with talk of reduced steel mill margins in China and fresh antipollution restrictions weighed on market sentiment in late-2018. However, occasional support stemmed from upturns on the Brazil-China route. Values fell sharply in the period since, reaching a fresh all-time low in early-April following a series of disruptive market developments. These included an abrupt fall in iron ore output and trade in Brazil following a mining dam accident, as well as fresh coal import restrictions by China and weather-induced iron ore mine closures in Western Australia. Although average sector earnings edged higher recently, they were still 66% lower than a year ago and still at loss-making levels.

Trends in the Panamax segment were similarly two-sided. Before the end of the year, the market drew support from the robust pace of Brazil’s late-season soyabean exports, mostly to China, with the nominal freight quotations on that route reaching multi-year highs of US$38-US$39/t. Good enquiry levels out of the US Gulf, including for coal and maize, also underpinned, as did renewed hopes for a resolution to the United States of America-China trade dispute. While values slumped in January-February 2019 amid broad-based industry weakness, the sector staged the strongest recovery among the grains and oilseeds carrying segments thereafter, with the Baltic Index quoted only a touch lower y/y. The post-slump recovery was driven by brisk demand and signs of tight vessel supply in South America, coupled with buoyant minerals trade out of Indonesia as well as on the South Africa-India route. Nevertheless, flood-related issues at the US Gulf and talk about emerging competition from Capesize carriers in Asia likely pared gains.

The Supramax and Handysize segments saw generally firm grains and minerals demand in the Atlantic as well as logistical issues at key origins in the fourth quarter of 2018. This contrasted with somewhat erratic demand in the Pacific Basin and rounds of discounting in Europe. The early-2019 downward trend was reversed in mid-February as active grains/oilseeds dispatches out of the US Gulf and South America returned as a driver of growth. This was supplemented by fresh enquiries for scrap shipments from the Baltic to the eastern Mediterranean, coupled with improved rate expectations for some Pacific voyages.

The table below provides a snapshot of developments on key selected grains and oilseeds carrying routes.

Food import bills

World food import bill in 2019 could fall

At USD 1.472 trillion, the provisional forecast for the global food import bill in 2019 points to a decline of 2.5 percent from the revised figure for 2018. Nevertheless, at this level, the bill would remain elevated, being just USD 51 billion short of the 2014 record.

The forecast year-on-year decrease in the world food import bill is partly a reflection of a decline in international price quotations for many commodities, and it is more the result of a sizeable fall in freight rates. Lower unit costs of importing food are likely to offset an expansion in global demand for many foodstuffs, implying that in 2019, more food can be purchased nominally for the same or lower cost.

At the commodity level, the product bill that is expected to undergo the largest absolute decrease in 2019 is that for tropical beverages – coffee, tea and cocoa – and spices. The near USD 11 billion year-on-year decline is on account of significantly lower price quotations in 2019 compared to last year, with international tea and coffee prices falling to multi-year lows. Bills of products in the oilseed complex (vegetable oils and oilseeds) are also expected to fall substantially in 2019, by a combined USD 15 billion from last year, as a result of much lower quotations (a 13-year low in the case of international vegetable oil prices) and a slowdown in global demand for oilseeds. Beverages, and fruits and vegetables, could also witness multi-billion dollar falls in 2019, while more moderate declines are foreseen for livestock and fish products. A recovery in sugar quotations, offset by a small contraction in import demand, looks set to leave the world sugar bill virtually unchanged. Similarly, the aggregate cereal bill could match the level of 2018, in spite of a rebound in import demand from last year.

Trends in the food import bills of least-developed countries (LDCs), low-income food-deficit countries (LIFDCs) and those situated in sub-Saharan Africa (SSA) are mixed. In the case of LDCs, their aggregate food import bill appears set to remain virtually unchanged from last year, while a 3-percent fall is anticipated in the bill of LIFDCs and a 4-percent rise is expected for SSA. All three vulnerable country groups are expected to benefit significantly from much lower bills of vegetable oils – commodities that habitually rank second in terms of import dependency. However, poor cereal production prospects for all these countries in 2019 are anticipated to instigate larger import volumes of these staples, and to curb the benefits of widely falling import bills of other products. Indeed, the dependence on imported cereals is expected to spike in 2019, reaching as much as 35 percent of the entire food bill for LDCs and SSA.

Exchange rates and food prices

Having reached a three-and-a-half year low in February 2018, the US dollar has begun to rise relative to major currencies, with the nominal index climbing to a 2-year high of 92 points in April 2019. With the US dollar being the primary currency used for international transactions, a strong (weak) US dollar typically imparts a loss (gain) to the domestic purchasing power of importing countries.

For instance, a strong US dollar raises serious concerns for LIFDCs. From April 2018 to April 2019, almost all the major food importing LIFDCs, which purchase more than USD 1 billion worth of food annually, out of USD 78 billion for the LIFDC as a group, saw their currencies fall against the US dollar in real terms, reversing the gains of generally lower international food prices.

Contact:

Adam.Prakash@fao.org

FAO price indices[1]

FAO food price indicators regain momentum

The FAO Global Food Consumption Price Index[2] tracks changes in the cost of a global food basket, as depicted by the latest FAO world food balance sheet (see http://faostat3.fao.org/download/FB/FBS/E).

After reaching a three-and-half year high in May 2018, the FAO Global Food Consumption Price Index (GFCPI), along with the FAO Food Price Index (FFPI), followed a declining trend over the remainder of the year, and each had lost more than 10 points by December 2018. However, at the beginning of 2019, both indices began rising, with unabated upward momentum in the FFPI while growth in the GFCPI has recently stalled, bringing about convergence between the two indices: in April 2019 the FFPI reached 170 points and the GFCPI was quoted at 173 points.

The recent convergence between the two indices can be explained by the relative weights of the components of each index: international prices of cereals that carry the largest weight in the consumption-based GFCPI (59 percent) fell markedly over March and April, while in the trade-based FFPI, quotations of high-valued livestock products that assume the greatest weight (52 percent) have sharply risen in recent months.

The FAO Food Price Index rises to a 10-month high[3]

The FAO Food Price Index (FFPI) rose in April 2019 to around 170 points, 1.5 percent (2.5 points) higher than in April and marking its highest value since June 2018. At this level, the FFPI would still remain 2.3 percent below its level in the corresponding month last year. Except for the sub-index for cereals, all the other sub-indices firmed in April, led by dairy and meat, and to a lesser extent vegetable oils and sugar.

The FAO Cereal Price Index averaged 160 points in April, down 2.8 percent (4.7 points) from March and 5 percent below its April 2018 value. The sub-index fell for the fourth consecutive month, pressured by large export availabilities and slowing trade. Among the cereals, wheat prices fell the most in March, influenced by prospects for a strong rebound in the 2019 production, amid large exportable supplies. Maize prices were also lower, mostly because of expectations of larger South American crops. By contrast, FAO’s rice price index was generally stable in April, amid diverging trends across the various market segments and origins.

The FAO Vegetable Oil Price Index averaged 128.7 points in April, up 1.1 points (or 0.9 percent) from the previous month. The rise mainly reflects slight increases in palm and soybean oil values. International palm oil price quotations rebounded somewhat on rising global import demand, combined with inventory drawdowns in major exporting countries. Soyoil prices, on the other hand, notched up, underpinned primarily by robust domestic demand in the US stemming from both the biodiesel and food sectors. Firming crude oil values also lent support to international vegetable oil prices.

The FAO Dairy Price Index averaged 215 points in April, up 10.7 points (5.2 percent) from March, representing the fourth consecutive month of increase. In April, international price quotations for butter, Whole Milk Powder (WMP) and cheese rose, as global import demand continued to be robust in anticipation of a further tightening in export availabilities from Oceania, with dry weather conditions reinforcing the seasonal milk production drop. By contrast, Skim Milk Powder (SMP) prices slipped for a second consecutive month from the February high, underpinned by continued slowdown in demand.

The FAO Meat Price Index[4] averaged just over 169 points in April, up 4.9 points (3.0 percent) from March, with month-on-month price quotation increases registered for pig and bovine meats and, more moderately, for poultry and ovine meats. International price quotations of pig meat rose sharply due to a surge in import demand in Asia, primarily in China, caused by a sharp fall in the country’s pig meat production associated with the rapid spread of the African Swine Fever. Bovine, poultry and ovine meat prices all firmed reflecting an overall tightening of global meat markets.

The FAO Sugar Price Index averaged 181.7 points in April 2019, up almost 1.4 points (0.8 percent) from March and now 3.2 percent above its April 2018 value. The latest rise in international sugar prices was largely driven by firmer crude oil prices. Stronger energy prices lend support to international sugar prices by affecting Brazilian sugar exports to the world market, as higher energy prices encourage producers to process sugarcane into ethanol for local sale. On the other hand, the continued weakness of the Brazilian Real against the US dollar capped the extent of the increase in international sugar price quotations.

[1] All changes referred to in this section, in absolute or percentage terms, are calculated based on unrounded figures.

[2] The FAO Global Food Consumption Price Index is published twice a year in Food Outlook.

[3] The FAO food price indices are updated on a monthly basis and are available on: http://www.fao.org/worldfoodsituation

[4] Unlike for other commodity groups, most prices utilized in the calculation of the FAO Meat Price Index are not available when the FAO Food Price Index is computed and published; therefore, the value of the Meat Price Index for the most recent months is derived from a mixture of projected and observed prices. This can, at times, require significant revisions in the final value of the FAO Meat Price Index which could in turn influence the value of the FAO Food Price Index.